By Matthew Denis
Nigeria recorded N1.08tn in Value Added Tax (VAT) revenue in January 2026 following the implementation of a revised sharing formula.
Documents from the February meeting of the Federation Accounts Allocation Committee (FAAC) showed that VAT collections increased from N913.96bn in Dec. 2025 to N1.08tn in Jan. 2026, representing a rise of N169.20bn or 18.5%.
After statutory deductions of N79.94bn, the net VAT available for distribution stood at N1.00tn.
Under the new formula, 10% of net VAT accrues to the Federal Government, 55% to states and 35% to Local Governments. Previously, the Federal Government received 15% while states got 50%.
Based on the new arrangement, the Federal Government received N100.32bn in January, compared to N150.48bn under the previous formula. States received N551.77bn, while Local Governments got N351.13bn.
Economic analysts urged states to utilise the increased allocations effectively.
Prof. Segun Ajibola, a former Chairman of the Chartered Institute of Bankers of Nigeria, advised state governments to ensure transparency in the use of additional VAT revenue and prioritise investment in agriculture and public utilities.
Dr. Ayo Teriba of Economic Associates said states should not rely solely on statutory allocations, urging them to strengthen internally generated revenue.
January’s VAT collections exceeded projections by N458.03bn, raising the possibility that states could earn more than the projected N5.07tn for 2026 if the current trend continues.
Dr. Tayo Aduloju of the Nigeria Economic Summit Group noted that the Federal Government could face revenue pressure if VAT rates are not reviewed.