Value Added Tax Allocations To Nigerian Governments Surge 26% To N7.73 Trillion In 2025

Distributable Value Added Tax (VAT) allocations to Nigeria’s three tiers of government rose to N7.73 trillion in 2025, a significant 26.46% increase from the N6.11 trillion shared in the previous year.

The data, compiled from the Federation Account Allocation Committee (FAAC) by the Office of the Accountant-General of the Federation, shows state governments received the largest share at N3.77 trillion, while the Federal Government got N1.16 trillion and Local Government Areas shared N0.71 trillion.

Okay News reports that the growth in VAT receipts is attributed to a combination of higher prices due to inflation, increased import costs from exchange rate movements, and improved tax compliance, particularly in major commercial centers, rather than a sudden boom in economic activity. The monthly disbursements were uneven, peaking in October 2025 and hitting their lowest point in December, largely due to the timing of remittances from tax collection.

The allocations reveal a stark concentration of economic activity, with a few states dominating VAT generation. Lagos State remained the undisputed leader, receiving N459.87 billion, which accounted for over 12% of all VAT allocated to states and was nearly six times more than states at the bottom of the list like Taraba and Ebonyi. Other top recipients included Kano (N148.81bn), Rivers (N137.38bn), Oyo (N120.51bn), and Delta (N101.42bn), highlighting the uneven consumption base across the country.

A similar pattern was observed at the local government level, where Lagos LGAs received N373.93 billion, far outpacing regions like Gombe and Nasarawa. The wide disparity underscores the heavy reliance of many states on federal redistribution, as internal commercial activity in numerous regions remains too low to generate substantial VAT revenues, reinforcing long-standing fiscal imbalances within Nigeria’s federation.