Tax Reform Bills: Governors seek adjustment to VAT

The discussion on the Value Added Tax (VAT) aspects of the Tax Reforms Bills shifted to the Nigeria Governors’ Forum (NGF) yesterday. The governors, who expressed support for the four bills introduced to the National Assembly by President Bola Ahmed Tinubu, proposed modifications aimed at ensuring a fairer distribution of resources.
The NGF suggested a VAT-sharing formula of 50 percent for equality, 30 percent for derivation, and 20 percent for population. This proposal differs from the Federal Government’s formula outlined in the bills, which allocates 20 percent for equality, 60 percent for derivation, and 20 percent for population.
The NGF meeting, held at the Congress Hall of the Transcorp Hilton Hotel in Abuja and chaired by Governor AbdulRahman AbdulRazaq of Kwara State, emphasized that these adjustments would promote a more balanced allocation of resources.
President Tinubu, during his inaugural presidential chat, addressed the ongoing debate surrounding the VAT components of the bills. He reaffirmed that while the tax reforms are here to stay, the Federal Government remains open to dialogue.
A communiqué issued by Governor AbdulRazaq confirmed that the governors supported the continuation of the legislative process at the National Assembly aimed at passing the bills.
The communiqué reads: “We, members of the Nigeria Governors’ Forum (NGF) and presidential tax reform committee, at a meeting convened on the 16th of January 2025 to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system, arrived at the following resolutions:
“The forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws.
“Members acknowledged the importance of modernising the tax system to enhance fiscal stability and align with global best practices.
“The forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.
“Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, to maintain economic stability.
“The forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.
“Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, to maintain economic stability.
“The forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.
“The meeting recommended that there should be no terminal clause for the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), the National Information Technology Development Agency, (NITDA) in the sharing of development levies in the bills
“The meeting supports the continuation of the legislative process at the National Assembly that will culminate in. the eventual passage of the Tax Reform Bills.”
Other governors at the meeting were Inuwa Yahaya (Gombe), Uba Sani (Kaduna), Hope Uzodimma (Imo), Abdullahi Sule (Nasarawa), Amadu Fintiri (Adamawa), Caleb Muftwang (Plateau) and Usman Ododo (Kogi).
Sule said the grey areas in the bills had been resolved, noting that the tax reform would not lead to an increase in the already high inflation.
He said the new sharing formula being proposed by the NGF would positively affect the North.
“The agreement today has given equilibrium, as all governors, the Northern elites and the presidency, are on the same page,” he said.
The governor, who spoke with reporters, said the misinformation about the reforms was corrected, adding that the meeting resolved the knotty issues in a way that would be beneficial to the country.
Sule stressed: “The way it was presented today, it will affect the North positively.
“One of the things we in the North were agitated about was increasing VAT from 7.5 per cent to 10 per cent this year and then, to 12.5 per cent and then, to 15 per cent.
“We were concerned that by doing that, it was going to add to the high inflation of 34 per cent we are currently contending with. This 34 per cent is in Lagos. But in the North, it is far more than that. It may be around 50 per cent.
“This is because, in the North, we are not so lucky to have planned in the past for industries and people who can work.
“So, increased VAT would have affected the people more in the Northern region as prices of commodities and services will increase and that will further make life difficult for the people.
“I’m happy we presented that and the committee agreed with us”.
On the principle of inheritance, which was also a bone of contention, Sule said: “That is already in the existing law. There has been some misinformation as regards these Tax Reform Bills.”
He further noted that, in contrast to the current sharing formula, which allocates 15 percent to the Federal Government, the NGF proposed a reduction to 10 percent for the Federal Government. The remaining 90 percent would be allocated to states and local governments.
Senator Natasha Akpoti-Uduaghan, Chair of the Senate Committee on Local Content, explained the North’s call for adjustments to the proposals. Representing Kogi Central District in the Senate, she stated that the region was not adequately prepared for the fiscal changes. She emphasized the need to revitalize Northern Nigeria’s socioeconomic and cultural heritage to improve the region’s economic prospects.
At a symposium held at Arewa House in Kaduna, representatives from non-partisan, pan-Nigerian civil society organizations—including youth and student groups from seven states in Northwest Nigeria—expressed their support for the proposed tax reforms.
A communiqué read by Comrade Hamza, National Coordinator of the Nigeria First Project Initiative; Comrade Bishir Dauda Katsina, National Secretary of the Muryar Talaka Awareness Initiative; and Sadi Garba, Coordinator of the Coalition of Northern Nigerian Students Forum, stated that the symposium was organized in response to ongoing debates surrounding the tax reform bills. Participants declared that the bills represent a call to action for Northern leaders to adopt innovative strategies to unlock the region’s full potential.