Nigeria’s VAT Pool Windfalls: Who’s Gaining at What Cost

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In January 2025, various states across Nigeria made significant contributions to the Value Added Tax (VAT) pool, with notable discrepancies in the amounts received in return. The VAT pool is vital for revenue distribution among states and plays a crucial role in financing local projects and initiatives.

Leading the contributions was Lagos State, which contributed a staggering N305.52 billion, receiving N62.59 billion in return, equating to 20.49% of its contribution. Rivers State followed with contributions of N90.21 billion, receiving N11.01 billion (12.20%).

Interestingly, several states received a much higher percentage than they contributed. Oyo State, with a contribution of N27.71 billion, received N13.02 billion, representing an impressive 47.00%. Meanwhile, Bayelsa received 62.65% of its N12.80 billion contribution, amounting to N8.02 billion.

Kano State’s allocation was particularly striking, as it received 141.49% of its contribution—N13.57 billion from a contribution of N9.59 billion. Similarly, Akwa Ibom, Edo, and Ekiti states received substantial returns of 156.26%, 160.67%, and 150.65% respectively.

Other notable allocations included Sokoto and Borno states, which received 191.63% and 223.56% of their contributions. Katsina and Niger states also saw returns exceeding 200%, with Katsina receiving N10.01 billion from a contribution of N3.86 billion, representing an astounding 259.34%.

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At the lower end, states like Osun and Abia received extraordinary percentages of their contributions, with Osun receiving 1,312.09% (N7.73 billion from N589.41 million) and Abia receiving 993.98% (N7.29 billion from N733.82 million). Such returns highlight the disparities in revenue sharing and the need for equitable distribution mechanisms.

The stark contrasts in contributions and returns raise critical questions about fairness and sustainability in Nigeria’s fiscal framework. How long can the system sustain such discrepancies? What reforms are necessary to ensure all states receive fair compensation for their contributions?

Overall, the January 2025 VAT pool allocations reflect the ongoing challenges and complexities of fiscal federalism in Nigeria, underscoring the importance of transparent and fair revenue distribution among states.

For more insights and updates, stay tuned to Newspot Nigeria.

Source: Cable Index