Tax Reform: Northern Governors Forum—Guilty of Hypocrisy or Driven by Self-Preservation?

Editorial 

The Nigerian Governors’ Forum (NGF), a collective of the 36 state governors, recently gave its endorsement to President Bola Ahmed Tinubu's tax reform bill during a meeting in Abuja with Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. This landmark event was hailed as a significant step towards a more equitable and efficient tax system for Nigeria. However, the subsequent opposition by the Northern States Governors' Forum (NSGF) to key aspects of the same reform exposes a potential contradiction that raises questions: Is this about genuine concerns, or is self-preservation the driving force?

At the heart of the controversy is the NGF's recommendation for a revised Value Added Tax (VAT) sharing formula: 50% based on equality, 30% based on derivation, and 20% based on population. While this formula seeks to ensure equitable resource distribution across all states, the NSGF has expressed strong opposition, particularly to the derivation component. Their argument hinges on the concern that northern states, traditionally less industrialized, could lose out since VAT is largely collected in urban, commercial hubs where company headquarters are located, predominantly in southern states.

This stance appears contradictory, as northern governors were part of the collective NGF endorsement of the reform. The very governors who signed off on the communique advocating these changes are now lobbying northern lawmakers to reject the derivation-based VAT model, citing fears of economic disadvantage.

The federal government, through the Fiscal Policy and Tax Reforms Committee, has sought to address these concerns. Oyedele clarified that the derivation-based model does not solely favor industrialized states but ensures that VAT revenue is allocated based on consumption rather than the location of corporate headquarters. This adjustment is aimed at fairness and addressing long-standing inequities in Nigeria’s tax system.

Analysis: Hypocrisy or a Fight for Survival?

The NSGF's opposition could be seen as hypocrisy. After all, they were part of the NGF’s unanimous decision to endorse the bill. By later opposing the derivation clause, they risk being perceived as undermining the collective agreement reached during the Abuja meeting. Such inconsistency weakens the credibility of their argument and the NGF's collective authority.

However, a closer look reveals a more complex reality. Northern states, grappling with decades of developmental challenges, rely heavily on federally allocated revenue, including VAT. The fear of losing a significant portion of this revenue, no matter how rational or equitable the reform may appear on paper, is understandable. For these governors, opposing the derivation formula may be less about hypocrisy and more about self-preservation. They are, after all, elected to prioritize the welfare of their states, even if it means clashing with a collective agreement.

The Way Forward

For President Tinubu’s tax reform to succeed, the federal government must deepen its engagement with stakeholders, especially the northern governors, to address their concerns transparently. Innovative mechanisms could be introduced to cushion the immediate revenue impact on less industrialized states while ensuring that the principles of equity and fairness underpinning the reform remain intact.

The NSGF, on the other hand, must reconcile its opposition with its role within the NGF. A transparent and unified approach to national reforms strengthens governance and fosters public trust. The lingering question, however, remains: Is the NSGF’s stance rooted in genuine fear of marginalization, or is it an act of political survival? Either way, their objections should not derail a reform that seeks to promote long-term equity and fiscal sustainability for Nigeria.

The tax reform debate has once again highlighted the fragile balance between national unity and regional interests. As the conversation continues, Nigerians are watching to see whether their leaders will rise above self-preservation and hypocrisy to put the nation first.