In recent developments, the northern governors have expressed significant opposition to tax reform bills aiming to adjust Nigeria's Value Added Tax (VAT) allocation based on derivation. This proposed model would allocate VAT funds to states where services and goods are consumed, rather than the headquarters' locations of companies.
During a meeting in Kaduna, northern governors argued that the new model is not in the interest of their states. In response, various groups and stakeholders, including the Middle Belt Forum (MBF), the Pan Niger Delta Forum (PANDEF), and advocacy groups, have voiced their frustrations, emphasizing a need for equitable distribution based on the source of VAT generation.
Alhaji Muhammad Inuwa Yahaya, the chairman of the Northern Governors Forum and Governor of Gombe State, communicated the forum’s unanimous rejection of the Tax Reform Bill. He argued that the derivation model would disadvantage northern states, as VAT currently benefits regions by centralizing the collection at corporate headquarters, which are mostly located in the south. The governors also urged their region's representatives in the National Assembly to oppose any bills that may harm northern interests.
The Middle Belt Forum (MBF) and PANDEF argue that the derivation principle is both fair and necessary. Dr. Isuwa Dogo of MBF contends that states should benefit from the VAT generated by their residents' consumption, noting that it’s inequitable for northern states, where alcohol is often forbidden, to share in VAT revenue derived from such goods. PANDEF's spokesperson, Chief Dr. Obiuwevbi Christopher Ominimini, highlighted how the Niger Delta suffers from environmental degradation due to resource extraction, with minimal benefits returned to the region. He believes that the derivation model would help address these longstanding grievances.
Various economists also weighed in on the debate. Dr. Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, argued that the controversy surrounding the VAT bill has both political and economic undertones. He highlighted that while the reform would likely benefit the southern states, it could exacerbate economic disparities unless managed carefully. Meanwhile, Biyi Adesuyi, CEO of Wealthigate Advisors, remarked that fiscal federalism where states manage their revenues was previously effective in Nigeria. Adesuyi contends that many northern states lack substantial internal revenue generation, thus leaning heavily on federal disbursements.
The Arewa Civil Rights Movement (ACRM) strongly condemned the governors’ position, describing it as detrimental to the north’s economic reputation. Dr. Agabi Emmanuel, ACRM’s national president, argued that the northern governors’ stance reflects a dependency on federal allocations instead of fostering a business friendly environment. Emmanuel urged northern lawmakers to resist the directive from their governors, emphasizing their accountability to constituents, not state executives.
Amid rising concerns about poverty in northern Nigeria, Senator Ali Ndume of Borno South criticized the tax reforms as anti people, pointing out the economic challenges many Nigerians currently face. He argued that higher taxes would disproportionately affect the middle class and struggling families across the nation.
The controversy surrounding the tax reform bills underscores deep-seated issues around revenue generation, economic development, and regional equity in Nigeria. As lawmakers and governors debate these reforms, it remains essential to consider the broader implications for Nigeria’s economic structure and regional dynamics.