Nigeria’s Value Added Tax (VAT) revenue rose in January 2026 as the implementation of a revised sharing structure increased the portion allocated to state governments while reducing the Federal Government’s share.
Data presented at the February meeting of the Federation Account Allocation Committee (FAAC) showed that total VAT collections for January stood at N1.08 trillion from N913.96 billion recorded in December 2025.
The improvement represents a month-on-month growth of 18.5 percent, indicating stronger consumption activity and improved tax administration across the country.
Despite the higher gross collections, the entire amount was not available for distribution. Various statutory deductions were applied before the final allocation was shared among the three tiers of government.
After deducting VAT taken at source and other statutory charges, the net distributable VAT stood at approximately N1 trillion, a notable rise from the N846.51 billion shared in December.
January was the first month in which a new VAT distribution formula was fully applied. Under the revised structure, states now receive 55 percent of net VAT proceeds, while the Federal Government receives 10 percent and Local Governments receive 35 percent.
The adjustment represents a shift from the previous structure where the Federal Government received 15 percent, states 50 percent, and Local Governments 35 percent.
As a result of the revised formula, the Federal Government’s allocation from VAT declined compared with what it would have received under the former arrangement. From the January pool, the Federal Government received about N100.32 billion.
State governments collectively received approximately N551.77 billion, while local governments were allocated N351.13 billion from the VAT pool.
The revised sharing formula reflects ongoing fiscal reforms designed to strengthen subnational government finances and improve revenue distribution across the federation.
The increase in VAT revenue also led to higher administrative deductions linked to tax collection. The Nigeria Revenue Service’s cost of collection, calculated at four percent of total VAT revenue, increased to N43.33 billion in January, compared with N32.72 billion in December.
Other statutory deductions were also recorded. Allocations linked to development and fiscal oversight institutions rose in line with the expanded VAT pool.
Overall, the FAAC report showed that total revenue available for distribution across all government revenue streams reached about N3.04 trillion in January. After deductions, the net distributable revenue stood at approximately N1.90 trillion.
This distributable pool consisted mainly of statutory revenue and net VAT receipts.
Following the allocation process, the Federal Government received about N525.23 billion from the combined revenue pool, while state governments shared N767.29 billion and Local Governments received N517.28 billion. In addition, oil-producing states received N90.19 billion as derivation revenue.
At the state level, Lagos maintained its position as the largest beneficiary of VAT allocations.
Other major recipients included Oyo, Rivers, Kano and the Federal Capital Territory, each of which received substantial VAT allocations due to their relatively strong economic activity and population levels.
VAT generation across states continues to show a high level of concentration. Economic activity in Lagos alone accounts for a significant portion of the country’s VAT base, largely due to the state’s large consumer market, extensive service sector and strong corporate presence.