State governments received N2.37tn from Value Added Tax revenue generated in the first half of 2026, representing an increase of N451.25bn compared with the corresponding period of 2025, according to The PUNCH analysis, ABNTV reports.
The figure indicates that states’ VAT allocation rose by 23.48 per cent from N1.92tn in the first six months of 2025, according to Federation Account Allocation Committee reports and data from the National Bureau of Statistics and the Office of the Accountant General of the Federation collated by The PUNCH on Sunday.
The analysis covered VAT generated from January to June 2026, although the proceeds were distributed at FAAC meetings held between February and July. Under the FAAC arrangement, revenue earned in a particular month is shared among the three tiers of government in the following month. This means that January revenue was distributed in February, while June revenue was shared in July.
A total of N4.31tn in distributable VAT revenue was shared among the Federal Government, states and local government councils during the first half of 2026. This was N471.07bn, or 12.26 per cent, higher than the N3.84tn distributed in the corresponding period of 2025.
The H1 2026 distributable VAT pool accounted for 33.09 per cent of the N13.04tn total distributable federation revenue shared during the six-month period.
In comparison, VAT represented about 37.99 per cent of the N10.12tn shared in the first half of 2025. This means that although VAT revenue increased in absolute terms in 2026, its share of total FAAC distributions declined because statutory and other federation revenues grew at a faster pace.
The N13.04tn shared from revenue generated between January and June 2026 was N2.92tn, or 28.86 per cent, above the N10.12tn distributed from revenue generated in the corresponding period of 2025.
The rise in states’ VAT receipts was driven by higher distributable VAT collections in four of the six months and the implementation of a new vertical sharing formula that increased the collective share allocated to states.
Before the commencement of the new tax regime on January 1, 2026, distributable VAT was shared 15 per cent to the Federal Government, 50 per cent to states, and 35 per cent to local government councils.
Under the new tax laws, the Federal Government’s share was reduced to 10 per cent, while the states’ portion increased to 55 per cent. The local governments’ allocation remained unchanged at 35 per cent.
The tax reforms took effect as scheduled from January 1, 2026, following the signing of the new tax laws in June 2025. The adjustment transferred five percentage points of the distributable VAT pool from the Federal Government to the states.
Based on the N4.31tn VAT distributed in H1 2026, the Federal Government gave up about N215.72bn to the states because of the change in the formula.
Had the previous 15 per cent formula remained in place, the Federal Government would have received about N647.15bn from the H1 VAT pool. Under the current 10 per cent allocation, its expected share was about N431.43bn.
States would have collectively received N2.16tn under the old 50 per cent formula. However, the current 55 per cent allocation raised their share to about N2.37tn, giving them an additional N215.72bn.
