Every North-East state received at least 2× what they contributed (₦46.68 billion in total), a 211.6% increase

Key Takeaways

  • The North-East remitted only ₦14.98 billion but received ₦46.68 billion, showing a 211.6% gain due to sharing.
  • Taraba, the lowest contributor (₦0.94 billion), saw the highest percentage gain (635%) with an allocation of ₦6.91 billion, reinforcing that smaller economies benefit the most from VAT sharing.
  • Bauchi, despite remitting just ₦2.44 billion, received the highest allocation (₦8.93 billion), a 266% increase, illustrating how VAT is shared based on equality and population, not economic activity.
  • Every state in the region received at least 2× what they remitted, highlighting the North East’s reliance on VAT sharing and fuelling the fiscal federalism debate on whether VAT should be retained at the state level.

The VAT remittance and sharing pattern in the North-East geopolitical zone of Nigeria reveals a significant reliance on the federal VAT sharing system. The six states collectively remitted ₦14.98 billion but received an allocation of ₦46.68 billion, representing a 211.6% increase in revenue through federal allocation. This trend showcases how the VAT sharing formula, which prioritises equality and population over direct revenue generation, disproportionately benefits states with lower economic activity.

Borno led remittance with ₦3.91 billion (26.1% of the zone’s total VAT), yet it received ₦8.74 billion, a 123% gain. However, the biggest beneficiary in terms of percentage increase was Taraba, which remitted the least (₦0.94 billion, just 6.3% of the total) but received ₦6.91 billion, a massive 635% increase. Bauchi, despite contributing only ₦2.44 billion, received the highest allocation in the region at ₦8.93 billion, a 266% boost, further confirming that VAT allocation is based on sharing metrics beyond just remittance levels.

With every state in the North-East receiving at least double their remittance, this shows a significant fiscal imbalance that continues to drive ongoing discussions about VAT decentralisation. As high revenue states push for VAT retention at the source, states in regions like the North-East, which benefit significantly from sharing, may face economic pressure if the system is altered.

Source:

Federal account allocation committee (FAAC)

Period:

January 2025
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