Despite Contributing Significantly To VAT Collections, Lagos, Rivers Receive Less Proceeds

Notwithstanding that Lagos and Rivers State contributed highest in the Value Added Tax (VAT) being collected by the Federal Government of Nigeria, the two states got lesser proceeds of their VAT contributions.

This was revealed after an analysis of revenue allocation data from Nigeria’s Federation Account Allocation Committee (FAAC).

The report identified disparities in the redistribution of VAT proceeds among other states who contributed largely to the collections.

The data analysis was made public by Agora Policy, a policy think tank.

The data captures VAT contributions and disbursements between January and October 2024.

In the document, Lagos State, which tops list of VAT contributors for the first 10 months of 2024, was allocated 16.78 per cent of its contributions. But, Imo State received a whooping 1,715.98 per cent of its contributions during the same period.

Lagos contributed N2.21 trillion in VAT, accounting for the highest share of the total pool. Meanwhile, Imo’s contributions were pegged at N3.33 billion, the lowest among the states. But Imo received N57.09 billion, a figure significantly higher than what it contributed.

The report categorised states based on the proportion of VAT they received relative to their contributions.

Aside from Lagos, other states such as Rivers, Oyo, and Bayelsa received less than what they contributed in the VAT.

Seventeen states, including Kano and Kaduna, received between 101 per cent and 300 per cent of their contributions, while eleven states, such as Bauchi and Ekiti, were allocated 301 per cent to 500 per cent.

Imo, Abia, Cross River, and Kebbi reportedly benefited the most, each receiving more than 500 per cent of their VAT contributions.

The data highlights Lagos and Imo as outliers.

For the ten months under review, the highest total VAT allocation to a state was N371.09 billion. On the contrary, Nasarawa received the least allocation, totalling N47.07 billion with a difference of N324.02 billion.

VAT is a crucial revenue source in Nigeria’s fiscal framework, with collections distributed among the federal, state, and local governments through a set formula.

The federal government currently retains 15 per cent, states receive 50 per cent, while local governments are allocated the remaining 35 per cent.

Critics have said that the current inter-state sharing formula—based on factors such as population, equality, and landmass—does not favour high-revenue states like Lagos and Rivers which contribute significantly to VAT collections.