By Udoh James Akpan
Most news oriented media houses will have their 14th March 2025 headlines read about the approval of the tax reform bills by the House of Representative. Even Taiwo Oyedele, Chairman, Presidential Fiscal Policy and Tax Reforms Committee took to his Linkedin page to announce the news. That is expected given that he chairs the committee that made the consequential proposals on the tax reforms.
The House of Representatives of the National Assembly approved the tax reform bills submitted by President Bola Tinubu following the presentation by its Finance Committee after the recent public hearing to obtain submissions from stakeholders despite initial controversy and opposition.
The Chairman of the Committee, Hon. James Faleke, submitted the report before the House at the plenary on Thursday, 13th March 2025 and it was subsequently approved. The approved version comes with 10 amendments which are 7.5% VAT retained, Restriction of presidential powers, Deletion of 5% excise duty, Removal of inheritance tax, 30% Company Income Tax, Taxation of free trade zones, Lottery, gaming business, Exemption of military personnel from tax and Revenue derivation formula
The revenue derivation formula was the most contested part of the proposal from the reform committee as it came with a lot of opposition from northern elites ranging from members of the National Assembly, governors, traditional rulers and others from the north including those that have openly opposed the Tinubu administration from the northern extraction. The northern based media houses were mostly sympathetic to the northern position.
I intend to zero in on the controversy and opposition from some northern Nigerians. It is however important to highlight what the House of Representative amended on that particular provision.
Thus, the amended bill reduces the proposed derivation formula from 60 percent to 30 percent. Currently, the value added tax (VAT) revenue is shared as follows: 15 percent to the federal government, 50 percent to states, and 35 percent to LGAs. States use a 50:30:20 formula—50 percent for equality, 30 percent for population, and 20 percent for derivation.
The House amended Section 77 of the Tax Administration Bill and approved that notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by virtue of the operation of Chapter Six of the Nigeria Tax Act shall be distributed as follows —10 percent to the federal government; 55 percent to the state governments and the Federal Capital Territory; and 35 percent to local governments.
The House recommended that the amount of the VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: equally – 50 percent; population – 20 percent; and consumption – 30 percent.
In addition, the House proposed that the basis of VAT taxation will now be consumption, rather than where the returns are filed. This is meant to address the concerns raised by various stakeholders at the public hearing that some regions may be disadvantaged as the headquarters of companies are largely located in one region, where all returns are usually filed.
One thing that the debate brought out was that Nigeria is divided into complex lines as a country, and elite consensus are usually achieved on these complex lines.
In recent times, other Nigerians seem to have joined national conversations through the social media. Many times, the conversations on the social media are toxic, emotional, illogical, ethnic, and insults-driven. It is a mob zone. Rather than rational contributions, you will see vile and ignorant and many times unrelated issues. But do not blame them, especially the youths.
The politics of Nigeria in the 21st century is not based on any ideology, it is based on some primordial sentiments, and it keeps changing based on who the president is. When Goodluck Jonathan was the president, the conversation was different and many from South West seemed to have aligned many from the North West and North East. When Muhammadu Buhari became president, many from the North Central, South East and South South flocked together. Now that Bola Tinubu is the president, it is even more confusing depending on the subject matter.
When the issues of 2027 election are being discussed, the North West seem to align with the South East. However, when the issue of public administration and economy are being discussed, the South East, South South, South West and North Central flock together.
Interestingly, in this debate, all Christians regardless of where they come from, side with these geo-political zones. The reason is simple – many Nigerians from the South and the North Central otherwise called the Middle Belt openly or secretly blame the Muslim North for the economic challenges of Nigeria. The Muslim North has been in power longer than any other group, yet all the negative indicators like out of school children, illiteracy, poverty etc are predominant in the Muslim North according to all statistics. It means that the Muslim North has not only failed her own people, but has failed the country.
The tax reform proposal brought out this reality about Nigeria. Most of the opposition actually came from the Muslim North, though they tried to drag others into their narrative, but it was essentially their own thing and their quarrel was with the Value Added Tax (VAT) component of the tax proposal. The sub-text of their opposition is loss of revenue to them.
The issue to interrogate here is what did they do with the revenue they have enjoyed so far including the Federation Account Allocation Committee Allocation (FAAC), which allocates revenue from the federation account to the three tiers of government (Federal, State, and Local) based on a formula, with the Federal government receiving the largest share, followed by States and Local Governments, respectively.
This is usually the argument of the South and the Christian North that are marginalised politically and socially. There are evidences of ostentatious lifestyle by the leaders from the Muslim North, but there is a stark reality of poverty and illiteracy among the common people, and this has contributed to the social problem in the north including insecurity.
The real and hard issues to have a conversation about is how Nigeria can function properly so that it would benefit all, both the elites and the so called common people. This conversation goes beyond geo-political zones and religion. It is more about classism and class struggle. The truth is that whatever affects the common people in the north, also affects the common people in the south, but the impact may be more severe in the north. Therefore, what governance approach will have a positive impact more on the people, rather than a parasitic class of elites. In my opinion, federalism has the ability to address more of these issues, than any other form of government being that Nigeria is a plural society of multi religion and ethnic groups.
Federalism in general terms in Nigeria is a system of government in which the same territory is governed by two levels of government. The national government is responsible for broader governance issues, which the sub-national like the state govern local concern. By letters of the Nigerian constitution, Nigeria is supposed to be a federal state, but in principles and spirit, Nigeria is not a federal state but somewhat quasi federal state. The main issue here has always been fiscal federalism.
Interestingly, the social media space is not so much involved in this important and development-driven conversation; they are more involved in shallow issues that has no real impact on their future.
During the tax reform bill debate, apart from some elites that made both informed and uninformed points, the usual vociferous people on the social media only reduced it to ethnic and historical quarrels and drama.
However, it is important to nuance here that each country’s federalism should be based on the reality and cultural context of that country, but the major principle of some issues being managed at the local level where the people live must be upheld. You cannot centralise governance in a plural state. Each sub-national must take her own destiny in her hand given her socio-cultural and economic reality and model a system that will suit her.
Every state should pursue its own development and economic agenda and to do that must be in control of its resources just like in the first republic. If Nigeria grows economically in a federal system, development will flourish, then political and social media drama will reduce.
