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Lagos State emerged as Nigeria’s biggest recipient of FAAC allocations in the first half of 2026, receiving N365.78bn and overtaking oil-producing states including Delta and Rivers in the ranking.
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Lagos’ allocation jumped 54.39 percent year-on-year from N236.92bn, with N344.06bn of its H1 receipts coming from VAT, highlighting the importance of the state’s large commercial and consumption base.
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Oil-producing states still dominated the upper rankings, with Delta, Rivers, Akwa Ibom and Bayelsa collectively receiving substantial derivation revenue, showing that both oil production and economic activity remain key drivers of FAAC allocations.
August 10, (THEWILL) — Lagos State has overtaken some of Nigeria’s biggest oil-producing states to emerge as the largest beneficiary of Federation Account allocations in the first half of 2026, receiving N365.78bn despite earning no revenue from the 13 percent derivation principle.
An analysis of gross revenue disbursement by the Federation Account Allocation Committee showed that the 36 states collectively received N4.54tn in net FAAC allocations between January and June 2026, up from N3.61tn in the corresponding period of 2025. This represents a 25.77 per cent year-on-year increase.
The top 10 beneficiaries received N2.16tn during the period, accounting for 47.47 percent of the total allocation to states.
Lagos recorded the biggest increase among the top beneficiaries, with its allocation rising by N128.86bn, or 54.39 percent, from N236.92bn in H1 2025.
The state also moved from third position last year to first in the latest ranking.
READ ALSO: Lagos Tops FAAC Allocations as 10 States Receive 40.1% of Q1 2026 Distributions
Lagos rises on VAT strength
Unlike the oil-producing states that benefit substantially from derivation revenue, Lagos’ position was driven overwhelmingly by its share of Value Added Tax.
The state received N344.06bn in net VAT allocation during the six months, alongside N10.91bn in net statutory revenue, N3.31bn from the Electronic Money Transfer Levy and N5.05bn in non-oil revenue augmentation.
Its VAT allocation alone accounted for almost 94 per cent of its total net FAAC receipt.
The figures highlight the importance of Lagos’ large formal economy, concentration of businesses and high level of commercial and consumer activity in generating VAT revenue.
Lagos’ emergence as the top beneficiary therefore reflects a different revenue pathway from that of states whose positions are largely strengthened by oil derivation.
READ ALSO: FAAC Revenue Soars 33 Percent To ₦4.5trn, Delivering Bigger June Payouts To FG, States And LGs
Despite Lagos’ rise, oil-producing states continued to dominate the upper end of the FAAC ranking.
Delta State ranked second with N331.43bn, followed by Rivers with N295.99bn, Akwa Ibom with N270.27bn and Bayelsa with N266.72bn.
Delta’s allocation was supported by N229.71bn in derivation revenue, the highest derivation receipt among the leading states. Bayelsa and Akwa Ibom also received about N169bn each from derivation.
Rivers received N117.33bn in derivation revenue.
The figures show that while VAT can push economically active non-oil states ahead in overall FAAC receipts, the 13 percent derivation principle continues to provide oil-producing states with a significant advantage.
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FAAC distribution broadens
Other states also recorded significant increases during the period.
Kano received N152.57bn, Oyo N139.09bn, Ondo N113.04bn, Jigawa N111.61bn and Borno N109.65bn.
Oyo recorded one of the fastest increases among the leading states, with its allocation rising by 45.99 percent year-on-year, largely supported by a N97.09bn VAT allocation.
The figures suggest that the increase in FAAC revenue was not restricted to oil-producing states, as states with large populations, commercial activity and consumption bases also benefited from higher VAT distributions.
However, the concentration of revenue remains significant. The top 10 states accounted for 92.66 percent of all derivation revenue distributed during the period, while taking 44.02 percent of total net VAT allocations.
The H1 2026 figures therefore highlight two increasingly important drivers of state government revenue: oil production and derivation on one hand, and economic activity and VAT generation on the other.
Lagos’ rise to the top of the ranking does not mean oil-producing states have lost their fiscal advantage. Rather, it shows how a state without derivation revenue can outperform traditional oil beneficiaries when its economic base generates sufficiently large VAT receipts.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
