Nigeria’s total Value Added Tax collections rose to N1.08tn in January 2026, marking an 18.5% increase from N913.96bn recorded in December 2025, according to documents presented at the Federation Account Allocation Committee meeting.
After deductions of N79.94bn, net VAT available for distribution stood at N1.00tn, also up 18.5% month-on-month. January marked the first full month under the revised VAT sharing formula, which allocates 10% to the Federal Government, 55% to states, and 35% to Local Governments. Previously, the Federal Government received 15%, states 50%, and Local Governments 35%.
Under the new formula, the Federal Government received N100.32bn, states shared N551.77bn, and Local Governments got N351.13bn. Compared to December, the Federal Government’s allocation declined by about 21%, while states and Local Governments saw significant increases.
The cost of VAT collection by the Nigeria Revenue Service rose to N43.33bn, while statutory deductions to agencies such as the North East Development Commission and the Revenue Mobilisation Allocation and Fiscal Commission also increased.
Overall, total funds available for distribution in January stood at N3.04tn, with N1.90tn shared after deductions. The Federal Government received N525.23bn in total allocation, states N767.29bn, Local Governments N517.28bn, and N90.19bn was allocated as 13% derivation.
Among states, Lagos State remained the largest VAT beneficiary, generating N533.40bn in non-import VAT and receiving over N101bn in net VAT allocation. Oyo State and Rivers State followed behind.
Despite the strong performance, the International Monetary Fund warned that maintaining the current VAT rate could reduce government revenue by up to 0.5% of GDP. Similarly, the Nigeria Economic Summit Group cautioned that without adjusting VAT rates, the Federal Government could face revenue shortfalls.
Analysts have urged states to strengthen internally generated revenue rather than rely solely on increased VAT allocations, stressing the need for transparency and productive investment of the additional funds.
