Nigeria’s states and the Federal Capital Territory (FCT) recorded a 41.2 per cent increase in tax revenue to N3.79 trillion in 2025, driven largely by higher Pay-As-You-Earn (PAYE) collections from workers.
Data from the National Bureau of Statistics (NBS) showed that tax revenue rose from N2.69 trillion in 2024, while PAYE collections increased to N2.64 trillion from N1.88 trillion in the corresponding period.
PAYE accounted for 69.5 per cent of total tax revenue generated by the states and the FCT during the year, making it the largest contributor to subnational tax receipts.
The increase came amid higher wage bills following the implementation of the N70,000 national minimum wage and salary adjustments across public and private sector organisations.
PAYE collections rose by approximately 40.4 per cent year-on-year to N2.64 trillion in 2025, reflecting the tax category’s dominant position in the revenue structure of states and the FCT.
Withholding tax ranked as the second-largest tax revenue source, contributing approximately N503 billion, or 13.28 per cent of total collections.
Other taxes generated N300.21 billion, up 48.9 per cent from N201.62 billion in 2024, accounting for 7.92 per cent of the total.
Direct assessment revenue increased to N112.65 billion from N87.05 billion, representing a rise of 29.4 per cent. The category provides states with a channel to collect personal income tax from eligible individuals, including entrepreneurs and high-net-worth taxpayers who may not earn salaries through formal payroll systems.
Stamp duties accounted for 2.94 per cent of total tax revenue, while local government revenue contributed 1.74 per cent. Road taxes and capital gains tax accounted for 1.32 per cent and 0.33 per cent, respectively.
The increase in PAYE collections followed the implementation of higher minimum wages across several states after President Bola Tinubu signed the N70,000 national minimum wage into law in July 2024, replacing the previous N30,000 benchmark.
Several states introduced new wage structures between late 2024 and 2025. Rivers State began paying a minimum wage of N85,000 in November 2024, while Oyo State implemented N80,000 from January 2025.
Kano and Katsina also approved minimum wages of N71,000 and N70,000, respectively, in late 2024.
The adjustments provided a basis for higher payroll expenditure and increased PAYE liabilities among eligible employees, although the extent to which wage increases contributed to the overall rise in tax collections was not quantified in the NBS figures.
According to the World Bank, the Federal Government’s personnel expenditure rose to N4.2 trillion in the first half of 2025 from N3.7 trillion in the corresponding period of 2024, following wage adjustments.
Several listed companies also reported higher staff costs in 2025. Wage and salary expenses rose by 33.02 per cent at First HoldCo, 31.51 per cent at Zenith Bank and 23.80 per cent at MTN Nigeria, providing further context for rising payroll-related costs across the economy.
Beyond tax collections, revenue generated by ministries, departments and agencies (MDAs) increased by 40.2 per cent to N1.36 trillion in 2025 from N968.16 billion in 2024.