The proposed Tax Reform Bill has reignited long-standing grievances over Nigeria's revenue distribution system, with Lagos’s dominance under scrutiny. At the heart of the debate is the allocation of Value Added Tax (VAT), which has disproportionately benefited Lagos under the guise of hosting corporate headquarters and ports. However, the North is pushing back, arguing that the reform will deepen existing inequities and institutionalize economic injustice.
The Consumption Tax Fallacy
The essence of VAT is straightforward: it is a consumption tax, meaning it should be credited to the point of consumption, not production or transaction. Yet, under the proposed reform, Lagos stands to further entrench its advantages. If a bottle of Coca-Cola is bought in Sokoto, with VAT embedded in the purchase price, that VAT should logically accrue to Sokoto, where the consumption occurred. Instead, Lagos claims the revenue because Coca-Cola’s headquarters is domiciled there. This not only defies logic but also robs the state where the actual economic activity transpired.
The same logic applies to imported goods. Northern traders, for instance, who import goods worth billions through Lagos ports to be sold in Kano, Sokoto, or Maiduguri, end up inadvertently enriching Lagos. The VAT paid at the point of entry into Lagos is credited entirely to the state, even though the goods are consumed elsewhere. This unjust framework undermines the economic autonomy of northern states.
Telecommunication and Digital Services: A Case Study in Inequity
Consider another example: the telecommunications sector. When a consumer in Gusau purchases airtime from MTN, VAT is recorded in Lagos simply because MTN’s headquarters is based there. This means that Lagos accrues billions annually from services consumed in other states, an arrangement that is both unfair and unsustainable. This practice denies states in the North the revenue they need to invest in infrastructure and public services.
Agriculture and the VAT Exemption Trap
The North is Nigeria’s agricultural backbone, producing food consumed nationwide. Yet, under the proposed tax framework, agricultural products are exempt from VAT to ease consumer costs. While this may appear beneficial at first glance, it effectively deprives northern states of VAT revenue for goods they produce in abundance. Ironically, Lagos, as the largest consumer of agricultural goods, reaps the benefits of this exemption without contributing to the economies of producing states.
Lagos’s Exploitative Dominance
Lagos’s defenders argue that the state deserves a larger share of VAT revenue due to its infrastructure and status as Nigeria’s economic hub. However, this argument overlooks the systemic exploitation of other regions. Lagos benefits not because of intrinsic merit but due to historical centralization policies and its strategic location. The North’s argument is not against Lagos’s growth but against a system that enables one state to thrive at the expense of others. It is neither selfish nor unreasonable for northern states to demand an equitable distribution of resources.
The North’s Stand: Equity, Not Charity
Northern stakeholders have been clear: their opposition to the proposed Tax Reform Bill is not about seeking undue advantages but about ensuring justice. The North contributes significantly to Nigeria’s economy, whether through agriculture, informal trade, or consumer markets. Yet, under the proposed model, the region risks further marginalization as VAT revenue becomes tethered to corporate locations rather than consumption.
No one is asking Lagos to shoulder the North’s burdens, but neither should the North be expected to subsidize Lagos’s economic dominance. The demand for a consumption-based VAT model is not an act of defiance but a call for fairness. Without such reforms, the North will continue to suffer from an unjust system that prioritizes a few states over the collective well-being of the nation.
A Call for Justice
The proposed Tax Reform Bill, far from resolving disparities, threatens to entrench them further. Lagos, as the primary beneficiary of the current system, has no moral ground to argue against equitable redistribution. The North’s demands are grounded in logic and fairness: VAT should reflect where goods and services are consumed. Anything less is a betrayal of the principle of justice that should underpin Nigeria’s fiscal policies. The federal government must listen to these voices and ensure that no region is left behind in the pursuit of national development.
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