How Tinubu, governors struck deal on tax bills

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How Tinubu, governors struck deal on tax bills

How Tinubu, governors struck deal on tax bills

New details have emerged about how President Bola Ahmed Tinubu and the 36 state governors reached an agreement on the contentious tax reform bills.

In a statement issued yesterday, President Tinubu praised the governors, who, under the Nigeria Governors’ Forum (NGF), announced adjustments to the tax bills. Less than 24 hours after their communiqué was issued, the president commended the governors, saying their actions showed they had Nigeria’s best interests at heart.

Sources close to the discussions revealed that the deal was finalised during a New Year visit by the governors to Tinubu’s residence in Lagos.

“The governors met with the president, who assured them of his good intentions and urged them to trust his administration,” a source disclosed.

However, some governors from northern states expressed concerns about the tax reforms, fearing that the bills might disproportionately impact their region. To address these concerns, the governors asked for concessions to balance the perceived disparities.

Following the visit, the governors returned to Abuja for discussions with the Presidential Committee on Tax and Fiscal Policy.

Speaking on behalf of the governors, Lagos State Governor Babajide Sanwo-Olu reaffirmed their support for President Tinubu’s leadership.

“It was a New Year’s visit to Mr President to felicitate with him and reaffirm our collective commitment to his vision for Nigeria,” Sanwo-Olu said.

Regarding the tax reform bills, Sanwo-Olu noted that while the matter was still under consideration by the National Assembly, extensive consultations had been conducted to ensure the bills would serve all Nigerians.

Key points of contention in the bills included the proposed sharing formula for Value Added Tax (VAT) revenue. Initially, 60% of VAT was to be allocated based on derivation, favouring states that generate higher VAT revenue. However, the governors proposed an alternative formula: 50% based on equality, 30% on derivation, and 20% on population, ensuring a more equitable distribution.

Another issue was the gradual increase in the VAT rate from the current 7.5% to 15% by 2030. Northern governors and lawmakers opposed the increase, arguing it would worsen economic hardship.

READ ALSO: FG, States, LGAs share ₦1.424tn December 2024 revenue at FAAC meeting

The Pan-Yoruba socio-political group, Afenifere, supported the governors’ stance against the VAT hike. Afenifere’s spokesperson, Prince Justice Faloye, warned that excessive taxation could lead to social unrest, as seen in Kenya.

Similarly, the Academic Staff Union of Universities (ASUU) criticised the tax reforms, stating that reductions in company taxes would harm tertiary education funding. ASUU President, Prof. Emmanuel Osodeke, urged the federal government to explore alternative revenue sources rather than undermining education funding.

Financial experts praised the governors’ revised proposals as a balanced approach. Prof. Uche Uwaleke, Nigeria’s first Professor of Capital Market, described the decision as a “win-win” for both the federal government and the states, noting that the ordinary Nigerian would benefit most.

Dr Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), also commended the adjustments but cautioned against tampering with funding for critical institutions like TETFund and NASENI, which play vital roles in education and innovation.

Northern and Igbo Groups’ Concerns

While the Arewa Consultative Forum (ACF) welcomed the governors’ adjustments, the Coalition of Northern Groups (CNG) rejected taxes on family wealth, citing cultural and religious concerns. Meanwhile, the Igbo Elders Consultative Forum warned that VAT increases would exacerbate economic hardship.

The revised proposals by the governors are expected to ease tensions and facilitate the smooth passage of the tax reform bills through the National Assembly.

Written by Sakinat Musa Abubakar, Editor at Neptune Prime 

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