2024 VAT Report Underscores Nigeria’s Unfair Revenue Sharing

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The 2024 Value Added Tax (VAT) breakdown has revealed significant disparities in contributions and allocations among Nigeria’s 36 states, highlighting a revenue-sharing system that continues to spark heated debates on fiscal fairness and equity.

Lagos State, the economic nerve centre of Nigeria, dominated the VAT pool, generating a staggering ₦2.75 trillion—accounting for over half of the national total. Despite this, Lagos received only ₦460.11 billion in return, representing just 16.74% of its contribution. Rivers State followed as the second-largest contributor, with ₦832.69 billion, but was allocated ₦186.66 billion, a mere 22.4% of what it generated.

Oyo State secured third place in contributions, generating ₦272.41 billion and receiving ₦116.83 billion, amounting to 42.9% of its VAT. Kano, on the other hand, contributed ₦77.76 billion but received more than it generated, with an allocation of ₦117.19 billion, representing 150.7% of its contribution. Delta State also saw a marginal gain, receiving ₦80.73 billion against its contribution of ₦73.39 billion (110%).

However, the most striking figures came from states with significantly smaller contributions. Imo State, for instance, generated just ₦4.38 billion but received an astounding ₦70.70 billion—equivalent to 1,613% of its VAT contribution. Cross River and Kebbi states followed a similar pattern, receiving 686.5% and 758.5% of their contributions, respectively.

Other states that benefited significantly from the redistribution include Enugu, which contributed ₦15.39 billion and received ₦67.54 billion (438.7%), and Ondo, which generated ₦13.80 billion and was allocated ₦68.57 billion (496.8%). States like Kaduna, Sokoto, and Bauchi also received allocations more than double or triple their contributions, underscoring the redistributive approach of the Federal Account Allocation Committee (FAAC).

The allocation imbalance has once again reignited discussions on Nigeria’s fiscal structure. While proponents of the current system argue that it ensures equitable development across the country, critics, particularly from high-revenue states like Lagos and Rivers, call for a restructuring that allows states to retain a greater share of what they generate.

As these figures fuel the ongoing debate about fiscal federalism and resource control, questions about the long-term sustainability and fairness of Nigeria’s revenue-sharing formula loom large. Is it time for a reform that incentivizes states to boost their internally generated revenue while balancing regional development?

The 2024 VAT report offers a snapshot of the economic dynamics within Nigeria and underscores the urgent need for conversations about how to create a more equitable and prosperous future.