Governors Back Tax Reforms, Endorse New VAT Sharing Formula
After weeks of intense debate, governors from Nigeria’s 36 states and the Presidential Tax Reform Committee have finally reached an agreement on how to share the Value Added Tax (VAT).
The governors, at the end of their meeting, endorsed the sharing of the VAT proceeds on the basis of 50 per cent equality, unchanged from what is currently in operation; 30 per cent derivation, from 20 per cent currently in operation and 60 per cent that was proposed by the Presidential Tax Reform Committee headed by Mr. Taiwo Oyedele.
The governors also agreed on 20 per cent sharing on population basis, from 30 per cent which is the current allocation before the tax reform proposal.
The tax reform deal came as Senate yesterday projected a N100 trillion aggregate expenditure for the 2026 fiscal year, and vowed to free funds it said were being held by some government organisations.
Chairman, Senate Committee on Appropriation, Senator Solomon Adeola (APC, Ogun West), made the disclosure during a Stakeholders Public Hearing and Interactive Session on the 2025 Appropriation Bill. The session had the theme, “The 2025 Budget of Restoration: Securing Peace, Rebuilding Prosperity.”
Chairman of the Senate Committee on Local Content, Senator Natasha Akpoti-Uduaghan, said some stakeholders in the north were jittery about the tax reform bills because the region was ill-prepared for such fiscal legislation.
At the same time, some northern groups urged Nigerians, particularly northerners, to be wary of political actors using the current tax reform debate as platform to advance their ambitions ahead of the 2027 general election.
However, Academic Staff Union of Universities (ASUU) reiterated its stance against the proposed Nigeria Tax Bill 2024, warning that it would spell doom for public universities in the country if implemented.
The communique of the governors’ meeting with members of the Presidential Tax Reform Committee in Abuja, held behind closed-doors, was signed by Chairman of Nigeria Governors’ Forum (NGF) and Governor of Kwara State, Alhaji Abdul Rahman Abdul Razaq.
The communique stated, “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.
“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.
“We, members of the Nigeria Governors’ Forum (NGF) and presidential tax reform committee, 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 more resolutions.
“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 TETFUND, NASENI, and 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.”
Yesterday’s meeting between the governors and members of the presidential committee marked a major breakthrough, as the northern states’ governors, emirs and chiefs had last year rejected the proposed tax amendment bills sent to the National Assembly by the federal government.
They said it was capable of jeopardising the wellbeing of the people in the region.
The northern leaders said they were not against any policy that would ensure the growth and development of the country, but called for equity and farness in the implementation of all national policies and programmes to ensure that no geopolitical zone was marginalised.
Their position was contained in a communique signed by Chairman of Northern Governors’ Forum, Governor Muhammadu Yahaya of Gombe State, after a joint meeting with the traditional council in Kaduna.
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The communique read, “Forum notes with dismay the content of the recent Tax Reform Bill that was forwarded to the National Assembly.
“The contents blare against the interests of the north and other sub-nationals, especially the proposed amendment to the distribution of Value Added Tax (VAT) to Derivation-based Model.
“This is because companies remit VAT using location of their headquarters and tax office and not where the services and goods are consumed.
“In view of the foregoing, the Forum unanimously rejects the proposed Tax Amendments and call on members of National Assembly to oppose any bill that can jeopardise the well-being of our people.
“For the avoidance of doubt, the Northern Governor’ Forum is not averse to any policies or programmes that will ensure the growth and development of the country.
“However, the Forum calls for equity and farness in the implementation of all national policies and programmes so as to ensure that no geopolitical zone is short-changed or marginalised.”
Senate Projects N100 Trillion Budget
The senate projected a N100 trillion aggregate expenditure for 2026, vowing to free funds held by some government organisations.
The National Assembly is currently considering the N49.7 trillion 2025 Appropriation Bill submitted to a joint session of the two chambers of the federal legislature in December last year by President Bola Tinubu.
Chairman, Senate Committee on Appropriation, Senator Solomon Adeola (APC, Ogun West), revealed the figure during a Stakeholders Public Hearing and Interactive Session on the 2025 Appropriation Bill, with the theme, “The 2025 Budget of Restoration: Securing Peace, Rebuilding Prosperity.”
The session had in attendance the governor of Kaduna State, Uba Sani, professional bodies, non-governmental organisations, and heads of critical economic agencies of the federal government.
Adeola said the National Assembly was working to shore up the federal government’s revenue by freeing funds held by organisations, including the Nigerian National Petroleum Company Limited (NNPCL).
He said, “In the past, we borrowed money to stabilise the naira, so that the exchange rate can be somehow good and that we are not being threatened. To stabilise the naira, we were borrowing.
“CBN is doing a lot of things behind the scenes.
“When this administration came, it said there is no need for that. If you recall, we are operating a free economy. We must be seen to be operating that free economy and it throws everything to the table. No more subsidy, no more exchange rate difference, and no more electricity tariff.
“By so doing, what we are trying to do, this N49.7 trillion 2025 budget you are seeing, maybe by next year it will have doubled because by then, there is still a lot of our revenue that still need to be freed.”
Adeola said, “A lot of revenue has been held hostage by no other person than organisations, like the NNPC. The NNPCL still believes that there are still some elements of subsidy that are being treated as an operational expense in their documents that they still need to wipe out for more revenue to be freed and all other sundry items.
“By the time all this comes to pass, I can tell you maybe next time when we are gathered here, we will start having a budget of a minimum of about N100 trillion. So we are working round the clock, especially on this side of the divide, to ensure that we shore up our revenue.”
Senate President and Chairman of the National Assembly, Senator Godswill Akpabio, urged his colleagues and other critical stakeholders to make the 2025 budget one that prioritised the welfare of Nigerians.
Akpabio said, “Together, we must ensure that this budget is not a mere ledger of revenue and expenditure, but a living document that prioritises the welfare of every Nigerian.
“This is not an ordinary assembly, and this is not an ordinary moment. For we are not gathered here merely as legislators, public servants, or citizens, but as custodians of Nigeria’s destiny, stewards of its promise, and architects of its future.
“Our beloved nation faces trials that would shake the resolve of lesser nations, but I am here to affirm, with unshakable conviction, that within every challenge lies the seed of opportunity. The task before us is formidable, but it is neither beyond our reach nor beneath our determination.”
Meanwhile, the Bureau of Public Procurement (BPP) said it had saved Nigeria N1.9 trillion from contract fraud over the years. Director-General of BPP, Dr Adebowale Adedokun, stated this during the budget defence session with the Senate Committee on Public Procurement.
