Nigeria’s 36 states and the Federal Capital Territory collected ₦112.65 billion in direct assessment taxes from self-employed individuals and largely informal businesses in 2025. That represents a 29.4 per cent increase from the ₦87.05 billion collected in 2024.
Lagos alone generated ₦72.41 billion, representing 64.3 per cent of the nationwide total. Rivers followed at a distant ₦6.26 billion, while Ogun collected ₦4.89 billion. The FCT recorded ₦3.21 billion and Benue completed the top five at ₦2.63 billion. Excluding Lagos, all other 35 states and the FCT generated only ₦40.23 billion combined, substantially below Lagos’s total.
At the bottom end, Sokoto recorded the lowest direct assessment collection at just ₦21.73 million. Taraba followed with ₦57.49 million, Ebonyi ₦64.54 million, Borno ₦70.10 million and Gombe ₦132.34 million. The gap between Lagos and Sokoto exceeds ₦72 billion.
This mirrors the fundamental imbalance in Nigeria’s tax system. PAYE dominates state revenues because it is easy to collect from formal employers. Direct assessment, which targets the self-employed and informal sector, requires a level of administrative capacity that most states do not have. Lagos has built that capacity over decades. Sokoto, Taraba and Ebonyi have not.
The human stakes are about tax equity. Nigeria’s informal sector accounts for an estimated 80 per cent of employment. Most of those workers pay no direct tax. The burden falls on the shrinking formal sector through PAYE. If states cannot tax the informal economy, they will continue to rely on salary deductions and federal allocations.
Direct assessment remains a small component of subnational taxation. States and the FCT generated ₦3.79 trillion in total tax revenue in 2025. Direct assessment accounted for only about three per cent of that. It represented just 2.2 per cent of the ₦5.15 trillion total IGR recorded nationwide during the year.
Winners and Losers
Winners: Lagos State, which has built the administrative capacity to collect direct assessment at scale. The self-employed Nigerians who comply, gaining formal tax records that can support access to credit.
Losers: States with weak tax administrations, which cannot reach their informal economies. Formal-sector workers, whose PAYE burden subsidises states that fail to tax the self-employed. The informal sector, which remains outside the tax net but also outside the formal financial system.
Bottom Line: A state that cannot tax its informal sector is a state that has not built a tax system. Lagos collects ₦72 billion from the self-employed. Sokoto collects ₦21 million. The difference is not the size of the informal economy. It is the capacity of the tax administration.