In 2023, the 36 states of the federation shared a total net Value Added Tax (VAT) allocation of N1.489 trillion.
Total VAT collection for the year by the Federal Inland Revenue Service (FIRS) stood at N3.63 trillion- an increase of 44.9% from the N2.511 trillion collected in 2022.
Nigeria charges a 7.5% rate for VAT- an increase from 5.0% as stipulated by the 2020 Finance Act which became effective in 2021.
There have been calls from different quarters for an increase in the VAT rate from the current figure. Notable among them are the International Monetary Fund (IMF) and the World Bank.
Sharing formula for VAT in Nigeria
Revenue generated from VAT is typically distributed among the three tiers of government through the Federation Accounts Allocation Committee (FAAC), following the current formula of 15% for the federal government, 50% for states, and 35% for local governments.
Additionally, each state retains 20% of the VAT collected within its borders. Another 30% of the VAT is distributed based on the population of the states, while the remaining 50% is shared equally among all states.
Distribution of VAT to the top ten states
In 2023, the top ten states with the highest VAT allocation received N602.54 billion of the total N1.489 trillion net allocation to the 36 states. This represents 40% of the total net allocation to the 36 states in the year under review.
A review of the FAAC allocation report from January to December 2023 was used in determining the states with the highest VAT allocation in 2023.
The top ten states with the most VAT allocation were dominated by states from the Northwest region with four states out of the six in the region. Only one state from the Southeast region featured among the top ten while the Northcentral region did not appear at all.
The Southwest and South-South region had two states among the top ten while the Northeast had only one state represented.
10. Jigawa state– total net VAT allocation to Jigawa state in 2023 stood at N38.50 billion representing a paltry 2.58% of the total VAT allocation to the 36 states. It settles at number 10 in the top ten.
09. Bauchi– the only state from the Northeast region to feature among the top ten raked in 38.51 billion in VAT allocation in 2023. It marginally edged Jigawa to ninth place on the list.
08. Anambra– the only state from the Southeast to also appear among the top ten received N39.19 billion in 2023 from VAT allocation.
07. Katsina– this northwest state collected N42.59 billion in VAT allocation in 2023 putting it at seventh place.
06. Delta– one of the two only South-south states to feature among the top ten in 2023. The state collected 43.02 billion as net VAT allocation in 2023. This represents just 2.8% of the total net VAT allocation to the 36 states.
05. Kaduna– another Northwest state on the list- this state received N44.50 billion in VAT allocation in 2023.
04. Kano– the centre of commerce in Northern Nigeria placed in the fourth position among states with the highest VAT allocation in 2023. It received N60.21 billion in the year- an average of about N5 billion monthly.
03. Oyo– the two southwest states in the top ten made the top three with Oyo state placing third receiving N62.94 billion.
02. Rivers– the centre of Nigeria’s oil industry received the second-highest VAT allocation in 2023 at N87.80 billion in the year. This is 5.8% of the total VAT allocation to the 36 states in the year.
01. Lagos– Nigeria’s economic nerve centre tops with the highest VAT allocation in 2023 with a whopping N145.27 billion- representing 9.7% of the total collection of the 36 states.
