The Nigerian fiscal landscape is bracing for a substantial influx of revenue from Value Added Tax (VAT) in 2025, with the Federal Government and 21 states projecting a combined collection of N2.5 trillion. This ambitious projection, gleaned from their respective budget estimates, represents a remarkable 65.8% surge compared to the N1.527 trillion anticipated for 2024. This significant increase underscores the growing importance of VAT as a revenue source for both federal and state governments. Notably, these projections do not factor in potential revenue gains from proposed tax reform bills, which, if implemented, could further bolster VAT collections.
VAT, a consumption tax applied at every value-adding stage of the supply chain, has become a focal point in Nigeria’s ongoing tax reform discussions. Recent reports indicate a substantial increase in VAT revenue under the current administration, with collections rising by N549 billion within a six-month period between October 2023 and March 2024, according to data released by the Federation Account Allocation Committee (FAAC). This upward trend in VAT revenue underscores the government’s efforts to enhance revenue mobilization and strengthen the nation’s fiscal position.
The 21 states contributing to this projected N2.5 trillion VAT revenue target for 2025 include Kebbi, Kaduna, Ekiti, Oyo, Osun, Ogun, Enugu, Borno, Ondo, Kano, Katsina, Ebonyi, Gombe, Anambra, Abia, Niger, Jigawa, Bauchi, Akwa-Ibom, Adamawa, and Delta. While the budget documents for the remaining 14 states and the Federal Capital Territory remain unavailable, the projections from these 21 states, coupled with the Federal Government’s estimates, provide a significant insight into the expected VAT revenue landscape for 2025.
The Federal Government, a major beneficiary of VAT revenue, has projected its share to increase significantly from N512.8 billion in 2024 to N972 billion in 2025. This substantial increase reflects the government’s reliance on VAT revenue to fund its budgetary commitments. Similarly, states across the federation are anticipating significant increases in their VAT allocations. Kebbi State, for instance, expects its VAT revenue to more than double, rising from N41 billion in 2024 to N87.3 billion in 2025. Kaduna State also projects a notable increase, from N48.2 billion to N57.8 billion.
Other states are also forecasting substantial VAT revenue growth. Ekiti State anticipates N54.9 billion, up from N52.6 billion in 2024. Oyo State projects a substantial leap from N78.8 billion to N144 billion. Osun State expects its VAT revenue to climb from N45.3 billion to N78.1 billion. These projections demonstrate the reliance of states on VAT revenue to finance their development agendas.
The remaining states included in the analysis also exhibit significant projected increases in VAT revenue. Ogun, Enugu, Borno, Ondo, Kano, Katsina, Ebonyi, Gombe, and Anambra project revenues of N85 billion, N74.9 billion, N87.3 billion, N71.5 billion, N97.3 billion, N85.9 billion, N50.8 billion, N39 billion, and N92.4 billion respectively, compared to their 2024 projections. Similarly, Abia, Niger, Jigawa, Bauchi, Akwa-Ibom, Adamawa, and Delta project VAT revenues of N60.6 billion, N64.6 billion, N80 billion, N78.5 billion, N70 billion, N52.5 billion, and N46.6 billion respectively, showcasing a general upward trend in projected VAT revenue across these states. The significant increases in projected VAT revenue across these states underscore the growing importance of this revenue stream for funding public services and development initiatives.
