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States, FCT Collect N2.64trn Taxes from Workers
The implementation of the N70,000 new minimum wage and salary adjustments across the public and private sectors pushed income tax deductions to a record high, as Nigeria’s 36 states and the FCT collected N2.64 trillion from workers as Pay-As-You-Earn tax in 2025.
This is according to data from the National Bureau of Statistics (NBS), which showed that PAYE accounted for 69.5 per cent of the N3.79 trillion in total tax revenue generated by states and the FCT during the year.
Total taxes collected by states increased 41.2 per cent to N3.79 trillion from N2.69 trillion as states stepped up tax collections amidst an increase in salaries and wages in line with the new minimum wage and market realities.
*PAYE Leads States’ Tax Revenue Growth*
PAYE remained the largest component of tax revenue collected by states and the FCT in 2025. In Nigeria, state governments are statutorily empowered to collect PAYE from workers who live in a state regardless of where the source of revenue is from.
Direct Assessment contributed N112.65 billion, representing 2.97 per cent of total tax revenue, while withholding tax was the second-largest component after PAYE.
PAYE collections rose 40.3 per cent to N2.64 trillion from N1.88 trillion in 2024, while Direct Assessment increased 29.4 per cent to N112.65 billion from N87.05 billion, an increase of N25.6 billion.
States see direct assessment as a potential source of income, especially from High-Net-worth Individuals and Entrepreneurs who often do not make up part of payroll. Here, taxpayers are expected to file their taxes after assessing themselves.
Other taxes rose 48.9 per cent to N300.21 billion from N201.62 billion, accounting for 7.92 per cent of total tax revenue, while withholding tax contributed about N503 billion, or 13.28 per cent.
Total tax revenue increased 41.2 per cent to N3.79 trillion from N2.69 trillion, with stamp duties accounting for 2.94 per cent, LGA revenue for 1.74 per cent, road taxes for 1.32 per cent and capital gains tax for 0.33 per cent.
Revenue from Ministries, Departments and Agencies (MDAs) rose 40.2 per cent to N1.36 trillion from N968.16 billion, accounting for 26.4 per cent of total internally generated revenue (IGR).
Taxes accounted for the remaining share of IGR generated by states and the FCT during the year.
*Minimum Wage Implementation Drives PAYE Surge*
The rise in PAYE collections came in a year when wage bills increased across the country. President Bola Tinubu signed the N70,000 minimum wage into law in July 2024, raising it from N30,000, with many states beginning implementation in late 2024 and through 2025.
States adopted higher minimum wages at different points in late 2024 and 2025. Kano approved N71,000 effective November 2024, while Katsina approved N70,000 effective December 2024, alongside adjustments across its public workforce.
Rivers began paying N85,000 with November 2024 salaries, while Oyo implemented N80,000 effective January 2025. These changes provide context for higher public-sector payrolls during the period.
According to the World Bank, the Federal Government’s personnel expenditure in the first half of 2025 increased to N4.2 trillion from N3.7 trillion a year earlier, following wage adjustments.
Most private sector businesses also raised wages to mitigate the impact of higher inflation and exchange adjustments experienced in 2024. Despite this, Nigerians still remain among the least salary earners, with purchasing power under pressure for macroeconomic reforms.
Several NGX-listed companies recorded higher wage bills in 2025. Wages and salaries rose by 33.02 per cent at FirstHoldCo, 31.51 per cent at Zenith Bank and 23.80 per cent at MTN Nigeria, providing additional context for increased payroll-related tax collections.
