State Allocations Surge to ₦2.37tn in First Half of 2026 Under Revised Tax Sharing Formula

State governments in Nigeria received ₦2.37 trillion from Value Added Tax distributions during the first half of 2026, marking a 23.48 percent increase compared to the ₦1.92 trillion allocated in the same period of 2025. Data from the Federation Account Allocation Committee, the National Bureau of Statistics, and the Office of the Accountant General of the Federation show that total distributable Value Added Tax revenue reached ₦4.31 trillion between January and June 2026, representing a 12.26 percent increase year-on-year.

The surge in subnational revenues was primarily driven by a revised vertical sharing formula under new tax legislation that took effect on January 1, 2026. The updated framework increased the states’ collective share of distributable Value Added Tax from 50 percent to 55 percent while reducing the Federal Government’s share from 15 percent to 10 percent. The local government councils’ allocation remained unchanged at 35 percent, yielding ₦1.51 trillion over the six-month period. Under this new model, the five percentage point adjustment transferred approximately ₦215.72 billion directly from the Federal Government’s potential share to the states.

Despite the absolute growth in consumption tax collections, multilateral institutions and economic analysts have raised considerations regarding the broader fiscal impact. The International Monetary Fund and the Nigeria Economic Summit Group noted that maintaining current Value Added Tax rates alongside structural tax reductions could narrow federal revenue margins unless offset by alternative revenue mechanisms.

Overall distributions across all federation revenue streams reached ₦13.04 trillion in the first half of 2026. General allocations to states rose to ₦4.47 trillion, excluding ₦864.89 billion in 13 percent derivation funds paid to oil-producing states. Meanwhile, federal allocations stood at ₦4.57 trillion, and local government allocations totaled ₦3.13 trillion. In light of the increased transfers, economic experts have urged state governments to ensure transparency in utilizing the funds, emphasizing investments in infrastructure, agriculture, and public utilities.