Economy
States Aim for N3tn Tax Revenue Boost Post-Reform
State governments in Nigeria have set a tax revenue target of approximately N3.12tn for the 2025 fiscal year, representing a significant increase from the N2.01tn targeted in 2024 and the N1.95tn actually collected.
This drive for increased Internally Generated Revenue (IGR) comes as the Federal Government implements comprehensive tax reforms aimed at reducing the number of taxes from over 60 to fewer than 10. These reforms are designed to simplify compliance, enhance revenue collection, and foster economic growth, potentially impacting state tax earnings.
The 2025 target represents a 55.4% increase from the 2024 projection. However, actual collections from 2024 reveal that states collectively achieved about 96.8% of the 2024 target, leaving a shortfall of approximately N62.6bn. While some states, like Lagos, significantly exceeded their revenue targets, others struggled to meet even half of their projections.
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Lagos recorded the highest tax revenue in 2024, generating N946.59bn against its target of N691.79bn. The state has now set an ambitious target of N1.4tn for 2025.
Kaduna and Rivers also performed well, with revenues of N178.97bn and N149.59bn respectively, and have set higher targets for 2025. On the other hand, states like Imo and Jigawa fell far below expectations due to structural inefficiencies and economic challenges.
Some states, particularly those with agrarian economies, recorded the smallest tax revenues in 2024. Discrepancies in reporting periods for actual collections contributed to unmet targets for some states. Meanwhile, the Federal Government’s proposed tax reforms could lead to a reallocation of taxing powers, potentially affecting state revenues.
The proposed reforms have sparked debates, especially around the allocation of Value Added Tax (VAT) revenue. The new proposal seeks to adjust the VAT distribution to favor states with stronger economies, which has raised concerns among governors from less developed states about potential fiscal imbalances.
The Nigeria Governors’ Forum has supported the tax reform bills submitted by President Bola Tinubu, advocating for a revised VAT sharing formula. The bills are currently being debated in the National Assembly.
