₦airaland Forum

By Adamu Lawal Toro

A trader in Bauchi taps her card on a POS machine to buy fabric. The transaction happens in Bauchi, the goods change hands in Bauchi, the money is spent in Bauchi. But when the tax is remitted, it is credited to Lagos. That is not a glitch. That is how Nigeria's VAT system has worked for years, and it is worth understanding precisely why before deciding who, if anyone, should answer for it.
Moniepoint is as good a place as any to see the distortion at scale, simply because it is everywhere. The fintech, headquartered in Lagos, now powers the largest network of POS terminals in the country, processing transactions in every state from Sokoto to Cross River. But Moniepoint is not unusual in how it remits VAT. It is simply the most visible face of a rule that governs every Lagos-headquartered bank, telco and fintech operating nationwide: GTBank, Access, Zenith, MTN, Airtel, OPay, PalmPay, all of them. Under the old VAT regime, tax collected on a transaction is remitted based on where the company is registered, not where the transaction physically occurred. A purchase in Bauchi becomes, on paper, revenue generated in Lagos, because that is where the company that processed it keeps its books.
This is not new. It is the same fight Rivers State picked with the Federal Inland Revenue Service in 2021, when Governor Nyesom Wike went to court arguing that VAT should be shared by derivation, the state where the economic activity happened, rather than swept into a federal pool and redistributed by a formula that rewards headquarters addresses over actual commerce. Rivers won at the Federal High Court. The case exposed what fiscal federalism advocates had argued for years: that the naira the poorest transacting Nigerian generates in Gombe or Yobe ends up subsidising infrastructure in a state that merely hosts the company's letterhead.
The numbers make the scale of it plain. FAAC data for the first half of 2026 shows Lagos alone generated ₦1.81 trillion in VAT, more than 52 per cent of Nigeria's non-import VAT nationwide, with Rivers a distant second at ₦560 billion. No honest person believes Lagos residents alone are responsible for over half the country's taxable consumption. What they are responsible for is hosting the headquarters of the institutions that process transactions for the rest of the country.
The reform meant to fix this is already law. The Tax Administration Act that President Tinubu signed shifts VAT sharing toward a derivation-based model, splitting allocations 50 per cent equally among states, 30 per cent by derivation, meaning where the transaction actually happened, and 20 per cent by population and consumption. On paper, that should mean a POS transaction in Bauchi finally shows up as Bauchi's revenue, not Lagos's. The Northern Governors Forum, ironically, initially resisted the very reform that should correct the imbalance working against their own states, worried about the transition mechanics rather than the destination. That fight has mostly been settled in the law's favour now. What has not been settled is implementation.
This is where the real accountability question sits, not with Moniepoint or any single fintech, but with whether the derivation formula is actually being applied to POS and electronic transaction data the way the law now requires. Financial technology platforms generate exactly the kind of granular, location-tagged transaction data that should make derivation-based VAT trivial to calculate correctly. A POS terminal knows precisely which local government it sat in when a sale happened. The question Nigerians and state revenue authorities should be asking is whether FIRS, now the Nigeria Revenue Service, is actually pulling that location data from the fintechs and applying it, or whether old habits, crediting the company's registered address, are still quietly running the calculation months into a reform that was supposed to end the practice.
If NRS is applying the new formula properly, the Bauchi trader's VAT should already be flowing back to Bauchi, and any residual distortion is a transition lag worth monitoring, not a scandal worth headlines. If it is not being applied, if fintechs and banks are still reporting VAT the old way while the law says otherwise, then the failure belongs to the regulator that has not enforced its own reform, not to a private company following whatever reporting format it has been told to use. Sanctioning Moniepoint for a system-wide accounting convention it did not invent would be scapegoating dressed up as accountability. It would let the actual point of failure, regulatory enforcement, disappear behind a corporate name Nigerians already recognise from their POS receipts.
What deserves scrutiny is simple and answerable. Has the Nigeria Revenue Service published guidance requiring derivation-based VAT reporting from POS operators and fintechs. Are states receiving allocations that reflect where transactions occurred rather than where headquarters sit. And if the answer to either is no, months after the law changed, that is the story, a regulator sitting on a reform it already has the authority to enforce, while states like Bauchi keep subsidising Lagos's revenue base one card tap at a time.

E pain you? Hahahahahahahaha haha!

VAT paid by financial sector is negligible because it is paid on a minute part of their revenue. I believe one brewery will pay more VAT than all banks put together.

Convert the population in your state to revenue and you will get revenue that is up to the ratio of your population to Lagos.

You have advantages that Lagos do not have especially in agric which you just need to convert.

If you are ten million people in your state then with proper organisation you will be able to make around half of whatever Lagos is making

Ojimaojo11:
By Adamu Lawal Toro

A trader in Bauchi taps her card on a POS machine to buy fabric. The transaction happens in Bauchi, the goods change hands in Bauchi, the money is spent in Bauchi. But when the tax is remitted, it is credited to Lagos. That is not a glitch. That is how Nigeria's VAT system has worked for years, and it is worth understanding precisely why before deciding who, if anyone, should answer for it.
Moniepoint is as good a place as any to see the distortion at scale, simply because it is everywhere. The fintech, headquartered in Lagos, now powers the largest network of POS terminals in the country, processing transactions in every state from Sokoto to Cross River. But Moniepoint is not unusual in how it remits VAT. It is simply the most visible face of a rule that governs every Lagos-headquartered bank, telco and fintech operating nationwide: GTBank, Access, Zenith, MTN, Airtel, OPay, PalmPay, all of them. Under the old VAT regime, tax collected on a transaction is remitted based on where the company is registered, not where the transaction physically occurred. A purchase in Bauchi becomes, on paper, revenue generated in Lagos, because that is where the company that processed it keeps its books.
This is not new. It is the same fight Rivers State picked with the Federal Inland Revenue Service in 2021, when Governor Nyesom Wike went to court arguing that VAT should be shared by derivation, the state where the economic activity happened, rather than swept into a federal pool and redistributed by a formula that rewards headquarters addresses over actual commerce. Rivers won at the Federal High Court. The case exposed what fiscal federalism advocates had argued for years: that the naira the poorest transacting Nigerian generates in Gombe or Yobe ends up subsidising infrastructure in a state that merely hosts the company's letterhead.
The numbers make the scale of it plain. FAAC data for the first half of 2026 shows Lagos alone generated ₦1.81 trillion in VAT, more than 52 per cent of Nigeria's non-import VAT nationwide, with Rivers a distant second at ₦560 billion. No honest person believes Lagos residents alone are responsible for over half the country's taxable consumption. What they are responsible for is hosting the headquarters of the institutions that process transactions for the rest of the country.
The reform meant to fix this is already law. The Tax Administration Act that President Tinubu signed shifts VAT sharing toward a derivation-based model, splitting allocations 50 per cent equally among states, 30 per cent by derivation, meaning where the transaction actually happened, and 20 per cent by population and consumption. On paper, that should mean a POS transaction in Bauchi finally shows up as Bauchi's revenue, not Lagos's. The Northern Governors Forum, ironically, initially resisted the very reform that should correct the imbalance working against their own states, worried about the transition mechanics rather than the destination. That fight has mostly been settled in the law's favour now. What has not been settled is implementation.
This is where the real accountability question sits, not with Moniepoint or any single fintech, but with whether the derivation formula is actually being applied to POS and electronic transaction data the way the law now requires. Financial technology platforms generate exactly the kind of granular, location-tagged transaction data that should make derivation-based VAT trivial to calculate correctly. A POS terminal knows precisely which local government it sat in when a sale happened. The question Nigerians and state revenue authorities should be asking is whether FIRS, now the Nigeria Revenue Service, is actually pulling that location data from the fintechs and applying it, or whether old habits, crediting the company's registered address, are still quietly running the calculation months into a reform that was supposed to end the practice.
If NRS is applying the new formula properly, the Bauchi trader's VAT should already be flowing back to Bauchi, and any residual distortion is a transition lag worth monitoring, not a scandal worth headlines. If it is not being applied, if fintechs and banks are still reporting VAT the old way while the law says otherwise, then the failure belongs to the regulator that has not enforced its own reform, not to a private company following whatever reporting format it has been told to use. Sanctioning Moniepoint for a system-wide accounting convention it did not invent would be scapegoating dressed up as accountability. It would let the actual point of failure, regulatory enforcement, disappear behind a corporate name Nigerians already recognise from their POS receipts.
What deserves scrutiny is simple and answerable. Has the Nigeria Revenue Service published guidance requiring derivation-based VAT reporting from POS operators and fintechs. Are states receiving allocations that reflect where transactions occurred rather than where headquarters sit. And if the answer to either is no, months after the law changed, that is the story, a regulator sitting on a reform it already has the authority to enforce, while states like Bauchi keep subsidising Lagos's revenue base one card tap at a time.

This is totally false. The amendment done has made filing to be done based on location of consumption. You can take this to the bank!

The story is too looong.

A lazy man needs summary.

On a serious note, balablu and his teams should be commended at least for the tax reform.

They really tried even though we are yet to the full implementation yet.
Same way we hav8seen the full implementation of the local government autonomy.

The writer thinks the north have much to gain from the new tax reform .

Don't make me laugh pls.

Does he think the northern governors forum that quickly rejected the new VAT reform are daft?

The good things is that the VAT reform has come to stay and everybody will have to be on their feet.

You wrote this book without being updated about the new VAT formula

Some of you are just too emotional to discuss politics

I agree with you OP. Since its the law now, states can probe the books and claim any VAT under-remittance. However, since everybody is sure about their volume, why did we peg derivation at 30%, let's make it 80%. Else we go for the 100% pushed by Wike RSG/Lagos LASG.
VAT is for the state. They rushed the tax bill to prevent Supreme Court hammer.
The guys who took FG to court have done their home work. Heads or tail, they know they are better off.
Una go think say una wise!

Everything produced in Lagos is Lagos GDP and the VAT belongs to Lagos.

If you collect VAT and produce tax in your state of ten million people then the total will be around half of Lagos VAT. Lagos does not have advantage in the agricultural sector

Buccalcavity2:
I agree with you OP. Since its the law now, states can probe the books and claim any VAT under-remittance. However, since everybody is sure about their volume, why did we peg derivation at 30%, let's make it 80%. Else we go for the 100% pushed by Wike RSG/Lagos LASG.

VAT is for the state. They rushed the tax bill to prevent Supreme Court hammer.
The guys who took FG to court have done their home work. Heads or tail, they know they are better off.
Una go think say una wise!

Did Wike and Sanwo Olu abandon the case because Tinubu is now president?

lawani:
Everything produced in Lagos is Lagos GDP and the VAT belongs to Lagos.
If you collect VAT and produce tax in your state of ten million people then the total will be around half of Lagos VAT. Lagos does not have advantage in the agricultural sector

The VAT on shipment that ends up outside Lagos should also be domiciled in the final location, not lagos.

anonimi:
The VAT on shipment that ends up outside Lagos should also be domiciled in the final location, not lagos.

VAT (Value added Tax) isn't on shipment. It is paid by companies that add value and whose revenue is over a certain threshold. Tariffs or duties is what is paid on shipment. Lagos is not paid any commission on it. Port states unlike oil states do not receive anything from what government makes on their land

lawani:
VAT (Value added Tax) isn't on shipment. It is paid by companies that add value and whose revenue is over a certain threshold. Tariffs or duties is what is paid on shipment. Lagos is not paid any commission on it. Port states unlike oil states do not receive anything from what government makes on their land

VAT is not charged on any of the shipping services, including clearing and forwarding?

anonimi:


VAT is not charged on any of the shipping services, including clearing and forwarding?

VAT is paid by production or servicing companies. Clearing and forwarding companies can possibly bill you VAT the same way a barber can bill you VAT. It is ordinarily not supposed to be more than on their own clearing charges. If they bill you on the value of your import then they are swindling you. Will Dangote refinery pay 7.5 percent on his equipments to clearing and forwarding agents? No. He will only pay VAT on their charges while the equipment producer will pay VAT at home. The company here in Nigeria importing will remove the value of the equipment from its VATable revenue

lawani:
VAT is paid by production or servicing companies. Clearing and forwarding companies can possibly bill you VAT the same way a barber can bill you VAT. It is ordinarily not supposed to be more than on their own clearing charges. If they bill you on the value of your import then they are swindling you. Will Dangote refinery pay 7.5 percent on his equipments to clearing and forwarding agents? No. He will only pay VAT on their charges while the equipment producer will pay VAT at home. The company here in Nigeria importing will remove the value of the equipment from its VATable revenue

In summary VAT is charged in Lagos ports for shipping services on goods destined to places outside the state.

anonimi:
In summary VAT is charged in Lagos ports for shipping services on goods destined to places outside the state.

How many clearing and forwarding agents? Let's say one thousand. How much is their average revenue per annum? Maybe 50 million. How much VAT is possible? Less than 3 million each. Total? 3 billion naira. Meanwhile there are also imports through land borders in the North however small and they collect tax on cattle headed to Lagos when they are not the ones eating the cattle. You work in Lagos you pay VAT in Lagos. You work anywhere else you pay taxes there but most people in Nigeria lack understanding about how things work

Thanks for taking the time to share this update. It highlights several critical points that many people easily overlook, and it definitely gives everyone here a whole lot of food for thought moving forward.