States Projected to Earn Over N4tn Annually from 2026 as VAT Reforms Take Effect — Oyedele

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, has projected that Nigerian states could generate over ₦4 trillion annually beginning in 2026, following the implementation of new Value Added Tax (VAT) reforms.

Speaking in Abuja on Tuesday during the launch of the BudgIT State of States 2025 Report, which also marked the initiative’s 10th anniversary, Oyedele revealed that states’ share of VAT revenue would rise to 55 per cent under the new framework.

> “With VAT reforms kicking in from 2026, states’ share will rise to 55 per cent. That could amount to over ₦4 trillion in 2026. The question is: will this money be spent, or will it be invested?” he said.

Oyedele noted that despite a significant rise in the Federation Account Allocation Committee (FAAC) disbursements—from ₦5.4 trillion in 2023 to ₦11.4 trillion in 2024—many Nigerians were yet to feel any direct benefits.

> “States are receiving more money than ever before. But there is a paradox: while governments have more naira, ordinary Nigerians have less disposable income,” he observed, urging state leaders to invest in projects that directly improve citizens’ lives.

The BudgIT report showed that 21 states still rely on federal allocations for more than 70 per cent of their income, a trend Oyedele described as troubling. However, he cited examples of progress such as Enugu State’s 381% growth in internally generated revenue (IGR) and Bayelsa’s 174% increase.

He further explained that the new tax laws, which allocate 100% of electronic money transfer levy proceeds to states and exempt state government bonds from taxation, would lower borrowing costs and expand fiscal capacity.

> “This is a unique opportunity for states to build resilience, close existing tax gaps, and invest in infrastructure,” he added.

While capital expenditure has, for the first time in years, surpassed recurrent spending, Oyedele cautioned that implementation remains weak in key sectors.

> “States implemented only two-thirds of their education budgets—spending less than ₦7,000 per citizen. In health, implementation was even lower, at just ₦3,500 per citizen,” he stated.

He also highlighted a reduction of ₦2 trillion in domestic debt and a $200 million drop in foreign loans, with 31 states cutting down their domestic debt stock. Yet, states still owe more than ₦1.2 trillion in arrears to pensioners, contractors, and workers.

> “Borrowing is not the problem; unproductive application of debt is,” he warned.

According to BudgIT’s 2025 rankings, Anambra emerged as the top-performing state in fiscal management, followed by Lagos, Kwara, Abia, and Edo, while Cross River fell sharply from fifth place in 2024 to 29th in 2025.

Oyedele urged governors to embrace upcoming fiscal reforms as a pathway to sustainable prosperity rather than short-term spending.

Also speaking at the event, the Deputy Governor of the Central Bank of Nigeria (CBN) in charge of Economic Policy, Dr. Muhammad Abdullahi, called for fiscal discipline, transparency, and digital revenue systems at the state level.

> “The challenge is to lock in this fiscal discipline permanently,” Abdullahi said, stressing the need for states to complete Treasury Single Account (TSA) adoption and ensure over 80% execution of education and health budgets.

He warned that subnational governments remain vulnerable to foreign exchange risks and disclosed that the CBN is developing instruments to help states hedge and monetise revenue exposures.

Abdullahi also reflected on Nigeria’s broader macroeconomic reforms, noting that the CBN is working to restore policy credibility by normalising the foreign exchange market and returning to orthodox monetary policy.

In a goodwill message, Razaq Fatai, Head of Economic Intelligence at the Nigerian Governors’ Forum (NGF), said the BudgIT report had become an invaluable tool for promoting fiscal accountability among states.

> “The essence of State of States is to help guide governance and ensure that governors take the information provided and make sure it reaches their people,” he said.

He noted that initiatives like SFTAS (State Fiscal Transparency, Accountability and Sustainability) and SABER (State Action on Business Enabling Reforms) had boosted transparency and improved the business environment.

Meanwhile, BudgIT Co-founder and Global Director, Oluseun Onigbinde, said the report had evolved into a “mirror” for assessing the fiscal choices of subnational governments.

> “This report began with a simple belief—that every kobo meant for citizens should be traceable, justified, and used to improve lives,” Onigbinde said.

He urged states to focus on education, health, and infrastructure, emphasising that transparency and data-driven governance are vital for building public trust and attracting investment.