Proposed tax reforms by the federal government of Nigeria are poised to significantly reshape state revenues, particularly with changes to the Value Added Tax (VAT) distribution, according to governmental officials and stakeholders.
Recently, Femi Ajayi, the Ekiti State Commissioner for Budget and Economic Planning, highlighted potential benefits for states, stating during the presentation of the state's 2025 budget: "With our great performance in the 2024 budget, we are looking forward to an impressive and productive year in Ekiti State through the deliberate efforts of our amiable governor, Biodun Oyebanji." If passed, these reforms could increase state revenue, especially from VAT and other means, fueling various developmental projects throughout the state.
The proposed tax reform bills sparked significant discussions among governors of the country's 36 states recently. The governors came together with members of the Presidential Tax Reform Committee and endorsed new modalities for sharing VAT proceeds. The agreed formula suggests maintaining 50 percent distribution based on equality, increasing the derivation share from 20 percent to 30 percent, and reducing the population-based allocation from 30 percent to 20 percent. This new structure is intended to encourage more equitable distribution of resources across states.
Concerns, particularly from northern states, have surfaced amid these tax reforms. Senator Natasha Akpoti-Uduaghan remarked, "The only reason why the north is jittery about the Tax Reform Bills is because we are ill-prepared." This statement was part of her call for revitalizing northern Nigeria's socio-economic structure to align with modern tax legislation adequately. The northern governors’ opposition had initially arisen from fears the reforms could undermine their regions, prompting discussions on ensuring equitable treatment and avoiding undue marginalization.
The proposed reforms haven’t met universal support, particularly among public university representatives. The Academic Staff Union of Universities (ASUU) has voiced strong opposition to the Nigeria Tax Bill 2024, claiming it would jeopardize funding for public universities. Professor Namo Timothy, Zonal Coordinator of ASUU, warned during a press conference, "This bill would spell doom for public universities in the country if implemented," emphasizing the importance of retaining the Development Levy, which has historically financed necessary projects through the Tertiary Education Trust Fund (TETFund).
Lawmakers and public officials have stressed the importance of moving forward with these reforms, yet caution surrounds the political discourse. The Northern Governors’ Forum, previously opposed, expressed willingness to support discussions surrounding reform as long as they are rooted equally across regions. The representatives articulated their stance, declaring, "We are not against any policy... but call for equity and fairness, ensuring no geopolitical zone is short-changed or marginalized." Such sentiments reflect the delicate political climate surrounding the impending tax legislation.
The Senate recently projected its fiscal planning for the 2026 budget, estimated at N100 trillion, emphasizing the need to reallocate previously trapped funds within governmental organizations to boost overall revenues. This projection was outlined during the Stakeholders Public Hearing focused on the federal budget, advocating for improvements not only to fiscal policy but also to the mechanisms for revenue generation.
With significant conversations underway about the proposed tax reforms, there is also a push for accountability from multiple stakeholders. Participants from various northern groups have urged individuals to remain vigilant against any misuse of the current tax reform debates as platforms for political ambitions. They emphasized the primary goal should be enhancing the country's fiscal structure, broadening the tax net, and ensuring compliance for realistic economic growth.
Each step taken toward enacting these reforms must involve clear communication among states, transparency with funding allocations, and a united perspective on how to uplift regions economically. Advocates argue sustainable approaches to agricultural and commodity production must be prioritized alongside the tax reforms to truly revitalize the economy. The numerous voices calling for constructive engagement show the appetite for systemic change.
The push for tax efficiency continues as both state and federal governments recognize the necessity for equitable growth. Only time will reveal how these proposed changes will unfurl and whether they will accomplish the desired financial stability across Nigeria.