14/01/2026
VAT DOES NOT “FOLLOW THE TRADER.” IT FOLLOWS THE STATE.
I’ve read the many reactions to my last post and I’m encouraged by the level of engagement and the quality of some of the arguments. This is a serious issue and it deserves serious thinking.
One pushback keeps recurring:
“Igbos are everywhere; they make money everywhere; so VAT data is unfair.”
Let’s clarify this important, valid but inapplicable point:
Even if a South-Easterner creates value in Kano, Kaduna, Lagos, or Port Harcourt, VAT is recorded where the transaction is formalised and remitted — and VAT allocation is paid to STATES, not ethnic groups.
VAT does not measure origin, ethnicity, or ownership of capital. It measures where value is booked, captured, and taxed.
So the real question is not who hustles where, but which states build systems that formalise, capture, and scale economic activity.
Now, to the numbers.
1) The South-East still receives far more than it contributes
In 2024, the South-East contributed ₦101.09bn to VAT but received ₦341.46bn, a 337.8% return.
That ₦341.46bn did not go to “Igbo traders in Lagos” or “Igbo businesses in Kano”. It went to Abia, Anambra, Ebonyi, Enugu, and Imo — the South-East states.
So when people say “our people are contributing everywhere”, my response is simple: VAT does not track people. It tracks states.
And by that measure, the South-East is a net beneficiary of redistribution.
2) This is not a South-East problem alone
In 2024:
South-West contributed ₦3.11trn, received ₦849.71bn (≈27%)
South-South contributed ₦1.08trn, received ₦543.49bn (≈50%)
North-West contributed ₦211.27bn, received ₦574.32bn (≈272%)
North-East contributed ₦174.50bn, received ₦411.84bn (≈236%)
North-Central (states) contributed ₦154.54bn, received ₦408.66bn (≈265%)
South-East contributed ₦101.09bn, received ₦341.46bn (≈338%)
This shows that Nigeria’s VAT system redistributes heavily from a few high-production zones to all others, with every zone outside the South-West and South-South receiving far more than it contributes.
This is a clear sign of a narrow, fragile production base, not regional dominance, hence, a Nigeria production failure, not a regional superiority contest.
And it gets starker under the proposed VAT reform.
If we apply the new distribution formula of 60% derivation, 20% equality and 20% population to 2024 VAT distribution it would have lifted
South-West receipts from about ₦850bn to over ₦2.0trn,
South-South from about ₦540bn to roughly ₦850bn
While cutting South-East receipts from about ₦340bn to roughly ₦220bn.
North-West would dip modestly, cushioned by population, while North-Central (outside the FCT) would fall more sharply once redistribution thins.
The exact figures will shift as VAT begins to follow consumption rather than headquarters — but the direction is clear: production and formal consumption will matter more than redistribution.
Maybe the "restructuring" or "true federalism" many clamour for is finally upon us without drama.
3) “VAT doesn’t capture informality” — exactly
Many South-East businesses operate informally or under-report. That is not an argument against the data; it is the diagnosis.
An economy that is vibrant but informal is not strong.
It cannot fund infrastructure, build industrial depth, or defend itself fiscally.
4) Final word
Let’s stop mixing three debates:
Igbo enterprise across Nigeria is real.
South-East state economies are structurally weak in hosting large, formal, scalable production.
VAT allocation is paid to states, not to where “our people” live or trade.
If we want the South-East to move from net beneficiary to net contributor, the path is industrialisation, power, logistics, security, and formalisation.
Presence is not production. And VAT does not reward identity — it rewards structure.
I’m grateful for the robust engagement and the serious intellectual contributions.
This is my final word on this thread.
Osita Chidoka
14 January 2026
