Value Added Tax (VAT) collections rose to a record N1.08 trillion in January 2026, marking the first full month under a revised revenue-sharing formula that shifts a larger portion of proceeds to states.
According to data from the Federation Accounts Allocation Committee (FAAC), a total of N1.08 trillion was collected as VAT by the Nigeria Revenue Service (NRS) in January 2026, up from N913.96 billion in December 2025.
Under the new sharing structure, the Federal Government received 10 percent of the distributable pool, amounting to N100.32 billion. State governments took 55 percent or N551.77 billion, while local governments received 35 percent, translating to N351.13 billion.
The adjustment reduces the Federal Government’s share from the previous 15 percent allocation and increases the state share from 50 percent. Local governments retain their 35 percent share.
Read also: Oyedele moves from taxman to deputy finance chief in fresh cabinet shake-up
With the previous VAT sharing formula, the Federal Government would have earned about N150.48 billion from the January pool, implying a revenue loss of roughly N50 billion for the centre under the revised structure.
Subnational governments are expected to benefit from the higher allocation, particularly states with strong consumption bases. Lagos State remained the largest beneficiary, reflecting its dominant share of VAT generation. Other top recipients included Rivers State, Kano State, Oyo State, and the Federal Capital Territory.
The non-import local VAT collection table shows the concentration of VAT generation. Total non-import VAT collections for January stood at N913.47bn, compared with N721.83bn in December, representing an increase of N191.65bn or 26.5 per cent.
Lagos alone generated N533.40bn in non-import VAT in January, accounting for 58.39 per cent of the total. Oyo generated N67.18bn, Rivers N66.35bn, FCT-Abuja N39.73bn, and Bayelsa N34.62bn.
VAT is considered one of the country’s more reliable sources of income, especially compared with oil revenue, which fluctuates with global prices.
The bigger fiscal test …
At a time when Nigeria is pursuing revenue reforms to stabilise public finances, the VAT milestone offers both encouragement and caution.
The numbers demonstrate the growing resilience of non-oil revenue, but they also highlight structural tensions within the federation’s revenue architecture.
This Nigerian Federal Government’s 2026 budget proposal outlines a significant deficit of approximately N23.85 trillion to N25.27 trillion, driven by a total projected expenditure of N58.18 trillion and estimated revenue of N34.33 trillion. This deficit is expected to be financed through heavy borrowing, with plans to borrow around N17.89 trillion.
