Lagos, Rivers, Oyo lead Nigeria’s VAT generation in 2026 as new sharing formula boosts state allocations

Lagos State generated N819.62 billion in Value Added Tax, Rivers State N278.23 billion, and Oyo State N79.78 billion, cementing their positions as Nigeria’s top VAT-generating states in 2026. Lagos alone accounts for over 52 per cent of the nation’s non-import VAT pool, reflecting the wide gap between the commercial capital and other states.

Data from the Federation Account Allocation Committee (FAAC) and the National Bureau of Statistics (NBS) shows that industrial activity, urban consumption, and trade in these states drive their strong tax performance. Bayelsa State generated N27.26 billion, while Kano State posted N22.97 billion in VAT.

New revenue-sharing formula increases state allocations

The top VAT-generating states are also the biggest beneficiaries of the revised VAT revenue-sharing formula introduced under recent tax legislation. FAAC data shows state governments received a combined N2.37 trillion in VAT allocations in the first half of 2026, a 23.5 per cent increase compared to the same period in 2025.

The surge followed a major adjustment in the vertical allocation formula. The states’ share of net VAT revenue rose from 50 per cent to 55 per cent. The Federal Government’s share was cut to 10 per cent, while local governments retained 35 per cent.

The revised VAT-sharing structure divides revenue among states using three key metrics: 50 per cent equality shared equally among all states regardless of size, 30 per cent derivation allocated based on how much VAT each state generates, and 20 per cent consumption or population distributed according to market size and population indicators.

Lagos, Rivers, Oyo dominate derivation-based allocations

Because 30 per cent of the distribution is tied directly to derivation, states with intense commercial activity receive significantly higher allocations. FAAC’s January to June 2026 data shows Lagos generated N1.81 trillion in VAT, Rivers N560.04 billion, and Oyo N253.67 billion. The Federal Capital Territory generated N182.93 billion, while Bayelsa State, Delta State, and Kano State also posted strong figures.

Analysts say the concentration of VAT revenue in Lagos, Rivers, and Oyo highlights Nigeria’s uneven economic development, where a handful of states continue to dominate national commercial activity and tax generation.

Legit.ng earlier reported that among the 36 states, Delta State emerged as the highest recipient of gross FAAC allocation, followed closely by Lagos State and Rivers State. The figures highlight the powerful influence of oil derivation revenue and strong tax collections in shaping monthly allocations.

What this means for the naira and Nigerian businesses

The widening gap in VAT generation between Lagos and other states reinforces the dominance of the South-West and South-South in the country’s commercial landscape. For businesses, the new sharing formula means states with higher consumption and industrial output will receive more federal revenue, potentially deepening regional economic disparities. For consumers and the naira, the concentration of tax revenue in a few states may influence where investment and government spending flow, further entrenching the economic advantages of Lagos, Rivers, and Oyo.