In a meeting held on January 16, 2025, the Nigeria Governors’ Forum (NGF), in collaboration with the Presidential Tax Reform Committee, appeared to have reached a consensus on the controversial tax reform bills.
The meeting was necessitated by the critical need to overhaul Nigeria’s tax framework to ensure equitable resource allocation, enhance fiscal stability, and align with global best practices.
The Nigeria Governors’ Forum reaffirmed its unwavering support for comprehensive reforms of Nigeria’s outdated tax laws. Governors and committee members acknowledged the urgent need to restructure the tax system, which many described as archaic and inefficient.
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The Chairman of the NGF, Governor AbdulRahman AbdulRazaq of Kwara State, noted: “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, and arrived at the following resolutions.
“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.”
A significant outcome of the meeting was the endorsement of a revised VAT-sharing formula aimed at promoting fairness in resource distribution among states. The new structure allocates 50% of VAT proceeds based on equality, 30% based on derivation, and 20% based on population. This formula, the governors noted, strikes a balance between equity and the recognition of states’ contributions to VAT revenue.
The Chairman of NGF also said: “The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality, 30% based on derivation, and 20% based on population.
“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.”
This change is seen as a response to long-standing concerns about the inequitable distribution of VAT revenues, which some states argued disproportionately favored others.
In the interest of economic stability, the Forum agreed to maintain the current VAT rate and Corporate Income Tax (CIT) levels. There was a collective acknowledgment that raising VAT or reducing CIT in the current economic climate could exacerbate inflationary pressures and hinder business activities. The Forum further emphasized the importance of protecting citizens’ welfare by continuing to exempt essential goods and agricultural produce from VAT.
The communiqué noted: “The Forum advocated 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 governors and the committee unanimously supported the continuation of development levies allocated to key institutions such as the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA). They recommended that these levies should not have terminal clauses in the proposed bills.
The Forum reiterated its support for the ongoing legislative process in the National Assembly aimed at passing the Tax Reform Bills. Members highlighted the need for comprehensive stakeholder engagement to ensure that the bills address both national and subnational concerns. This process, they argued, would create a robust framework for tax administration and revenue generation.
COMMUNIQUE ISSUED AT THE END OF THE SUBNATIONAL CONSULTATIONS AND ENGAGEMENT WITH THE PRESIDENTIAL TAX REFORM COMMITTEE
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, and arrived at the following resolutions:
1. The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws. Members acknowledged the importance of modernizing the tax system to enhance fiscal stability and align with global best practices.
2. The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: – 50% based on equality, – 30% based on derivation, and – 20% based on population.
3. 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.
4. The meeting recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills.
5. 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.
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H.E. AbdulRahman AbdulRazaq
Chairman, Nigeria Governors’ Forum & Governor of Kwara State.