Opposition voices are beginning to overwhelm President Bola Tinubu’s tax reforms, threatening to derail one of Nigeria’s first-ever comprehensive fiscal policies.
The tax bills successfully scaled second reading in the Senate last week, but it is now being branded ‘anti-North,’ with political and economic groups tagging them as an agenda to impoverish the region.
“We condemn these bills sent to the National Assembly. They will drag the North backward and also affect the South East, South West, and some South-Western states like Oyo, Osun, Ekiti, and Ondo,” Babagana Zulum, governor of the northeastern state of Borno, said last Friday.
In October, President Tinubu asked the National Assembly to consider and pass four tax reform bills: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.
Read also: Tinubu tax reforms I’ll reduce the burden on 90% of Nigerian workers Presidency.
The Northern States Governors Forum (NSGF) has since openly opposed the bills, with the National Economic Council (NEC) advising the president to withdraw them for further consultation.
The most contentious clause contained in Section 77 of the proposed Nigeria Tax Administration Bill, 2024, is the VAT sharing formulae.
The proposed distribution is 10 per cent to the federal government, 55 per cent to states, and 35 per cent to local government areas (LGAs).
The section reads, “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: (a) 10% to the Federal Government; (b) 55% to the State Governments and the Federal Capital Territory; and (c) 35% to the Local Governments. Provided that 60% of the amount standing to the credit of states and local governments shall be distributed among them on the basis of derivation.”
Currently, VAT revenue is shared as follows: 15 per cent to the federal government, 50 per cent to states, and 35 per cent to local governments. States presently use a 50:30:20 formula—50per cent for equality, 30 per cent for population, and 20 per cent for derivation.
The proposed increase in VAT derivation from 20 per cent to 60 per cent has sparked sharp criticism, particularly from northern stakeholders, who argue that the new formula disproportionately favours southern states, especially Lagos.
Despite the advantages put forth by the federal government regarding the advantages of the bills, particularly the arguments that it would reduce the burden of taxation on Nigerians, northern governors are not yet convinced.
The VAT-sharing formula has deepened regional divisions. Northern governors argue that the proposed model undermines their region’s economic interests and primarily benefits the South. They contend that such changes could further marginalise the North economically, and vowed to resist it.
Read also: Tinubu tax reforms explained in layman language
Opposition grows
Since the tax reform bills scaled second reading in the Senate, opposition has continued to intensify.
During the debate, lawmakers, particularly from the North, insisted that the bills should be withdrawn, but Barau Jibrin, deputy Senate president, who presided over the session, said the bills should be read for the second time and all grievances be accommodated at the committee stage.
Following the bill’s passage, northern senators held a closed-door meeting to deliberate on their next steps.
The debate has extended beyond the Senate, with socio-cultural organisations weighing in. While Afenifere and Ohanaeze Ndigbo have expressed support for the bills, the Arewa Youths Forum (AYF) has opposed them, raising concerns over equity, fairness, and the potential for disproportionate burdens on the northern region.
The Northern Youth Assembly (Majalisar Matasan Arewa), representing northern youths across 19 states, openly attacked the deputy Senate President for presiding over the session in which the bills were passed.
Other political figures like former Vice President Atiku Abubakar, former vice president, also raised concerns about the bills. Atiku urged the National Assembly to revisit and publish the resolutions of NEC.
Rabiu Kwankwaso, former Kano State governor, criticised the timing of the bills, citing Nigeria’s ongoing economic struggles.
“Now is not the right time to review VAT or introduce new taxes… The government must prioritise relief for the people rather than impose additional burdens,” he said on his X handle.
With the bills advancing to the committee stage amidst growing opposition, their survival depends on navigating the deepening divisions in both the Senate and the broader political landscape.
Bills’ benefits
However, Samuel Nzekwe, an economist, applauded the bills ffor theirpotential to boost government revenue, noting that Nigeria is not collecting enough revenue from VAT.
On the contentious clause, he said, “I don’t see any evil done to the North; they are good bills.”
He however expressed concern that the North may thwart the bills using their number at the National Assembly.
Currently, there are 108 senators as the late Ifeanyi Ubah is yet to be replaced. Northern senators are in the majority with a total of 58 senators across North-East, North-West and North-Central geopolitical zones.
Read also: A taxing truth: Will Nigeria reform ambitions deliver?
At the House of Representatives, 72 lawmakers have vowed opposition to the bills, largely from the North-East region. The House also postponed its debate on the bills indefinitely.
Chinedu Obi, director-general of the Inter-Party Advisory Council of Nigeria (IPAC), urged the National Assembly not to allow politics to trump economics.
“We politicise everything, even bills with good intentions. If we must get out of the woods, we must approach the bills differently,” he said, urging the National Assembly to pass bills that would serve the national interest.
Speaking with BusinessDay, Eze Onyekpere, lead director, of the Centre for Social Justice, said that the tax reform bills are good and necessary to bolster government revenues and drive the overall economy.
Onyekpere, who questioned the opposition against the bills, said that they seek to review the VAT distribution formula and ensure that state revenues remain intact.
“I do not know why there is opposition to the bill. With the current distribution formula for VAT, states where industries’ headquarters are collect the major part of the revenue, but the bill is out to correct this by ensuring that, for example, if Coca-Cola headquarters are in Lagos, the ones that customers consume in Zamfara should be credited to Zamfara State instead of Lagos.”
Auwal Musa Rafsanjani, executive director of the Civil Society Legislative Advocacy Centre (CISLAC), noted that the Nigeria Tax Bill, 2024, represents a unique opportunity to reposition Nigeria’s fiscal framework for greater equity and efficiency.
However, he urged the National Assembly and the executive to critically assess and address key gaps in the bill to ensure inclusivity, economic equity, and sustainable governance.
“The proposed VAT rate increases—doubling by 2030—risk exacerbating inflation and poverty. CISLAC recommends maintaining the current VAT rate of 7.5 per cent until the economy stabilises, with comprehensive measures to protect vulnerable populations from price shocks.
Read also: Tax Reform Bills propose new sharing formula, cede 55% to state governments.
“The current exemption list excludes critical items like cooking energy (LPG and kerosene) and electricity at the consumer level. Expanding these exemptions is essential to mitigate the regressive effects of VAT on low-income households,” he further said.
Taiwo Oyedele, chairman, of the Presidential Fiscal Policy and Tax Reforms Committee, while speaking with BusinessDay recently, explained that the bills seek to address the current tax system which gives credits for the VAT generated to the place where it is remitted.
