State governments across Nigeria received a massive N2.37 trillion from Value Added Tax (VAT) revenue in the first half of 2026, marking a significant increase driven by both higher collections and a new tax-sharing formula. Data compiled from Federation Account Allocation Committee (FAAC) reports showed that states earned N451.25 billion more than the N1.92 trillion received during the same period in 2025, representing a 23.48 per cent increase.
The surge follows the implementation of Nigeria’s new tax regime, which took effect on January 1, 2026. Under the revised arrangement, the states’ share of distributable VAT revenue increased from 50 per cent to 55 per cent, while the Federal Government’s portion dropped from 15 per cent to 10 per cent. The adjustment effectively transferred about N215.72 billion from the Federal Government to state governments, strengthening subnational finances and giving states a larger stake in consumption tax revenue.
A total of N4.31 trillion in distributable VAT revenue was shared among the three tiers of government between January and June 2026, an increase of over N471 billion compared to the corresponding period last year. January delivered the biggest boost, with states receiving N551.77 billion in VAT allocations, the highest monthly figure recorded during the six-month period. Although allocations fluctuated in subsequent months, states recorded stronger year-on-year VAT receipts in five out of six months, highlighting the impact of both improved collections and the revised revenue-sharing formula.
Beyond VAT earnings, state governments also benefited from rising overall FAAC allocations. States collectively received N4.47 trillion in general allocations during the first half of 2026, excluding derivation payments to oil-producing states. This represented a 30.58 per cent increase compared to the N3.43 trillion allocated during the same period in 2025. Local government councils and the Federal Government also recorded higher allocations, reflecting broader growth in federation revenues despite the Federal Government’s reduced share of VAT proceeds.
While the revenue boost has been welcomed, economists and policy experts have urged state governments to use the additional funds responsibly. Analysts say the increased allocations present an opportunity to invest in critical sectors such as agriculture, infrastructure, healthcare, and education rather than relying solely on federal transfers. Transparency advocates have also called for public accountability in how the extra VAT revenue is spent, stressing that citizens should see measurable improvements in public services as states enjoy the benefits of the new tax framework.
source: punch
