Nigeria’s New VAT Sharing Formula to Deliver N5 Trillion Windfall to States

Nigeria’s New VAT Sharing Formula to Deliver N5 Trillion Windfall to States
Nigeria’s 36 states are poised to receive an estimated N5.07 trillion in Value Added Tax (VAT) revenue in 2026 following the implementation of a revised VAT sharing formula introduced under the National Tax Acts. The Federal Executive Council approved the changes as part of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which took effect this month. (Punch Newspapers)

Under the new formula, the Federal Government’s share of VAT revenue will decrease from 15 per cent to 10 per cent, while states will receive 55 per cent and local governments will maintain 35 per cent of the distributable pool. This adjustment, alongside projected growth in the VAT base to N9.23 trillion in 2026, drives the significant increase in allocations to subnational governments. (Punch Newspapers)

Fiscal analysts say the reform reflects a broader shift toward strengthening fiscal federalism, enabling states to better fund infrastructure, public services, and development initiatives. Local governments are also expected to benefit from increased receipts. However, the Federal Government’s VAT share will drop nominally even as the overall pool expands. (Punch Newspapers)

Source: PUNCH Online (January 8, 2026)