Business

Tax law: N5tn VAT windfall for states as new formula begins

Published

4 months ago

January 8, 2026

The 36 states of the federation are set to receive an estimated N5.07tn as their share of Value Added Tax in 2026, following the commencement of a new VAT sharing formula introduced under the National Tax Acts, findings by The PUNCH have shown.

This development is contained in the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper approved by the Federal Executive Council.

According to the fiscal framework, the implementation of the new National Tax Acts from January 2026 will reduce the Federal Government’s VAT share from 15 per cent to 10 per cent, while the states’ share rises from 50 per cent to 55 per cent, and Local Governments continue to receive 35 per cent.

According to the projections in the MTEF/FSP document, the Federal Government’s VAT allocation is expected to drop to N922.53bn in 2026, down from N1.04tn in 2025, even as the VAT pool itself grows significantly year on year.

The projected N922.5bn allocation to the Federal Government represents 10 per cent of the anticipated N9.23tn distributable VAT revenue for 2026, confirming the full implementation of the new formula.

Under the previous formula used in 2025, the Federal Government received 15 per cent of the VAT pool, which was projected at N6.95tn for that year. The difference in share means the Federal Government will now receive five percentage points less of a larger pool.

If the previous 15 per cent formula had been retained in 2026, the Federal Government’s VAT share would have amounted to approximately N1.38tn. With only 10 per cent allocated under the revised law, the Federal Government is projected to receive N922.5bn.

The difference between the two figures is N461.27bn, which represents what the Federal Government may forfeit to the states as a result of the revised allocation ratio, if the revenue target is met.

The five percentage point shift in VAT share from the Federal Government to states is projected to give states an additional N461.27bn in 2026, pushing their collective allocation to N5.07tn, up from N3.47tn in 2025.

The 2026 figure represents 55 per cent of the N9.23tn pool, compared to the 50 per cent share of the N6.95tn pool in 2025. Local Governments, whose VAT share remains unchanged at 35 per cent, are expected to collect N3.23tn in 2026, up from N2.43tn in 2025.

The year-on-year growth in total VAT revenue, from N6.95tn to N9.23tn, provides some cushion to the Federal Government, even as it absorbs the loss in its percentage share. However, the data also makes it clear that the bulk of the VAT growth is now structurally flowing to subnational governments under the new tax law, which aims to deepen fiscal federalism.

Further projections in the fiscal document show that the VAT pool is expected to increase to N10.87tn in 2027 and N13.28tn in 2028. Applying the 10 per cent share, the Federal Government’s VAT revenue is projected to rise to N1.09tn in 2027 and N1.33tn in 2028.

These nominal increases reflect the expanding VAT base but do not reverse the structural shift in distribution. By contrast, the states’ 55 per cent share will yield N5.98tn in 2027 and N7.30tn in 2028, while Local Governments are projected to receive N3.81tn and N4.65tn respectively under their constant 35 per cent share.

The long-term trend indicates that state and local governments are now better positioned to benefit from rising VAT collections, especially as tax net expansion and digital enforcement continue to improve.

The VAT pool is only one segment of the total distributable public revenue. The main Federation Account pool—dominated by oil revenue, company income tax, and customs duties—is projected to decline sharply in 2026 before rebounding in subsequent years.

The main pool is expected to shrink from N60.26tn in 2025 to N41.06tn in 2026, representing a N19.2tn drop. The current revenue-sharing formula for the main pool gives the Federal Government 52.68 per cent, states 26.72 per cent, and local governments 20.60 per cent.

Based on these ratios, the Federal Government’s share is projected to decline from N31.74tn in 2025 to N21.63tn in 2026. This reflects a loss of about N10.1tn. State governments will see their share fall from N16.10tn to N10.97tn, while local governments will collect N8.46tn, down from N12.41tn.

Although the main pool is expected to improve slightly in subsequent years—rising to N45.67tn in 2027 and N50.90tn in 2028—the Federal Government’s earnings from this stream remain significantly below 2025 levels. Its share is projected to recover to N24.06tn in 2027 and N26.81tn in 2028.

Similarly, states are expected to receive N12.20tn and N13.60tn, while local governments would get N9.41tn and N10.48tn over the two years.

Another key component of the distributable pool is stamp duty revenue, formerly the Electronic Money Transfer Levy. The distributable stamp duty pool is projected to rise from N228.85bn in 2025 to N456.07bn in 2026.

The formula for this stream mirrors the VAT structure: 10 per cent to the Federal Government, 55 per cent to states, and 35 per cent to local governments. This means the Federal Government will collect N45.61bn in 2026, up from N34.33bn in 2025.

States will receive N250.84bn, nearly doubling their previous year’s allocation of N114.43bn. Local Governments are projected to receive N159.62bn in 2026, compared to N80.10bn in 2025.

The rise is attributed to growth in electronic payment channels and the wider adoption of digital financial services, which are driving up transaction volumes and collections.

Projections for 2027 and 2028 suggest continued expansion in stamp duty revenue, reaching N579.82bn and N752.45bn, respectively. Of this, the Federal Government is expected to receive N57.98bn in 2027 and N75.24bn in 2028, while states will get N318.90bn and N413.85bn. Local Governments will be entitled to N202.94bn in 2027 and N263.36bn in 2028.

The new VAT formula and rising stamp duty revenues reflect a broader structural rebalancing of public finance in Nigeria, with states and local governments increasingly positioned as primary beneficiaries of consumption-driven taxes.

The PUNCH earlier reported that the Nigeria Economic Summit Group warned that the Federal Government could face revenue shortfalls if it does not increase the value-added tax rate as part of the ongoing tax reform process.

The Chief Executive Officer of NESG, Dr Tayo Aduloju, made this statement during an interactive media session in Abuja. He emphasised that while reforms to the VAT system are essential, maintaining the current VAT rate without an increase could result in a significant loss of revenue for the government.

Speaking on the issue, Aduloju said, “Without those rate hikes, it means that the government might lose some revenue.” Aduloju explained that the current tax reform process must strike a balance between simplifying the tax system and increasing the VAT rate to maintain revenue stability.

According to him, simply reducing the number of taxes without adjusting the VAT rate could weaken the government’s revenue base.

Also, in its most recent Article IV Consultation Report on Nigeria, the International Monetary Fund noted that although the recent tax reforms approved by the National Assembly and President Bola Tinubu represent a major step forward in modernising the VAT and Company Income Tax regimes, the choice to maintain the current VAT rate would lead to an immediate revenue shortfall.

It stated that the Federal Government may lose as much as 0.5 per cent of the country’s Gross Domestic Product in revenue following its decision not to raise the VAT rate.

“The decision not to raise the VAT rate now is reasonable, given high poverty and food insecurity, and with the cash transfer system to support the most vulnerable households not yet fully rolled out. However, this will reduce consolidated government revenue by up to ½ per cent of GDP in the authorities’ estimates,” the report noted.

According to the Fund, unless alternative financing options are found, subnational governments may be forced to either scale back spending or ramp up their own revenue efforts.

The IMF, however, acknowledged the government’s justification for delaying a VAT hike, particularly at a time of worsening poverty and food insecurity.

Speaking recently at the launch of the BudgIT State of States 2025 Report in Abuja, where he delivered the keynote address, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, projected that states could earn more than N4tn annually from 2026 when new Value Added Tax reforms take effect.

He said, “With VAT reforms kicking in from 2026, states’ share will rise to 55 per cent. That could amount to over N4tn in 2026. The question is: will this money be spent, or will it be invested?”

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Business

NNPC urged to revive refineries after Dangote snub

Published

2 hours ago

May 15, 2026

Newsbreak365_Admin

The National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike, has tackled the Nigerian National Petroleum Company Limited (NNPC) over its attempt to increase its stake in the Dangote Petroleum Refinery despite the poor state of government-owned refineries.

Ukadike stated this while reacting to comments by the President of the Dangote Group, Aliko Dangote, that the refinery rejected requests by the NNPC to increase its 7.25 per cent stake in the $20bn facility.

Dangote had disclosed this during an interview with the Chief Executive Officer of the Norwegian Sovereign Wealth Fund, Nicolai Tangen, monitored by our correspondents on Wednesday.

Reacting to the development, Ukadike questioned why the national oil company was seeking to invest more funds in the privately-owned refinery when the Port Harcourt, Warri, and Kaduna refineries under its control had remained largely inactive despite billions of dollars spent on rehabilitation.

“Why is NNPC trying to invest money in the Dangote refinery when it has three refineries that are not working? Why is NNPC not investing that money in those ones?” Ukadike asked.

He added, “The NNPC did not revive our refineries, but they want to look for where the refinery is already working to put money into it. Does that make sense?”

The IPMAN spokesman said Dangote had the right to reject the offer from the NNPC if he considered it unsuitable for his business interests.

“If Dangote refused to sell more stakes to NNPC, he must have his reasons. Dangote is a businessman. He doesn’t want issues, unnecessary crises, and nepotism. He knows what he wants, and I also think he has enough cash to fund his business,” he stated.

Ukadike further urged the national oil company to focus on reviving critical oil infrastructure across the country instead of pursuing additional ownership of the refinery. “The NNPC should repair the pipelines and revive the refineries instead of eyeing the Dangote refinery,” he said.

Dangote had stated during the interview that the NNPC was interested in acquiring more shares in the refinery after previously purchasing a 7.25 per cent stake for $1bn in 2021. According to him, the request was rejected because the company planned to list the refinery publicly and allow more Nigerians to own shares in the project.

“The other biggest risk is government inconsistencies in policies, and we are addressing that one because if you look at our refinery, the national oil company already owns 7.25 per cent, and they are trying to buy more. We are the ones that said no; we want to now spread it and have everybody be part of it,” Dangote said.

The NNPC had initially planned to acquire a 20 per cent stake in the refinery, but later reduced its ownership to 7.25 per cent after failing to pay the balance before the June 2024 deadline.

Dangote had explained this in 2024, saying, “The agreement was actually 20 per cent, which we had with NNPC, and they did not pay the balance of the money up until last year; then we gave them another extension up until June (2024), and they said that they would remain where they had already paid, which is 7.2 per cent. So NNPC owns only 7.2 per cent, not 20 per cent.”

However, a stakeholder in the petroleum sector who pleaded for anonymity because of the sensitivity of the matter held that the interest of the nation is well served by NNPC having a 20 per cent stake in the Dangote refinery.

“I think Nigeria is better served by NNPC being a shareholder. If NNPC could have taken 20 per cent of that refinery, Nigeria as a country would be better served,” the stakeholder said.

According to him, the fact that the NNPC failed to get the 20 per cent take before does not mean it could not get it again. He said Dangote refused NNPC’s offer because he wants to remain in control.

“You know Dangote is planning to value his company at $50bn. I think he’s going to sell 10 per cent only, so he remains in control, making a lot of money for himself. Selling only 10 per cent means he has 90 per cent. If NNPC were there with 20 per cent, then NNPC would have two directors. These two directors would have some say,” he said.

The stakeholder added that such an important asset cannot exist in a country without the government’s involvement.

“You can’t have such a big asset in the country, and then the government or the government’s agent has no say in the decisions of that company. It can’t happen. It’s wrong. I’m not saying the government must have a say in all the big companies, but in a company that is so big that it can influence whether the sun rises or falls in that country, the government must have a say.

“The refinery is big. In any case, NNPC is also the supplier of last resort. It’s the national oil company. That has some meaning. I think that in the best interest of the country, if we all agree that Dangote is too big to fail, then it means that Nigerians as a people need to be inside the Dangote refinery to make sure it does not fail,” the operator said.

Meanwhile, a senior official of the NNPC said the NNPC is proud of its current stake in the Dangote refinery.

“The NNPC is proud and happy that we own a 7.2 per cent stake in Dangote. And whatever we own as a stake in Dangote as a national oil company is on behalf of the entire Nigeria. So, when the opportunity presents itself in the long term, yes.

“But right now, we are proud of the 7.2 per cent stake we own in the Dangote refinery. Apart from that, the quality and level of collaboration that is currently going on between NNPC and Dangote is in the interest of the entire Nigeria,” the official said, begging not to be mentioned because he was not authorised to speak on the matter.

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Business

2027 poll spending may trigger inflation, MPC warns

Published

3 hours ago

May 15, 2026

Newsbreak365_Admin

The Governor of the Central Bank of Nigeria and Members of the Monetary Policy Committee have warned that rising political and election-related spending ahead of the 2027 general elections could undermine the country’s disinflation gains and trigger fresh inflationary pressures.

The warnings were contained in the personal statements of MPC members released by the apex bank and obtained by The PUNCH on Thursday. The MPC, at its 304th meeting held on February 23 and 24, 2026, reduced the Monetary Policy Rate by 50 basis points from 27 per cent to 26.5 per cent, while retaining other key monetary parameters.

CBN Governor, Olayemi Cardoso, had earlier warned in the MPC communiqué that election-related fiscal spending could threaten the inflation outlook despite the current moderation in prices.

According to the communiqué signed by Cardoso, “The outlook indicates that the current momentum of domestic disinflation will continue in the near term. This is premised on the lagged impact of previous monetary policy tightening, sustained stability in the foreign exchange market and improved food supply. However, increased fiscal releases including election-related spending could pose upside risk to the outlook.”

Also, in his personal statement, he noted “Growing fiscal pressures, from reduced government fiscal headroom and the approaching 2027 election cycle, warrant particular attention given the well-established link between pre-election fiscal expansion and inflation.”

CBN Deputy Governor for Economic Policy, Dr Muhammad Abdullahi, also highlighted election-related spending as a major risk to the inflation outlook. He said, “As political activities intensify ahead of the 2027 elections, increased fiscal injections and consumption spending could elevate demand-side inflation.”

Abdullahi added that “the fiscal deficit has already increased significantly, and election-related spending is likely to exacerbate this trend in 2026 and early 2027.” According to him, stronger fiscal-monetary coordination would be needed to manage the liquidity impact of rising government spending.

Similarly, the CBN Deputy Governor for Operations, Emem Usoro, warned that the pre-election environment could worsen liquidity conditions and inflation expectations. Usoro stated, “Crucially, the pre-election environment increases the risk of liquidity surges, higher FX demand and a drift in inflation expectations.”

She added that the risks justified maintaining tight liquidity conditions despite the moderate rate cut. According to her, “These considerations support small, cautious adjustments and the retention of strong liquidity and prudential buffers.”

Also raising concerns was the newly appointed Deputy Governor, Lamido Yuguda, who said increased fiscal releases and election spending could disrupt the disinflation trend.

Yuguda, who was a former Director General of the Securities and Exchange Commission, noted, “The 75 per cent CRR on non-TSA public deposits remains critical, particularly given the potential for increased fiscal releases as implementation of Executive Order 9 advances.”

He further warned that, “Potential increases in fiscal spending associated with the electoral cycle could generate demand pressures and disrupt the disinflation trajectory.”

A member of the MPC, Dr Aloysius Ordu, warned that political spending tied to the elections could put pressure on foreign exchange demand and test the resilience of the economy. He said, “Domestically, rising political spending and FX demand pressures associated with the 2027 elections will test the resilience of the economy.”

Ordu added that although reforms such as Executive Order 9 were expected to improve fiscal transparency and strengthen reserves, high debt servicing costs and political-cycle spending remained major concerns for macroeconomic management.

Another MPC member, Bandele Amoo, also expressed concern over excess liquidity from fiscal injections and early political activities ahead of the elections. He said, “My primary concern is the persistence of excess liquidity from fiscal injections, which could undermine disinflation gains and exchange rate stability.”

Amoo further noted that “fiscal spending pressures linked to the 2026 budget cycle, and early political activities ahead of the 2027 elections may heighten risks.”

Another committee member, Professor Murtala Sagagi, said the main domestic risks to inflation included fiscal slippages and election-related spending. He said, “Upside risks to the inflation outlook warrant monitoring, particularly increased fiscal releases including election-related spending and any pass-through from global oil price volatility to domestic fuel prices.”

Sagagi added that “the primary domestic risks are fiscal slippage and the possibility of election-related spending which are medium-term in nature.” He urged stronger fiscal discipline and closer coordination between monetary and fiscal authorities.

The next meeting of the Monetary Policy Committee is scheduled to hold on Tuesday, May 19 and Wednesday, May 20, 2026. This would be about four days after the National Bureau of Statistics is expected to release the country’s Consumer Price Index report for April 2026 on May 15.

Nigeria’s inflation rate rose to 15.38 per cent in March 2026, marking a reversal in the recent easing trend, as increases in food, transport, and accommodation costs pushed prices higher. The PUNCH observed that this was the first time the headline inflation rate had increased since March 2025.

In its Inflation Forecast report for April 2026, the Financial Market Dealers Association projected that Nigeria’s headline inflation would rise to 16.42 per cent year-on-year in April 2026, as sustained pressure from food prices, higher energy costs and elevated global commodity prices continue to shape the domestic price environment.

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Business

Presidential fleet operations gulp N4.24bn in six months – Read report details

Published

1 day ago

May 14, 2026

Newsbreak365_Admin

The Presidential Air Fleet received at least N4.24bn in disbursements between June and December 2025, the latest updates on GovSpend, a civic technology platform that tracks and analyses Federal Government spending, have revealed.

Findings by The PUNCH also revealed that the disbursements, made into the Presidential Air Fleet naira transit account operated by the Presidential Air Fleets (State House), were recorded in eight separate transactions across three months of June, July and December 2025, with the bulk of the transfers concentrated in July, when four transactions totalling N2.43bn were made in the space of a week.

A breakdown of the transactions shows that N1.285bn was disbursed on June 12, followed by N430m on July 24, N1.28bn on July 25, N92m on July 29, and N626m on July 31.

In December, three further disbursements were recorded. They include N9m on December 18, described in the GovSpend database as “Presidential Air Fleet forex transit funds,” N343.9m on December 30 and N90.9m on December 31.

Four of the eight transactions carry no accompanying description, listed simply as “None,” a pattern consistent with previous disbursements to the transit account.

Most disbursements to the Presidential Air Fleet transit account are labelled “Forex Transit Funds,” typically funds allocated for foreign exchange requirements to facilitate international transactions, covering expenses related to operations outside the country, including fuel purchases, maintenance or services in foreign currencies.

The new figures add to a growing cumulative spend that has accelerated significantly since Tinubu assumed office.

At least N26.38bn was spent on the operations of the Presidential Air Fleet from July 2023 to December 2024, with N14.15bn disbursed in 2024 alone.

The Presidential Air Fleet’s total budget allocation stood at N17.32bn in 2025, declining to N14.70bn in 2026.

The reduction was driven mainly by decreased capital expenditure.

Engine overhaul projects across the fleet consumed N4.58bn in 2024, N8.65bn in 2025 and N6.05bn in 2026, bringing the three-year aggregate to N19.27bn.

Since 2017, under the Buhari administration, budgetary allocations for the fleet have shown a growing trend, with one exception in 2020, rising from N4.37bn in 2017 to N20.52bn in 2024, a 370 per cent increase in running costs over seven years.

In an interview with our correspondent, the General Secretary of the Aviation Round Table, Olumide Ohunayo, had blamed the meteoric rise on the age of some of the aircraft in the fleet and the declining value of the naira, as well as the “commercial use” of aircraft by the Nigerian Air Force.

Ohunayo explained, “The cost will definitely increase over the years because, for one, this issue of the naira against the dollar.

“As the naira keeps falling to the dollar, we will see a rise in cost because most of the costs of training crew and engineers and replacing aircraft parts are all in dollars.

“Also, some of these aircraft are not new. The older the aircraft, the higher the cost of maintenance and operation.

“Lastly, during these past years, terrorism and insecurity have increased in Nigeria, which has also affected the cost of insuring the aircraft.”

In late April 2024, Tinubu was compelled to charter a private jet to continue his journey to Saudi Arabia after the state-owned Gulfstream 550, which had been assigned to carry him, developed an unspecified technical fault in the Netherlands, forcing him to abandon the aircraft mid-tour.

The episode had prompted the House of Representatives Committee on National Security and Intelligence to recommend the procurement of two new presidential aircraft.

In August 2024, the official Boeing 737 business jet for the President was replaced with an Airbus A330 purchased for $100m through service-wide votes.

The nearly 15-year-old plane, an ACJ330-200, VP-CAC (MSN 1053), is “spacious and furnished with state-of-the-art avionics, customised interior and communications system,” Tinubu’s Special Adviser on Information and Strategy, Mr Bayo Onanuga, said, adding “it will save Nigeria huge maintenance and fuel costs, running into millions of dollars yearly.”

From February through July 2025, the President flew a San Marino-registered BBJ (REG: T7-NAS).

Sources who spoke to one of our correspondents confirmed that the primary aircraft had been flown to South Africa to change its colours to reflect the office of the President. It was flown back in July 2025.

The Presidential Air Fleet comprises a fixed-wing fleet that includes the Airbus ACJ330-200, a Gulfstream G550, a Gulfstream G500, two Falcon 7Xs, a Hawker 4000 and a Challenger 605, three of which are reportedly unserviceable.

The rotor-wing fleet includes two Agusta 139s and two Agusta 101s, operated by the Nigerian Air Force under the supervision of the Office of the National Security Adviser.

The CEO of Centurion Security Limited, John Ojikutu, argued that the disbursements for the air fleet operations were justified considering all related expenses.

“That’s not a big deal. If they are going for repair, particularly for C-checks. It’s always around that range.

“They will fly it abroad, buy fuel, catering, and hotel bills are also involved; pilots will fly it back, and the figure likely includes far more than the direct cost of repairing the aircraft,” Ojikutu explained, adding that the figure likely includes far more than the direct cost of operating the aircraft.

The Presidency did not respond to inquiries on the nature of the specific disbursements captured in the recent data.

As of the time of filing this report, calls to the Special Adviser to the President on Information and Strategy, Bayo Onanuga, went unanswered.

In an earlier interview with our correspondent, Onanuga had argued that the costs of maintaining the air fleet are not for the President but in the interest of Nigerians.

“It’s not President Tinubu’s plane; it belongs to the people of Nigeria, it is our property…the President did not buy a new jet; what he has is a refurbished jet, but it is a much newer model than the one President Buhari used.

“Nigerians should try to prioritise the safety of the President. I’m not sure anybody wishes our President to go and crash in the air.

“We want his safety so that he can hand it over to whoever wants to take over from him,” Onanuga said.

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