A report by Abuja-based think tank, Agora Policy, has revealed a significant disparity between states’ contributions to the value-added tax (VAT) pool and their subsequent allocations.
The data for the report, which is based on figures from the federation accounts allocation committee (FAAC) for 2024, comes amidst controversy over the distribution of revenue in Nigeria and further reignites debates about fairness, fiscal equity, and the need for systemic reform.
The VAT, which is Administered by the Federal Inland Revenue Service (FIRS), has been a critical source of non-oil revenue since its introduction in 1993 to replace the Sale Tax, with its sharing formula grabbing headlines recently, as Taiwo Oyedele-led tax and fiscal policy committee proposed a change to ensure fairness in the distribution.
The committee had proposed a VAT-sharing formula of 20 percent based on equality, 60 percent based on derivation, and 20 percent based on population.
However, the Nigeria Governors’ Forum (NGF) rejected the committee’s suggestion and proposed a sharing formula of 50 percent based on equality, 30 percent based on derivation, and 20 percent based on population — which Oyedele said his committee has no objection to.
While implementation is projected to commence in July, the current sharing formula of 50 percent based on equality, 30 percent based on population and 20 percent based on derivation, creates a glaring imbalance.
The latest report shows that Lagos state contributed N2.75 trillion to the VAT pool in 2024—nearly half of the total revenue generated, but in contrast, received just N460 billion as VAT share, representing only 16.7 per cent of its contribution.
Rivers state, another major contributor, generated N832 billion but received N186.6 billion from the VAT pool, accounting for 22.4 per cent of its input.
In contrast, states with significantly lower contributions benefitted more from the redistribution.
Data showed that Kano State, for instance, which contributed N77.7 billion, received N117.1 billion from the VAT pool, while Katsina, with a contribution of just N22 billion, was allocated N85.6 billion.
Abia state contributed N8.68 billion but received N63.78 billion — a 734.8 per cent return.
Similarly, Imo state contributed N4.38 billion but was allocated N70.7 billion, reflecting a 1,613 per cent return.
Across the geopolitical zones, the south-west, led by Lagos, contributed N3.11 trillion, accounting for the largest share of the VAT pool.
Despite its major contribution, the zone received only N849.71 billion, representing 27.4 per cent of its contributions.
Also, the south-south contributed N1.08 trillion but was allocated N543.49 billion— 50.3 per cent of its contributions.
The north-west contributed N211.27 billion to the VAT pool but received N574.32 billion in return, equating to 271.8 per cent of its contributions.
The north-east, despite contributing N174.50 billion, received a significant N411.84 billion, amounting to 236 per cent of its contributions.
With a contribution of N154.54 billion, the north-central zone received N408.66 billion, translating to 264.4 per cent of its input.
The south-east contributed the least (N101.09 billion) but received a hefty N341.46 billion — a 337.8 per cent return on its contribution.
Across the regions in Nigeria, southern states, driven by economic hubs like Lagos and Rivers, contributed N4.28 trillion to the VAT pool but received only N1.73 trillion, representing 40.5 per cent of their contributions.
In sharp contrast, northern states contributed N540.31 billion yet received N1.39 trillion, or a return of 258.2 per cent.
