Geopolitical Zones’ VAT Contributions and Allocations Reveal Deep Fiscal Imbalances in 2025
Fresh figures released by the Federation Accounts Allocation Committee (FAAC) and compiled by TheCable Index have provided a detailed breakdown of how Nigeria’s six geopolitical zones contributed to and benefited from the national Value Added Tax (VAT) pool in 2025. The data, which has circulated widely on social media and online forums, has once again brought to the surface long-standing arguments about revenue generation, redistribution, and the structure of Nigeria’s fiscal system.
When Lagos and Rivers States — Nigeria’s two largest VAT-generating states — are excluded, the South-West emerged as the highest contributor to the VAT pool, generating ₦519.29 billion in 2025. The zone received ₦503.31 billion in return, representing 96.92 percent of its contribution. The South-South followed with a contribution of ₦459.65 billion and received ₦472.16 billion, amounting to 102.72 percent of what it generated.
The northern zones recorded significantly different ratios. The North-West contributed ₦370.92 billion but received ₦743.69 billion, translating to 200.50 percent of its contribution. The North-Central zone generated ₦266.24 billion and received ₦528.99 billion, or 198.69 percent. The North-East recorded ₦201.40 billion in VAT contributions while receiving ₦521.38 billion, representing 258.89 percent. The South-East contributed the least at ₦139.75 billion but received ₦436.01 billion, equivalent to 312.01 percent of its contribution.
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The picture shifts even more dramatically when Lagos and Rivers States are included. With both states factored in, the South-West contributed a combined ₦3.97 trillion to the VAT pool in 2025 but received ₦1.08 trillion, just 27.12 percent of its contribution. The South-South contributed ₦1.29 trillion and received ₦678.62 billion, representing 52.56 percent.
In contrast, VAT receipts for the North-West, North-Central, North-East, and South-East remained unchanged in absolute terms, maintaining ratios well above 100 percent. This has intensified claims that Nigeria’s VAT allocation formula disproportionately favours consumption-heavy or less industrialised regions at the expense of major commercial hubs.
Analysts note that VAT in Nigeria is centrally collected and redistributed using a formula that considers population, equality of states, and derivation, rather than purely where the tax is generated. Supporters of the current system argue that it promotes national cohesion and supports regions with weaker economic bases. Critics, however, contend that it discourages productivity, penalises high-performing states, and fuels regional resentment.
The debate has also revived calls for fiscal restructuring, including proposals that states should collect VAT independently and remit an agreed percentage to the federal government. Similar arguments have previously been advanced by some state governments, particularly in the South-West and South-South, though these efforts have faced legal and political obstacles.
Beyond regional rivalries, some commentators have pointed out that Nigeria’s overall VAT revenue — estimated at roughly ₦7 trillion — remains relatively small compared to the size of the national budget and the country’s tax-to-GDP ratio. They argue that while the distribution formula is contentious, broader tax reforms may be more critical to addressing Nigeria’s fiscal challenges.
As discussions continue, the latest VAT figures underscore a recurring tension in Nigeria’s federal arrangement: balancing redistribution with incentives for economic growth. Whether the renewed debate will translate into policy reform remains uncertain, but the data has once again placed fiscal equity at the centre of national discourse.