Total Value Added Tax (VAT) earnings rose to ₦1.08 trillion in January as a new sharing formula commenced, altering how the proceeds are split among the Federal Government, states, and Local Governments.
Documents presented at the February meeting of the Federation Account Allocation Committee and obtained on Tuesday showed that total VAT collections by the Nigeria Revenue Service stood at ₦1.08 trillion in January 2026, compared with ₦913.96 billion in December 2025.
The increase of ₦169.20 billion represents an 18.5 per cent rise month-on-month. However, the full ₦1.08 trillion was not available for sharing. VAT deductions at source amounted to ₦79.94 billion in January, up from ₦67.45 billion in December, leaving a net VAT of ₦1.00 trillion for distribution.
In December, the net VAT shared stood at ₦846.51 billion. The month-on-month increase in the net distributable VAT was ₦156.72 billion, also representing an 18.5 per cent increase.
January marked the first full month under the revised VAT sharing formula. Under the new structure, 10 per cent of net VAT goes to the Federal Government, 55 per cent to state governments, and 35 per cent to Local Governments.
Previously, the Federal Government received 15 per cent, states 50 per cent, and Local Governments 35 per cent. If the previous 15 per cent formula had been retained, the Federal Government would have received about ₦150.48 billion from the ₦1.00 trillion net VAT shared in January, instead of the ₦100.32 billion it got under the new 10 per cent structure, implying a shortfall of roughly ₦50.16 billion.
Conversely, states, which now receive 55 per cent, shared about ₦551.77 billion, meaning their allocation increased by approximately ₦50.16 billion compared to the ₦501.61 billion they would have received under the former 50 per cent formula.
Based on the new sharing formula, from the ₦1.00 trillion net VAT shared in January, the Federal Government received ₦100.32 billion, states received ₦551.77 billion, while Local Governments were allocated ₦351.13 billion.
In December, under the old 15 per cent formula, the Federal Government’s VAT share stood at ₦126.98 billion. The January allocation of ₦100.32 billion, therefore, represents a decline of ₦26.65 billion, or about 21 per cent, compared with what the Federal Government received in December.
For states, the impact of the new formula was positive. Their collective share rose to ₦551.77 billion in January from ₦423.25 billion in December, an increase of ₦128.52 billion, equivalent to 30.4 per cent.
Local Governments received ₦351.13 billion in January, up from ₦296.28 billion in December, an increase of ₦54.85 billion or 18.5 per cent.
The cost of collection rose alongside the higher VAT pool. The NRS VAT cost of collection, calculated at 4 per cent, increased to ₦43.33 billion in January from ₦32.72 billion in December, a rise of ₦10.61 billion or 32.4 per cent.
The Nigeria Customs Service import VAT cost of collection, which stood at ₦3.84 billion in December, was nil in January, which may be due to the tax reforms, which made NRS the main agency in charge of collecting government revenue.
Other statutory deductions included 3 per cent to the North East Development Commission Project Account, which rose to ₦31.20 billion from ₦26.32 billion, an increase of ₦4.87 billion . The 0.5 per cent deduction to the Revenue Mobilisation Allocation and Fiscal Commission increased to ₦5.42 billion from ₦4.57 billion, up by ₦846.02 million.
State governments received ₦767.29 billion, local governments got ₦517.28 billion, while the 13 per cent derivation share amounted to ₦90.19 billion.
The PUNCH