VAT Boom Across the States: 32 States Post Revenue Surge in 2025 — Triggering Wide-Ranging Economic Ripple Effects

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By Anthony EMEKA NWOSU

Nigeria’s fiscal map is undergoing a significant transformation. Fresh data from the Federation Account Allocation Committee (FAAC), analysed by TheCableIndex, show that 32 out of 36 states recorded increased Value Added Tax (VAT) contributions between 2024 and 2025 — a development that signals not just revenue growth, but a potential structural shift in subnational economic activity.

The growth cuts across regions, political blocs, and economic classifications, pointing to a broad-based expansion in taxable transactions and improved fiscal administration nationwide.

A Year of Exceptional Growth

The headline figure tells a compelling story: only four states recorded declines, while the overwhelming majority saw double-digit increases — with several states posting triple-digit growth.

The Breakout Performers

Imo State led the national surge with a staggering 381.3% increase, growing from N4.38bn in 2024 to N21.08bn in 2025 — more than quadrupling its VAT contribution within a year.

Ondo followed with 192.4% growth (N13.80bn to N40.35bn), while Bayelsa recorded a 154% increase, rising from N64.66bn to N164.26bn.

Nasarawa (+151.5%) and Kebbi (+147.1%) also delivered triple-digit expansion, underscoring a widening economic base beyond traditional commercial hubs.

These dramatic jumps suggest improvements in revenue capture mechanisms, increased formalisation of businesses, and heightened commercial activity.

Regional Strength: A Nationwide Phenomenon

Northern Nigeria: Expanding Market Activity

Northern states posted strong upward momentum:

  • Jigawa nearly doubled its VAT contribution (+99.8%)
  • Zamfara (+96.5%)
  • Kaduna (+88.5%)
  • Kano (+54.8%)
  • Sokoto (+67.4%)
  • Katsina (+64%)
  • Niger (+52.9%)
  • Yobe (+75.2%)

Kano, in particular, saw VAT rise from N77.76bn to N120.37bn, reinforcing its status as a major commercial engine in the North.

The scale of growth across northern markets indicates expanding trade flows, improved tax compliance systems, and stronger integration into the formal economy.

South-West: Sustained Base Expansion

Lagos — Nigeria’s commercial powerhouse — recorded a 25.5% increase, growing from N2.75 trillion to N3.45 trillion, an absolute increase of N700bn. While its percentage growth appears moderate compared to smaller states, the sheer volume of expansion dwarfs most others.

Oyo rose by 35.9%, from N272.41bn to N370.24bn, while Ogun climbed by 55.2%. Osun (+79.3%) and Ekiti (+40.6%) also demonstrated strong performance.

The South-West’s steady growth reflects deepening consumer markets, expanding service sectors, and improved tax efficiency.

South-South & Oil-Producing States: Diversification in Motion

Delta (+55.1%), Akwa Ibom (+68.2%), Edo (+64.6%), and Bayelsa (+154%) all posted significant increases.

This suggests a gradual shift beyond oil-dependent revenues, as non-oil economic transactions contribute more meaningfully to VAT pools.

South-East & Middle Belt: Solid Gains

Abia nearly doubled its VAT (+92.9%), Ebonyi rose by 39.3%, and Enugu by 45.8%.

Benue (+58.6%), Plateau (+86.1%), Nasarawa (+151.5%), and Kogi (+19.1%) reflect expanding commercial footprints in the Middle Belt.

The Exceptions: Four States in Decline

Despite the broad upward trajectory, four states recorded year-on-year declines:

  • Rivers (-0.1%) — a marginal drop from N832.69bn to N831.53bn
  • Anambra (-6.4%)
  • Borno (-9.9%)
  • Taraba (-31.3%) — the steepest contraction

Notably, Rivers remains one of Nigeria’s largest VAT contributors despite the slight dip.

The Domino Effects: Why This Matters Beyond the Numbers

The surge in VAT contributions sets off a chain reaction across Nigeria’s fiscal and economic ecosystem.

1️⃣ Stronger FAAC Allocations

Higher VAT collections expand the distributable revenue pool under FAAC. This directly increases allocations to states and local governments, improving liquidity across tiers of government.

Domino effect:

  • More predictable monthly allocations
  • Improved salary payments
  • Reduced borrowing pressure
  • Enhanced budget implementation rates

2️⃣ Greater Fiscal Autonomy for States

When states grow their VAT base, they reduce overdependence on federal oil revenues.

Domino effect:

  • Improved creditworthiness
  • Stronger internally linked revenue systems
  • Enhanced investor confidence
  • Better long-term fiscal planning

States demonstrating consistent growth may find it easier to access capital markets for infrastructure financing.

3️⃣ Formalisation of the Informal Economy

VAT growth often signals improved compliance and digitisation of tax systems.

Domino effect:

  • More businesses entering formal registration
  • Broader tax net without necessarily raising tax rates
  • Increased financial inclusion
  • Better economic data for policy planning

This shift strengthens the economic architecture at subnational levels.

4️⃣ Consumer Market Expansion

VAT is consumption-based. Rising VAT contributions suggest:

  • Increased household spending
  • Growth in retail and service sectors
  • Expanding supply chains
  • Higher transaction volumes

Domino effect:

  • Job creation in commerce and logistics
  • Real estate demand growth
  • Increased SME activity

5️⃣ Inter-State Competitive Pressure

As some states record dramatic improvements, others face pressure to reform revenue systems.

Domino effect:

  • Adoption of digital tax platforms
  • Improved transparency in revenue administration
  • Policy reforms to attract businesses
  • Healthy fiscal competition among states

This competitive dynamic may accelerate nationwide reform.

6️⃣ Reduced Oil Revenue Vulnerability

VAT growth strengthens Nigeria’s non-oil revenue structure.

Domino effect:

  • Improved macroeconomic stability
  • Greater resilience to global oil price shocks
  • Stronger domestic consumption base
  • Gradual economic diversification

A Structural Shift in Progress?

The 2025 VAT performance may represent more than a cyclical spike. If sustained, it signals:

  • Deepening internal economic integration
  • Stronger state-level fiscal management
  • Expanding domestic markets
  • Maturing tax administration systems

With 32 states posting growth, Nigeria’s subnational revenue ecosystem appears to be broadening beyond traditional commercial strongholds.

The coming fiscal years will determine whether this momentum consolidates into long-term structural reform — or remains a one-year surge.

But for now, the numbers point to one clear conclusion:

Nigeria’s states are generating more taxable economic activity than they did just one year ago — and the ripple effects are only beginning.

Source: FAAC | TheCableIndex

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