Value-Added Tax (VAT) collections in Nigeria have reached an unprecedented ₦1 trillion, marking a significant milestone as the nation transitions into a new system of tax revenue sharing between federal and sub-national governments.
According to data released by the Federal Inland Revenue Service (FIRS), this is the first time VAT inflows have crossed the trillion-naira threshold, reflecting strengthened compliance and broadening tax bases following recent policy reforms.
The boost in VAT receipts comes against the backdrop of the Tax Amnesty (Miscellaneous Provisions) Act 2020 and other legislative measures aimed at deepening revenue generation beyond oil. Under the restructured tax framework, Nigeria’s states and the Federal Capital Territory (FCT) will now receive 50 per cent of VAT revenues collected within their jurisdictions a shift from the previous system where such revenues were largely pooled at the national level.
President Bola Tinubu has described the achievement as “a triumph of fiscal federalism and cooperative governance”, noting that increased VAT inflows alongside improved remittance practices signal growing public participation in the formal economy.
“The surpassing of the ₦1 trillion mark is evidence of strengthened taxpayer confidence and the effectiveness of collaborative revenue administration,” the Presidency said in a statement on Friday.
Under the new arrangement, state and FCT governments are expected to use their share of VAT proceeds to fund critical services including education, health, infrastructure, and security. Analysts have noted that the shift could help ease funding pressures on state budgets, particularly as Nigeria navigates persistent economic headwinds including inflationary impacts and exchange rate volatility.
Economists have also attributed the VAT surge to enhanced compliance mechanisms, digital tax filing platforms, and broader economic activity following Nigeria’s reopening of key sectors in recent years.
While the record VAT haul has been welcomed, tax experts are urging continued reforms to ensure sustainability. Dr. Funmi Alade, a fiscal policy analyst, said that “hitting the ₦1 trillion milestone is commendable, but longer-term stability requires ongoing efforts to formalise the informal sector and improve tax literacy.”
Under the Shared Revenue Framework, the Federal Government will retain 50 per cent of VAT revenue, with the remaining half allocated to sub-national governments based on collections within each state. This fiscal shift aligns with broader national priorities to narrow revenue disparities and promote locally driven development.
The Federal Ministry of Finance has assured that robust oversight measures are being put in place to ensure that increased revenue flows translate into tangible improvements in public welfare, particularly at the grassroots level.
Officials say that the VAT milestone sets a positive precedent for Nigeria’s evolving tax ecosystem and highlights the potential of non-oil revenue streams to support national development in the years ahead.
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