Nigeria’s 36 states and the Federal Capital Territory generated N2.64 trillion in Pay-As-You-Earn tax in 2025, a rise of about 40.4 per cent from the N1.88 trillion recorded the previous year, according to National Bureau of Statistics data.
PAYE accounted for 69.5 per cent of the N3.79 trillion in total tax revenue collected by the states and the FCT. Overall tax collections climbed 41.2 per cent to N3.79 trillion from N2.69 trillion, reflecting stronger enforcement and higher wage bills after the introduction of a new national minimum wage.
Breakdown of State Tax Revenue
PAYE remained by far the largest single source of tax income for sub-national governments. Under Nigerian law, states are entitled to collect PAYE from workers resident within their borders regardless of where the income is earned.
Direct Assessment contributed N112.65 billion, or 2.97 per cent of total tax revenue, rising 29.4 per cent from N87.05 billion in 2024 an increase of N25.6 billion. States view this category as a potential growth area, particularly for high-net-worth individuals and entrepreneurs who are not captured on formal payrolls and are required to self-assess their liabilities.
Withholding tax was the second-largest component after PAYE, generating approximately N503 billion, or 13.28 per cent of the total. Other taxes rose 48.9 per cent to N300.21 billion from N201.62 billion and accounted for 7.92 per cent of collections. Smaller contributions came from stamp duties (2.94 per cent), local government revenue (1.74 per cent), road taxes (1.32 per cent) and capital gains tax (0.33 per cent).
Revenue collected by ministries, departments and agencies increased 40.2 per cent to N1.36 trillion from N968.16 billion, representing 26.4 per cent of total internally generated revenue. Taxes made up the balance of IGR for the year.
Higher Wages Drive the Increase
The jump in PAYE collections coincided with widespread salary adjustments. President Bola Tinubu signed the N70,000 national minimum wage into law in July 2024, more than doubling the previous N30,000 level. Many states began implementing the new rate in late 2024 and through 2025.
Implementation timelines varied. Kano approved N71,000 effective November 2024, while Katsina adopted N70,000 from December 2024. Rivers State began paying N85,000 with November 2024 salaries, and Oyo introduced N80,000 from January 2025.
Federal Government personnel expenditure also rose, reaching N4.2 trillion in the first half of 2025 from N3.7 trillion a year earlier, according to the World Bank, following wage adjustments. Private-sector employers similarly increased salaries in response to inflation and exchange-rate pressures. Among listed companies, wages and salaries rose 33.02 per cent at FirstHoldCo, 31.51 per cent at Zenith Bank and 23.80 per cent at MTN Nigeria, adding further support to payroll-related tax receipts.
Despite the higher nominal wage bills, purchasing power for many workers remained under pressure amid broader macroeconomic adjustments.
