The 36 states of Nigeria will receive an estimated N5.07 trillion as their share of Value Added Tax (VAT) in 2026. This follows the new VAT sharing formula under the National Tax Acts, as revealed in the 2026–2028 Medium-Term Expenditure Framework (MTEF).
Under the new rules, the Federal Government’s VAT share drops from 15% to 10%. Meanwhile, states’ share rises from 50% to 55%. Local governments keep their 35% share. This shift marks a major move toward deeper fiscal federalism.
The total VAT pool is projected to grow to N9.23 trillion in 2026—up from N6.95 trillion in 2025. As a result, the Federal Government will get N922.5 billion (10%), down from N1.04 trillion in 2025.
If the old formula had continued, the federal share would have been about N1.38 trillion. The difference—N461.27 billion—now flows to states. That explains why their 2026 VAT allocation jumps from N3.47 trillion to N5.07 trillion.
Local governments also benefit. Their 35% share translates to N3.23 trillion in 2026, up from N2.43 trillion the previous year.
Looking ahead, the VAT pool is expected to keep growing—to N10.87 trillion in 2027 and N13.28 trillion in 2028. States will receive N5.98 trillion and N7.30 trillion in those years, respectively.
However, VAT is only one part of Nigeria’s revenue picture. The main Federation Account—fueled by oil, company tax, and customs—will shrink sharply in 2026. It drops from N60.26 trillion in 2025 to N41.06 trillion in 2026.
This means the Federal Government loses about N10.1 trillion from that pool alone. States and local governments also see lower allocations from this stream.
Another key revenue source is stamp duty (formerly the Electronic Money Transfer Levy). Its distributable pool will nearly double—from N228.85 billion in 2025 to N456.07 billion in 2026.
The same VAT sharing formula applies: 10% federal, 55% states, 35% local. So states will get N250.84 billion from stamp duties in 2026—more than double their 2025 share.
Why is this happening? Digital payments are surging in Nigeria. More transactions mean more stamp duty revenue—most of which now goes to subnational governments.
Still, risks remain. The International Monetary Fund (IMF) warned that keeping the VAT rate unchanged—without raising it—could cost the government 0.5% of GDP in lost revenue.
The Nigeria Economic Summit Group (NESG) echoed this concern. CEO Dr. Tayo Aduloju said, “Without rate hikes, the government might lose some revenue.” He stressed the need to balance tax simplification with stable income.
On the other hand, the IMF acknowledged the government’s caution. With high poverty and weak social safety nets, a VAT hike could hurt vulnerable households.
In Abuja, Presidential Tax Reforms Committee Chairman Taiwo Oyedele noted that states could earn over N4 trillion annually from VAT starting in 2026. But he posed a critical question: “Will this money be spent—or invested?”
The Nigeria VAT share 2026 shift empowers states financially. Yet, it also tests their readiness to manage larger budgets wisely—and sustainably.
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