The Nigeria Governors’ Forum (NGF) has reiterated its strong support for the modernization of Nigeria’s tax system and approved a revised Value Added Tax (VAT) distribution formula that aims for a more equitable sharing of resources.
In a communique issued on January 16, 2025, following a meeting with the Presidential Tax Reform Committee, the NGF emphasized the importance of reforming the country’s outdated tax laws to foster fiscal stability and align with global best practices.
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Kwara State Governor, AbdulRahman AbdulRazaq, who chairs the NGF, stated that the Forum is fully committed to updating Nigeria’s tax system. “The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws,” the communique read. “Members acknowledged the importance of modernizing the tax system to enhance fiscal stability and align with global best practices.”
The NGF’s proposed VAT distribution formula allocates 50% based on equality, 30% based on derivation, and 20% based on population, ensuring a fairer distribution of the revenue. This move follows recent debates surrounding the proposed tax reforms, which have faced both support and opposition across the country.
While southern leaders, including Lagos State Governor Babajide Sanwo-Olu and other prominent figures, have expressed strong backing for the tax reform bills, northern governors have raised concerns about the provisions, particularly those related to VAT. The Northern Governors Forum, which opposed the bills in late October, argued that they could undermine the welfare of their citizens.
Despite the opposition, the Senate passed the bills for a second reading in November 2024, though the House of Representatives suspended discussions amid pressure from northern lawmakers.
In response to these challenges, the Chairman of the Presidential Committee on Fiscal and Tax Reforms, Taiwo Oyedele, assured that ongoing consultations would continue to build broader support for the reforms.
The NGF also proposed that the development levies from the tax reform bills should not apply to critical agencies like the Tertiary Education Trust Fund (TETFund), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA). Furthermore, the Forum advocated for maintaining the VAT exemption on essential goods and agricultural produce to safeguard citizens’ welfare.
In a related development, the Minister of Information and National Orientation, Alhaji Muhammed Idris, expressed appreciation for the NGF’s support and their counter-proposal on VAT distribution. “We are pleased to note the support of the governors for the tax reforms and their counter-proposal of 50% equality for the sharing of VAT revenue,” Idris said. He emphasized that the final decision rests with the National Assembly, which will consider all stakeholders’ input.
However, the reforms have faced criticism from groups like the Academic Staff Union of Universities (ASUU), who fear that changes to funding for TETFund could negatively impact Nigeria’s tertiary education system. ASUU warned that the replacement of the Development Levy with the Nigeria Education Loan Fund could drastically reduce resources for public universities.
