Why Investing in Lagos is Crucial for Nigeria’s Economy: Breaking Down the VAT Debate
Political figures and commentators, including Peter Obi, Nasir El-Rufai, the African Democratic Congress (ADC), and media outlets such as Daily Trust, have recently criticized the Federal Government for prioritizing Lagos in its investment plans. However, economic data reveals that such criticisms may stem from a misunderstanding of Nigeria’s financial structure and Lagos’s central role in sustaining the national economy.
Lagos: The Engine of Nigeria’s VAT Revenue
According to official figures, Lagos generated ₦2.75 trillion in VAT in 2024, which accounted for 54% of Nigeria’s total VAT revenue. Despite this, Lagos only received back ₦460.11 billion (16.74%), with the majority of its contributions redistributed to other states.
This redistribution benefits states like Anambra, which receives about three times what it contributes, and Zamfara, which receives nearly four times its VAT contribution. Despite carrying this financial burden for the nation, Lagos has historically not protested the imbalance.
The Logic Behind Investing in Lagos
Critics have argued that President Bola Tinubu’s administration is favoring Lagos at the expense of other regions. But if Nigeria fails to invest in its primary revenue hub—the “goose that lays the golden egg”—how can the nation sustain its growth?
Take Detty December as an example: Lagos attracts $72 million annually from tourism during the festive period. With the planned $400 million expansion of the Murtala Muhammed International Airport (MMIA), capacity would increase from 6.5 million to 20 million passengers annually, potentially raising Lagos’s December tourism revenue to $180 million per year.
This single project could pay for itself within five years, while also boosting VAT contributions that benefit every Nigerian state.
Conclusion: Short-Term Politics vs Long-Term Growth
Instead of sowing discord, Nigeria’s political class and media should recognize that investments in Lagos are not just about Lagos—they are about sustaining the revenue pipeline that keeps the entire federation afloat. Undermining such efforts amounts to economic short-sightedness.
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