President Bola Ahmed Tinubus Tax Reform Bill, particularly Section 77, has sparked concerns over its potential economic impact on Northern Nigeria.
The proposed changes, aimed at restructuring Nigeria’s tax system for efficiency and transparency, could significantly benefit Lagos while reducing revenues for northern states.
According to a recent publication by one Engr. Bashir I. Bashir at the weekend, Northern States face revenue risks under the President’s Bill.
Commenting on the proposed VAT re-distribution formula, he said, “The Bill introduces a consumption-based value-added tax (VAT) distribution model, favoring derivation (where VAT is generated) over equality. Lagos, which accounted for over 55% of Nigeria’s VAT revenue in 2022 (?535 billion), stands to gain the most due to its economic dominance.
According to him, “In contrast, northern States like Kano (?40 billion in VAT) and others with smaller economic bases could lose up to 40% of current allocations, affecting critical sectors like education and healthcare”.
On the issue of ‘Centralized Tax Administration’, posited that: “The reform also centralizes tax collection under federal agencies, limiting states’ ability to generate localized revenue through environmental or agricultural levies. This shift could cost northern states billions annually and weaken fiscal autonomy, particularly for agrarian economies reliant on agriculture and informal trade”.
Engr Bashir also cited sectoral disparities regarding the bill, saying: “Northern Nigeria, home to over 60% of the population; but, contributing less than 30% of national economic activity, it may struggle to compete under the new framework. The regions dependence on agriculture contrasts with Lagoss diversified economy, which includes finance, logistics, and manufacturing, further widening economic inequalities.
Proffering his recommendations, Engr. Bashir urged Northern stakeholders to advocate for revisions to the VAT formula to prioritise population and equity alongside derivation.
“State governors are encouraged to lobby for compensation mechanisms and pursue economic diversification strategies, such as investments in agro-processing and renewable energy”, he stressed.
In conclusion, he noted that, Section 77 of the Tax Reform Bill risks exacerbating economic inequalities, consolidating Lagoss dominance while limiting development opportunities for Northern Nigeria. A united, strategic response is needed to address these disparities and ensure equitable growth and balanced national growth.
