Nigeria’s fiscal landscape continued to be dominated by a handful of economically significant and oil-producing states in the first quarter of 2026, even as stronger federal revenue distributions resulted in increased allocations for most states across the federation.
An analysis of allocations from the Federation Account Allocation Committee (FAAC) shows that the 36 states received a combined N2.49 trillion between January and March 2026, representing a significant increase from the N1.98 trillion shared during the corresponding period of 2025.
Although the top 10 beneficiary states continued to account for a substantial share of total allocations, their dominance eased slightly.
Together, the leading states received N998.65 billion, representing 40.1 per cent of total allocations, compared with N842.77 billion, or 42.5 per cent, recorded during the first quarter of 2025.
The figures indicate that while wealth remains concentrated among a few states, increased distributable revenues enabled broader growth in allocations across much of the country.
One of the most significant developments during the quarter was the growing importance of Value Added Tax (VAT) as the largest contributor to state revenues.
FAAC records show that states shared more than N1.28 trillion from VAT during the three-month period, far exceeding the approximately N811.97 billion distributed through statutory allocation, which has traditionally been driven largely by oil revenues.
States also benefited from additional revenue streams, including a N26 billion augmentation from non-oil revenue distributed in February, over N30 billion generated from the Electronic Money Transfer Levy (EMTL), and about N16.4 billion from ecology funds.
The changing revenue composition underscores a gradual shift in Nigeria’s fiscal structure, with consumer spending, electronic transactions and internally generated commercial activities becoming increasingly important in determining federal allocations.
Lagos maintained its position as Nigeria’s highest FAAC beneficiary after receiving N200.21 billion during the first quarter of 2026, a sharp increase from N123.72 billion recorded during the same period last year.
The state posted the highest year-on-year growth of 61.8 per cent among all states.
Almost the entire allocation came from VAT receipts, with Lagos receiving approximately N193.50 billion through VAT collections alone. The state also received N3.31 billion from the Electronic Money Transfer Levy, N918.51 million from the February non-oil revenue augmentation and N778.12 million from ecology funds.
Interestingly, Lagos recorded a negative statutory allocation of N2.50 billion in February, leaving its cumulative statutory allocation for the quarter at only N1.70 billion.
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The figures reinforce Lagos’ position as Nigeria’s commercial hub, with its allocation driven overwhelmingly by consumption and business activities rather than oil-derived revenues.
Delta remained the second-largest recipient with N143.42 billion, slightly higher than the N138.06 billion received in the corresponding period of 2025.
Unlike Lagos, Delta’s allocation continued to depend largely on statutory and derivation revenues, which contributed approximately N108.12 billion, while VAT accounted for about N33.79 billion.
Rivers State ranked third despite recording one of only two year-on-year declines nationwide. The state received N123.96 billion, down from N135.38 billion in Q1 2025, representing an 8.4 per cent decline.
Nevertheless, Rivers continued to demonstrate a diversified revenue profile, receiving about N69.68 billion from VAT and N52.66 billion through statutory allocation.
Bayelsa followed with N114.47 billion, while Akwa Ibom received N109.76 billion, with both oil-producing states continuing to rely heavily on statutory and derivation revenues despite growing VAT contributions.
Kano retained its position as the highest-ranked northern state after receiving N75.03 billion, representing a 25.8 per cent increase over the N59.63 billion received during the first quarter of 2025.
VAT generated approximately N45.25 billion for the state, comfortably exceeding its statutory allocation of N27.06 billion, highlighting Kano’s importance as one of Nigeria’s largest commercial centres.
Jigawa emerged among the fastest-growing recipients after receiving N55.75 billion, representing a 30.9 per cent increase over the previous year.
Similarly, Katsina completed the top 10 with N52.58 billion, a 20.3 per cent increase from the N43.70 billion recorded in the corresponding period of 2025.
Among the strongest performers was Oyo State, whose allocation rose by 48 per cent from N46.60 billion to N68.98 billion.
More than three-quarters of Oyo’s allocation came from VAT, which contributed approximately N52.81 billion, while statutory allocation stood at about N14.18 billion.
The figures reflect expanding commercial activities and a growing service sector within the state.
While oil-producing states such as Delta, Bayelsa and Akwa Ibom continue to derive significant benefits from statutory and derivation allocations, VAT has become the dominant source of FAAC receipts for major commercial states, including Lagos, Rivers, Kano, Oyo, Jigawa and Katsina.
Overall, the data indicates that consumption taxes, electronic transactions and expanding commercial activities are playing an increasingly central role in determining how federal revenues are distributed.