State governments in Nigeria received N2.37 trillion in Value Added Tax (VAT) allocations during the first half of 2026, marking a 23.5% increase from the N1.92 trillion recorded in the same period of 2025. Total VAT distributions for the period reached N4.39 trillion, up 14.3% year-on-year.

This revenue growth was bolstered by the implementation of the Nigeria Tax Act on January 1, 2026, which revised the VAT sharing formula. The new framework reduced the Federal Government’s share of distributable VAT from 15% to 10%, while increasing the share for state governments from 50% to 55%. This shift resulted in a net transfer of approximately N219.72 billion from the Federal Government to the states compared to the previous revenue-sharing arrangement. Additionally, the new law has adjusted distribution criteria to focus more on equality, population, and the place of consumption, moving away from a model previously dominated by the location of corporate headquarters.