The National Bureau of Statistics (NBS) has reported that Lagos State collected N16.74 billion in road taxes in 2023, making it the top-earning state in this category.

This figure represents a notable share—41.7%—of the total N40.14 billion road taxes paid by Nigerians to state governments, highlighting Lagos’s prominent role in tax revenue.

The report also shows that Lagos had no recorded road tax revenue in 2022, yet surged to lead the nation in 2023. The data underscores Lagos’s economic importance and its effective collection methods, which have placed it at the forefront of state-level revenue generation.

While Lagos achieved the highest collection, other states also saw significant increases. Ebonyi State, for instance, posted a remarkable 3,804% rise in road tax revenue, while Rivers State recorded a 270.66 cent rise, collecting N830.01m compared to N223.93m in 2022.

Sokoto State’s collections grew by 41.22 per cent, reaching N194.66m, while Yobe State saw a 30.4 per cent increase to N81.88m, despite its relatively modest overall figure.

In contrast, several states experienced declines in road tax collections. Enugu State reported a 95.12 per cent drop, from N1.1bn in 2022 to N53.47m in 2023.

The Federal Capital Territory recorded no road tax revenue in 2023, a notable absence given its administrative significance.

The federal government is currently proposing a new tax reform which will look into the tax generation of all the states of the country.

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For instance the document of the proposed tax reform read in parts, that Lagos and its LGs are on track to receive more than N650 billion from VAT in 2024, if the reform falls through.

“This is because companies remit VAT using the location of their headquarters and tax office and not where the services and goods are consumed.

“At the current trend, Lagos State and its LGs are on track to receive more than N650 billion from VAT in 2024.

“The closest State to Lagos in VAT receipt is Rivers State which received 4.4 per cent (N129.5 billion) from January to June 2024. FG was only slightly ahead of Lagos with 13 per cent allocation.”

It stressed that “If 60 per cent is confirmed as the new derivation, then Lagos State and its Local Governments will receive at least 30 per cent of total VAT collected if the current derivation mechanism is used.

“Meaning Lagos State and its LGs will receive more than N1.8 trillion as VAT allocation in 2025, assuming a total VAT collection of N6 trillion, even if there was no rate increase but only a change in derivation and ceding of an additional 5 per cent to states” the proposed tax reform document read.

The NBS report sheds light on the growing importance of road taxes in states’ internal revenue, with total IGR across Nigerian states rising to N2.43 trillion in 2023, up 26% from the previous year’s N1.93 trillion.