More facts have emerged as to how President Bola Ahmed Tinubu and the 36 state governors of the federation finally arrived at a consensus on the contentious tax reform bills.
The president, yesterday, issued a statement praising the governors who, speaking under the umbrella of the Nigeria Governors Forum (NGF), announced some adjustments to the tax bills.
Thereafter, less than 24 hours after they came up with a communiqué, President Tinubu poured encomiums on the governors, saying it was clear that they meant well for Nigeria.
Sources privy to how the governors and the president agreed to move on told our correspondent that the deal was sealed in Lagos.
“The deal was perfected when the governors paid a New Year visit to Tinubu in his house in Lagos,” one of the sources, who is close to a governor, said.
“The president told them that he meant well, and he wanted them to give him the benefit of doubt,” one of the sources said.
Another source corroborated, saying the governors, while agreeing to endorse the tax reform bills, nonetheless asked the president to also make some concessions.
“There was little push back from some northern governors who said they have to have something tangible to give their people.
“The governors said the general sentiment in the region was that all the bills were targeted at pauperising the region,” another source said.
He said at the end of the day, it was agreed that the governors would go back to Abuja and meet with the Presidential Committee on Tax and Fiscal Policy Reform.
Weekend Trust reports that after their meeting with the president, the governors restated their commitment to partner with his administration in advancing the nation’s development.
Speaking on behalf of the governors, Lagos State Governor Babajide Sanwo-Olu, emphasised their shared resolve to support the president’s leadership and vision for the country.
Sanwo-Olu highlighted the governors’ appreciation for President Tinubu’s leadership and their determination to align with his government’s goals to deliver social and economic transformation to Nigerians.
“It was a New Year’s visit to Mr President. It was a good time to come in and felicitate him, to wish him well in the period of the season and today, we thank God. It is the first day of the new year, and as his committed co-journeyers in this country’s leadership agenda, it is important that the forum of the governors come around and felicitate him, wish him well, and listen to him. Pretty much, that was what transpired today and I am happy that I am part of it.
“The Progressives’ chairman spoke on behalf of all of us, thanking him and giving our collective commitment that we will continue to work under his leadership, work with his government, and appreciate the strength of leadership that he puts right now and also congratulate him on his very recent nomination as Man of the Year of one of the foremost daily newspapers,” Sanwo-Olu said.
On the issue of the tax reform bills, Sanwo-Olu said the matter was not discussed during the meeting, as it remained under consideration by the National Assembly.
He, however, stated that extensive consultations had already been conducted, ensuring that the final bill would serve the best interests of all Nigerians.
But the sources that spoke with the Weekend Trust yesterday said the matter actually came up.
Our correspondent reports that the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, had at the height of the crisis pushed back on allegations that the panel did not consult with Nigerian governors, disclosing that the heads of the sub-national governments cancelled four scheduled meetings.
Oyedele, who appeared on Arise Television, also disclosed that in the course of consultations, the committee met physically with at least 120 Muslim clerics, mostly from the North as well as the League of Democrats, to break down the implications of the ongoing tax reforms.
“We have more than 20 government institutions represented. We have the private sector, whether it’s manufacturers, whether it’s women in business. We have 45 students from 22 universities across Nigeria.
“In addition to that, we had extensive engagement with the governors. I went to the governors’ forum. We wrote and wanted to meet with six governors, one from each of the six geopolitical zones. Up until this moment, it is only the governor of Lagos State we were able to see,” he had said.
It was learnt that after their return from Lagos, a meeting was organised between the governors and the tax team, which held yesterday.
The areas of contention in the bills submitted to the National Assembly included the suggested sharing of 60 per cent of Value Added Tax (VAT) revenue based on derivation, meaning states would receive funds proportional to the VAT generated within their territories.
This had been a major source of contention from governors and lawmakers, particularly from the North.
The governors have, however, recommended a sharing formula for VAT revenue with 50 per cent based on equality, 30 per cent on derivation and the remaining 20 per cent based on population to ensure an equitable distribution of resources.
The Chairman of the NGF and governor of Kwara State, AbdulRahman AbdulRazaq, who read the communiqué at the end of the meeting, said the governors’ resolutions from the meeting included a consensus “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 is as opposed to Section 146 of the Nigeria Tax Bill which provides for a gradual increase in the VAT rate from the current 7.5% to 10% in 2025, 12.5% in 2026, and further increments until it reaches 15% by 2030.
Tread softly to avoid the Kenyan situation — Afenifere
The Pan-Yoruba socio-political organisation, Afenifere, has supported the position of the NGF rejecting the increment in VAT being proposed in the Tax Reform Bills.
The national publicity secretary of the group, Prince Justice Faloye, speaking with Weekend Trust stated that the increase in VAT will harm the poor.
“Afenifere as a welfarist organisation, we are for the welfare of the masses across the country, not only in Yorubaland,” he said.
He stated that there was a limit to which the government can impose taxes on the already overstretched population.
According to him, it was the imposition of taxes that triggered demonstrations in Kenya and the Bola Tinubu-led government must tread softly to avoid the Kenyan situation.
Faloye stated that VAT “Is a regressive tax that disproportionately affects poorer families, who pay a larger percentage of their income.”
He stated that the plan to double the VAT rate will place the highest burden on the poor.
“With manufacturing, employment and income declining, the expected 100% increase in VAT receipts is primarily targeting the telecoms sector, where the poor market their goods and ideas at relatively affordable rates. The next target is bank charges, with 90% of accounts holding less than N500,000.”
Govs’ position on tax reform bills not explicit — ASUU
Also in an interview with the Weekend Trust, on Friday, the leadership of the Academic Staff Union of Universities (ASUU) said the governors’ position on the tax reform bills was not explicit for Nigerians.
The President of ASUU, Prof. Emmanuel Osodeke, said although their step was in the right direction, it has to be clearly spelt out to see exactly what they have for tertiary education in the country.
“Our reaction is that they (governors) are not explicit. The law is not just about scrapping. They say by this year (2025), the majority of them, will take 4% of the companies’ profits as the tax.
“By 2028, they will reduce it to 2%. They will reduce it; it is not the companies that will decide to reduce it, but the government said it wants to reduce it.
“By 2030, they will go to NASENI. What they (governors) said there was that they should not scrap it. It was not explicit; it is a step in a right direction but it has to be explicit,” the don told one of our correspondents in an interview.
The union also insisted that the federal government was hell-bent on destroying public tertiary institutions in order to pave way for their private ones to thrive.
Osodeke wondered why company tax that was meant for funding of tertiary education would be reduced from 4% to 2% while VAT that will affect every Nigerian including university members of staff would be increased to 15%.
The union president also asked the federal government to look for alternative sources of income to fund NELFUND instead of tampering funding system of tertiary education.
Experts, ACF, Igbo group hail adjustments
Experts in the financial sector, the Arewa Consultative Forum (ACF) and the Igbo Elders Forum (IEF), yesterday, endorsed the adjustments made to the contentious tax reform bills.
Weekend Trust reports that the bills had sharply divided the country along regional lines, even as opposition political parties and other groups also took advantage of the situation to tongue-lash the Tinubu administration for what they described as working against the interest of the poor.
Masses are the winners – Prof. Uwaleke
Reacting to the governor’s resolution speaking exclusively with Weekend Trust, Nigeria’s first Professor of Capital Market and President of the Capital Market Academics of Nigeria, Uche Uwaleke of Nasarawa State University, Keffi, described the position taken by the governors as a win-win for the federal government and the sub-national. He said the ordinary Nigerian is the greatest winner.
“To start with, the governors endorsed the tax reforms bills including the Nigeria Tax Bill which seeks to harmonize all the major taxes such as the CIT, PIT, CGT etc., the Nigeria Tax Administration Bill which provides a framework for tax management in Nigeria, the Nigeria Revenue Service Bill which seeks to replace the FIRS with the NRS to perform a broader role of revenue administration for the federation, and the Joint Revenue Board Bill which seeks to transform the JTB with an expanded mandate as well as establishes the office of the tax ombudsman to protect taxpayers,” he stated.
He said the decision not to increase the VAT rate was a good one made against the backdrop of the already elevated inflation in Nigeria.
Uwaleke also argued that the idea of a non-terminal clause in respect of TETFund will go down well with members of the academia and defuse the tension already being generated by stakeholders in the education sector.
He said: “Also, the very contentious horizontal sharing formula for VAT has now been amicably resolved. Going forward, I expect the process of passage of the bills to proceed smoothly at the National Assembly.
“My only concern is the decision not to allow a reduction in the Company Income Tax from 30% to 25% by 2030 as proposed in the bill.”
Also speaking on the governors’ proposition, the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said there were two major components, which the tax committee had done a very good job on; which is looking at the tax systems, archaic laws and there is the political component which is about revenue allocation.
He argued that revenue allocation was not exactly a tax reform bill. “Tax reform is about efficiency of tax administration; the political component requires a political consensus which is what we are now seeing.
Dr Muda said: “Now that the governors have stepped in, we are scaling a major hurdle. Of course there are other issues like ASUU and TETFund. Nobody can deny the impact of TETFund on the infrastructural development of our tertiary institutions. It had been very phenomenal and that is not something to tamper with. If you take that away, we will not have the same kind of impact on infrastructural development in our tertiary schools.
“I wish the committee has not entangled itself in these revenue allocation issues otherwise we will not be having all these issues. This is a politically sensitive and emotive issue but we can move forward now.”
Also throwing his weight behind the governors’ forum, Chief Economist and Partner at SPM Professionals, Dr Paul Alaje, stated that the recommendation put forth by Nigeria’s Governors’ Forum is in alignment with his proposal that VAT sharing should range from 30% to 35% based on derivation.
He stated that the position of the governors reflect “a bit of the people’s concerns,” adding that he agreed that VAT should not increase as well as Company Income Tax (CIT).
“I think there should be significant rebate for smaller businesses on CIT. That is the position we have and the governors, to a large extent, aligned with most of our views.”
He added that VAT sharing should encourage states that have a more consumptive population. “It is not about production; it is about where products are consumed, not where they are produced.
“Should we have derivation increased to 60 per cent? We should but we cannot do it abruptly, we cannot do it all of a sudden. So let’s move the rate gradually, the same thing we advocated for in fuel subsidy, the same thing we advocated for in exchange rate. We are dealing with human beings, it is not a scientific experiment; it is a human experience.”
Govs’ position good move — ACF
In its reaction, the Arewa Consultative Forum (ACF) described the governors’ proposition as an improvement on the bill sent to the National Assembly.
The ACF National Publicity Secretary, Professor Tukur Muhammad-Baba, said the group will come out with a more definite position soon.
He said, “As you know, the ACF had earlier issued a notice showing displeasure with the tax reform bills and especially public reactions heaping insults on the northerners and so on. We also announced that we have set up a specific technical committee that will look at the content of the laws and make recommendations to ACF which we will take action afterwards.
“The committee has concluded its work and submitted a report. Next week Friday has been slated by ACF to look at all the issues and make recommendations appropriately, so it will be a bit premature to make comments.”
But on the flip side, the Coalition of Northern Groups (CNG) rejected taxing family wealth or inheritance, adding that it unjustly burdens families, negates religious tradition and contradicts cultural values.
Addressing a press conference on Friday in Bauchi, the National Coordinator, Coalition of Northern Groups, Comrade Jamilu Aliyu Charanchi, said the CNG unequivocally vowed to continue to mobilise against the defunding of TETFUND, NASENI and NITDA as these critical institutions play pivotal roles in advancing education, innovation and technological development in Nigeria.
VAT hike‘ll increase hardship in the land – Igbo elders
The Igbo Elders Consultative Forum (IECF) also backed the governors of the 36 states against moves to increase the VAT rate in the country.
The secretary of the forum, Professor Charles Nwekeaku, made their position known while speaking with Weekend Trust on Friday.
He said, “Right now there is too much hardship in Nigeria, so increasing VAT will have an adverse effect on the country.”
However, on the sharing formula, the forum said the recommended 50% on equality of states, 30% on derivation and 20% on population was not encouraging as it is the continuation of the current method that has kept the country where it is.
The forum, therefore, recommended 50% on derivation, 30% equality of states and 20% on population.
“The sharing formula should have emphasised derivation to encourage hard work, productivity and competition among the component units of the federation,” he said.
Tinubu promises to partner with govs
In his reaction yesterday, President Tinubu described the dialogue between the governors and the Presidential Committee on Tax and Fiscal Policy Reform as a constructive conversation in resolving differences.
He also promised to partner with the governors to promote economic growth, national harmony, peace and stability, saying that he regards the governors as vital contributors to nation-building.
Bayo Onanuga, Special Adviser to the President on Information and Strategy, in a statement in Abuja on Friday, said the president expressed his “appreciation for the governors’ forum’s unanimous endorsement of the four Tax Reform Bills currently under consideration by the National Assembly.
“President Tinubu lauds the governors for their bold leadership and commitment to fostering unity among leaders nationwide, transcending regional, ethnic and political barriers to advance Nigeria’s development.”
Onanuga said the president “noted that the dialogue between the NGF and the Presidential Committee on Tax and Fiscal Policy Reform highlights the power of constructive conversation in resolving differences.
“He also encourages other stakeholders with ideas and suggestions for refining the tax bills to engage with the ongoing legislative process at the National Assembly.”
President Tinubu also urges the National Assembly to expedite the legislative process for the crucial bills so that the country can swiftly reap the benefits of the reforms.
Contributions from: Saawua Terzungwe, John C. Azu, Baba Martins, Idowu Isamotu (Abuja), Abdullateef Aliyu (Lagos), Maryam Ahmadu-Suka (Kaduna), Usman A. Bello (Benin) & Hassan Ibrahim (Bauchi)