BREAKING: Nigeria Governors’ Forum rejects proposed VAT increase

The Nigeria Governors’ Forum (NGF) has opposed the proposed increase in Value Added Tax (VAT) from 7.5% to 10%, describing the move as untimely.

The decision was reached during a meeting held in Abuja on Thursday, where the governors collectively voiced concerns over the potential impact of such an increment on the economy and citizens.

The governors, however, expressed their support for the ongoing legislative process surrounding the Tax Reform Bills, emphasizing the need for balanced reforms that do not overburden Nigerians.

Last year, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, disclosed that the committee had proposed a bill to the National Assembly advocating for the VAT increase as part of broader fiscal reforms.

He had said, “We have significant issues in our tax revenue. We have issues of revenue generally which means tax and non-tax. You can describe the whole fiscal system in a state that is in crisis

“When my committee was set up, we had three broad mandates. The first one was to look at governance: our finances as a country, borrowing, coordination within the federal government and across sub-national.

“The second one was revenue transformation. The revenue profile of the country is abysmally low. If you dedicate our whole revenue to fixing roads it will be insufficient. The third is on government assets.

“The law we are proposing to the National Assembly has the rate of 7.5% moving to 10% from 2025. We don’t know how soon they will be able to pass the law. Then subsequent increases are also indicated in terms of the year they will kick in.”

Speaking at an investor meeting at the last IMF/World Bank Annual Meetings in Washington DC, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, also announced the move.

According to the minister, the proposed VAT increase, currently under consideration by the National Assembly, would be applied gradually and will primarily affect luxury items.

He said essential items consumed by poorer and vulnerable Nigerians would remain exempted from VAT or attract a zero rate.

But in a communique issued, on Thursday, the governors said, “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 modernizing the tax system to enhance fiscal stability and align with global best practices.

“The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources:

o 50% based on equality,
o 30% based on derivation, and
o 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. 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.

“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 meeting supports the continuation of the legislative process at the National Assembly that will culminate in. the eventual passage of the Tax Reform Bills.”