Tax law: VAT hits record N1tn as new sharing era begins
Tax law: VAT hits record N1tn as new sharing era begins as Nigeria’s Value Added Tax (VAT) pool surged at the start of 2026, delivering the first major revenue test of a new sharing formula that tilts more proceeds to states while cutting the Federal Government’s slice.
Documents presented at the February meeting of the Federation Accounts Allocation Committee (FAAC), obtained by The PUNCH, showed that total VAT collections rose to ₦1.08 trillion in January 2026, up from ₦913.96 billion in December 2025. 
But the full ₦1.08 trillion was not available for distribution. VAT deductions at source in January were ₦79.94 billion, leaving a net distributable VAT of ₦1.00 trillion, which is the “record ₦1tn” highlighted in the headline. 
That is the key distinction behind Tax law: VAT hits record N1tn as new sharing era begins: the record is in what was shared after deductions, not simply what was collected.
What changed: the new VAT sharing formula
January 2026 was reported as the first full month under the revised VAT sharing formula. Under the new structure:
• Federal Government: 10%
• States: 55%
• Local Governments: 35% 
Previously, the split was:
• Federal Government: 15%
• States: 50%
• Local Governments: 35% 
This is why Tax law: VAT hits record N1tn as new sharing era begins matters beyond the big number. The same ₦1.00 trillion now moves differently through the federation, reshaping who feels the boost first.
https://ogelenews.ng/tax-law-vat-hits-record-n1tn
Who gained, who lost: the January arithmetic
From the ₦1.00 trillion net VAT shared in January, the allocations were:
• Federal Government: ₦100.32bn
• States: ₦551.77bn
• Local Governments: ₦351.13bn 
Punch also did the counterfactual: if the old 15% formula had remained, the Federal Government would have received about ₦150.48bn instead of ₦100.32bn, implying a shortfall of roughly ₦50.16bn for the centre. 
On the other side, states, now at 55%, gained roughly that same ₦50.16bn compared with what they would have received under the former 50% structure. 
So, Tax law: VAT hits record N1tn as new sharing era begins is also a quiet fiscal rebalancing story: less for Abuja, more for the states, while local governments retain the same percentage but benefit when the pool expands.
Why the VAT pool jumped in January
The report showed:
• Gross VAT: ₦1.08tn (January) vs ₦913.96bn (December)
• Month-on-month increase: ₦169.20bn (about 18.5%) 
The net VAT shared also rose sharply:
• Net VAT shared: ₦1.00tn (January) vs ₦846.51bn (December)
• Increase: ₦156.72bn (about 18.5%) 
In plain terms, Tax law: VAT hits record N1tn as new sharing era begins because the pool grew and the new formula kicked in at the same time. That combination magnified the states’ gains.
The Lagos effect and the familiar VAT geography
The distribution data again showed how VAT “activity” concentrates.
Punch reported that Lagos remained the dominant beneficiary. For January:
• Lagos gross VAT allocation: ₦111.22bn
• After deduction: Lagos net VAT (state): ₦101.34bn
• Lagos local governments (collectively): ₦70.57bn 
Other large allocations listed included Oyo, Rivers, Kano, FCT, and Bayelsa, with smaller allocations at the bottom end going to states like Taraba, Ebonyi, and Ekiti. 
This is where the politics sits inside Tax law: VAT hits record N1tn as new sharing era begins. The formula includes components (including equality, population, and derivation factors as described in the report), but economic activity still shapes outcomes, and that creates winners and losers. 
The “tax law” angle: what these reforms are trying to do
The VAT sharing shift is part of a broader tax reform effort that has been under debate since 2023–2025, including changes designed to simplify taxes and adjust revenue administration.
Independent explainers have noted the new VAT sharing formula (10/55/35) as one of the major changes under the new tax reform direction. 
Reuters previously reported the broader tax reform push in Nigeria, including legislative debates around VAT design and revenue sharing, and the pressure to raise revenue in a low tax-to-GDP environment. 
That context matters because Tax law: VAT hits record N1tn as new sharing era begins is not a one-off FAAC headline. It is the first big monthly reading in a new fiscal arrangement that could reshape state budgeting, especially if VAT performance stays above projections.
What to watch next
Three things will determine whether January was a spike or a pattern:
1. Consistency of VAT growth
If collections stay near or above ₦1tn net, states’ monthly inflows could remain structurally higher under the 55% share. 
2. Federal adjustment pressure
A reduced federal share combined with rising spending needs can create pressure for either efficiency gains, new revenue lines, or renewed debate about the VAT rate path (which has been part of the broader reform conversation). 
3. Subnational accountability
Higher allocations raise the same old question: will states spend the extra money on visible public goods, or will it dissolve into overheads?
For now, the verified story is straightforward: Tax law: VAT hits record N1tn as new sharing era begins, with January 2026 delivering ₦1.08tn gross VAT, ₦1.00tn net VAT, and a new 10/55/35 sharing split that favoured states. 
https://punchng.com/tax-law-vat-hits-record-n1tn-as-new-sharing-era-begins
