According to Oyedele, the suggested changes aim to create a “fairer system” by basing VAT distribution on the location of consumption rather than solely on where VAT is collected.

Oyedele’s clarification comes in response to recent opposition from the Northern States Governors Forum (NSGF), which has rejected the proposed amendments in the Tax Bill currently under consideration by the National Assembly. Northern governors argue that the derivation model could disadvantage states with lower VAT-generating activities. In a communique issued after their joint meeting with the Northern Traditional Rulers Council, the governors urged lawmakers to “oppose any bill that jeopardizes the well-being of our people.”

The proposal by the federal committee, according to Oyedele, would ensure that states generating goods or services that are VAT-exempt, or consumed in other regions, would still receive recognition for their contributions. He noted, “A state that produces essential goods shouldn’t lose out because its products are VAT-exempt. The state of origin should be acknowledged for its contributions.”

Despite the pushback, Oyedele confirmed that the committee is seeking a balanced solution, noting that they plan to work with stakeholders across all regions. He clarified that the proposed reforms focus on VAT distribution and do not call for a reduction in the federal government’s share of overall federation revenue. The recommendation, Oyedele added, aims to increase the share allocated to state and local governments from 85% to 90%, with the intention of discontinuing multiple forms of consumption taxes that currently create an additional tax burden on businesses.

The ongoing VAT reform debate reflects broader concerns about fiscal equity, as both federal and state leaders navigate challenges around taxation and revenue sharing amidst Nigeria’s current economic strain.

Meanwhile, former Independent National Electoral Commission (INEC) Chairman, Professor Attahiru Jega, expressed concerns over Nigeria’s economic policies being influenced by international organizations like the World Bank and International Monetary Fund (IMF). Speaking at the Chartered Institute of Directors of Nigeria (CIoD) Annual Directors’ Conference, Jega cautioned the government to be wary of taking all advice from these institutions, warning that such policies might lead to long-term issues despite short-term benefits.

Senator Ali Ndume, representing Borno South, echoed similar sentiments, urging the federal government not to burden the poor with more taxes. Ndume highlighted the economic hardships facing average Nigerians, particularly those in poverty, and advocated for a tax approach that targets wealthier individuals and corporations.

As debates around taxation policies and economic direction continue, Nigeria’s leaders face the challenge of balancing fiscal responsibility with the pressing need for social equity.

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Expressing shared aspirations for a prosperous and united Nigeria, she addresses concerns about the bill’s shift to a derivation-based VAT distribution model and outlines how the reform can fuel economic growth in Northern states.

According to Dr. Zacch Adedeji, Executive Chairman of FIRS, the reform aims not to impose new taxes but to streamline existing ones, targeting “prosperity, not poverty.” By focusing on reducing tax burdens for small businesses and ensuring a fair contribution from larger entities, the reform promises simplicity and efficiency for businesses, including farmers and local traders.

Aderonke explains that under the derivation-based VAT model, funds generated from goods and services produced in the North would be directly reinvested into local infrastructure such as roads, schools, and hospitals. This approach, she emphasizes, could stimulate local business, attract industries, and create sustained growth within the region. “It’s an opportunity for states to benefit directly from their economic activities, fostering development in a way that aligns with the strengths and resources of each state,” she writes.

Historically, VAT revenue has been centralized, but this reform presents an opportunity to ensure that states retain and reinvest a portion of their generated revenue, encouraging a self-sufficient North. Aderonke notes that the model would inspire the North to harness its comparative advantages and focus on regional development, building economic resilience and independence.

The letter also addresses the reform’s commitment to transparency and accountability, promising taxpayers greater visibility into how their contributions are used. Dr. Adedeji emphasizes that the reform “creates a fairer, simpler tax system that respects and values taxpayers’ contributions.”

Highlighting the alignment with President Bola Tinubu’s Renewed Hope Agenda, Aderonke calls upon Northern governors to support the reform, stressing that their leadership could help build a unified and prosperous Nigeria. The Tax Reform Bill, she concludes, offers a critical step toward ensuring that all regions are empowered and valued within a fair and equitable system.

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