Northern Governors Ban Alcohol, Yet Shares in Alcohol Tax Collected in the South
Northern Governors Ban Alcohol, Yet Shares in Alcohol Tax Collected in the South
-James Clifford
Several northern states in Nigeria have strict bans on the sale, consumption, and distribution of alcoholic beverages, often enforced under Sharia law. Despite these prohibitions, the same states continue to receive significant revenue from value‑added tax (VAT) and other alcohol‑related tax receipts collected in other parts of the country, a situation that has triggered heated debate about fairness and fiscal equity.
Revenue Sharing and VAT Allocation
Value‑added tax (VAT) is charged at 7.5% on goods and services across Nigeria, including alcoholic beverages. Revenue from VAT is pooled at the federal level and shared among the federal government, states, and local governments through the Federation Accounts Allocation Committee (FAAC). Under the current formula, the federal government takes 15%, states share 50%, and local governments get 35% of the distributable VAT pool.
VAT revenue has been rising sharply in recent years. For example, from January to November 2024, out of about N5.72 trillion in VAT revenue available to share, states and the Federal Capital Territory (FCT) received more than N4.18 trillion, leaving the remainder for other tiers of government. Under new tax reforms taking effect in 2026, states’ share of VAT is projected to rise to 55% — about N5.07 trillion out of an estimated N9.23 trillion VAT pool, while the federal share will drop to 10%.
The Alcohol Tax Paradox
VAT includes taxes collected from breweries, bottling companies, and distributors of alcoholic drinks. Over an eight‑year period up to 2021, a total of about N304.3 billion was generated from VAT on alcohol products. During that time, 12 states with strict Sharia law policies, which ban alcohol entirely, together received about N926.4 billion in total VAT allocations under FAAC.
For example:
• Kano State, where alcohol sales are banned, historically received one of the hig
