Copyright bizwatchnigeria
Nigeria’s subnational governments could collectively earn over ₦4 trillion annually beginning in 2026, following the full implementation of the new Value Added Tax (VAT) reforms, according to Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee. Speaking at the launch of the BudgIT State of States 2025 Report in Abuja, Oyedele revealed that the revised VAT allocation formula would increase states’ share of the tax revenue to 55%, significantly boosting their fiscal autonomy. “With the VAT reforms set to take effect in 2026, states’ earnings could exceed ₦4 trillion. The critical question is whether this revenue will be spent or invested productively,” Oyedele stated during his keynote address at the event, which marked BudgIT’s 10th anniversary. He noted that while Nigeria’s recent reforms have doubled Federation Account Allocation Committee (FAAC) disbursements — from ₦5.4 trillion in 2023 to ₦11.4 trillion in 2024 — many households are yet to feel the benefits due to rising living costs. “States are earning more than ever, but ordinary Nigerians still have less disposable income,” he said. The fiscal expert urged state governments to channel the new revenues into projects that deliver tangible social and economic benefits. The BudgIT report showed that 21 states still depend on federal allocations for over 70% of their total income, a situation Oyedele described as unsustainable. However, some states have made impressive progress. Enugu achieved a 381% increase in internally generated revenue (IGR), while Bayelsa recorded a 174% rise. Oyedele noted that new tax measures — including the transfer of electronic money transfer levies to states and tax exemptions for state bonds — would reduce borrowing costs and strengthen fiscal resilience. He added that capital expenditure has, for the first time in years, overtaken recurrent spending, although budget execution in critical sectors like education and health remains weak. “States spent less than ₦7,000 per person on education and ₦3,500 on health,” he said. Meanwhile, Central Bank of Nigeria (CBN) Deputy Governor for Economic Policy, Dr. Muhammad Abdullahi, urged states to sustain fiscal discipline and transparency. He called for full digitisation of revenue systems, adoption of the Treasury Single Account (TSA), and improved budget implementation to achieve 80% or higher efficiency in health and education. According to Abdullahi, Nigeria’s fiscal structure had been weighed down by multiple exchange rates, deficit financing through Ways and Means, and dwindling reserves. He assured that the CBN’s ongoing reforms aim to restore macroeconomic stability and encourage responsible state-level governance. The BudgIT Co-founder, Oluseun Onigbinde, reaffirmed the report’s purpose as a “mirror of governance,” saying it helps states assess performance and improve transparency. “Transparency is now a competitive advantage among states,” he added.
