States get N2.37 trillion VAT in six months under new sharing formula

State governments received N2.37 trillion from Value Added Tax (VAT) allocations in the first half of 2026, up by 23.5% from N1.92 trillion in the corresponding period of 2025.

This was as a new VAT sharing formula transferred an estimated N219.72 billion from the Federal Government to the states.

An analysis by Nairametrics of Federation Account Allocation Committee reports, using data from the Office of the Accountant General of the Federation and the National Bureau of Statistics, shows that VAT remained a major contributor to federation revenue, accounting for 31.2% of the N14.08 trillion shared among the three tiers of government in H1 2026.

The analysis covers VAT revenue generated between January and June 2026. Under the FAAC framework, revenue generated in a particular month is distributed in the following month. Consequently, VAT collected in January was shared in February, while revenue generated in June was distributed in July.

What the data shows

FAAC distributed N4.39 trillion from VAT in the first six months of 2026, compared with N3.84 trillion in the corresponding period of 2025, representing a year-on-year increase of 14.3%.

• Out of the total VAT pool, state governments received N2.37 trillion, while local government councils got N1.51 trillion, and the Federal Government received N431.43 billion.
• January revenue, shared in February, produced the strongest VAT allocation of the year, with states receiving N551.77 billion. That amount declined to N340.52 billion from February revenue, before easing further to N283.47 billion from March collections as VAT receipts moderated.
• Allocations rebounded sharply in April, when states received N410.90 billion following stronger VAT collections in the preceding month. The figure declined slightly to N378.83 billion in May before recovering to N407.40 billion in June.
• Compared with the corresponding period in 2025, states recorded higher VAT receipts in five of the six months reviewed. January posted the largest increase, with allocations rising from N359.39 billion in 2025 to N551.77 billion in 2026. February increased from N304.72 billion to N340.52 billion, while March was the only month to record a slight year-on-year decline, falling from N296.88 billion to N283.47 billion.

April allocations rose from N299.04 billion to N410.90 billion, May increased from N345.86 billion to N378.83 billion, while June climbed from N315.75 billion to N407.40 billion.

The stronger performance in most months reflected a combination of higher VAT collections and the implementation of the new revenue-sharing framework.

What you should know

A significant factor behind the increase was the implementation of the Nigeria Tax Act, which came into effect on January 1, 2026.

• Under the previous VAT sharing formula, the Federal Government received 15% of distributable VAT, states received 50%, while local governments got 35%.
• The new law reduced the Federal Government’s share to 10%, increased the states’ allocation to 55%, and retained the local governments’ share at 35%.
• Based on the N4.39 trillion VAT distributed during H1 2026, the revised formula transferred an estimated N219.72 billion from the Federal Government to state governments.

Had the previous formula remained in place, the Federal Government would have received about N651.15 billion from VAT during the six-month period, while states would have received roughly N2.15 trillion.

Instead, the Federal Government received N431.43 billion, while states collected N2.37 trillion.

Beyond increasing states’ collective share, the law also changed how VAT is distributed among states. The new framework allocates 50% based on equality, 20% according to population and 30% using the place of consumption, replacing the previous approach that largely rewarded states where companies maintained their headquarters.