Governors Back Tax Reforms, Propose New VAT Sharing Formula

The Nigeria Governors’ Forum (NGF) has reaffirmed its commitment to overhauling Nigeria’s outdated tax laws giving green light to tax reforms, endorsing a revised Value Added Tax (VAT) sharing formula that allocates 50% of revenue based on equality.

In a communiqué issued after consultations with the Presidential Tax Reform Committee on January 16, 2025, NGF Chairman and Kwara State Governor AbdulRahman AbdulRazaq emphasized the need for modernizing the country’s tax framework to boost fiscal stability and align with global standards.

The governors proposed a VAT distribution structure of 50% on equality, 30% on derivation, and 20% on population, aimed at achieving a fair allocation of resources. Additionally, they urged the continued exemption of essential goods and agricultural produce from VAT to protect citizens’ welfare and promote agricultural productivity.

Despite the Senate’s approval of four tax reform bills for a second reading last November, debates in the House of Representatives were indefinitely suspended following opposition from northern governors and lawmakers. The bills include the Nigeria Tax Bill 2024, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill.

While southern leaders and lawmakers have expressed strong support for the reforms, citing their potential to drive positive changes, northern stakeholders have raised concerns about their socioeconomic impact on a region already grappling with poverty and security challenges.

The NGF reiterated its support for legislative processes on the tax bills and called for broader consultations to address regional concerns and ensure the reforms align with national interests.