How Tinubu, Governors Reached Consensus on Tax Reform Bills After Intense Negotiations

President Bola Ahmed Tinubu and the 36 state governors have reached a consensus on the contentious tax reform bills following high-level discussions. The agreement, which came after a series of negotiations, was finalized during a New Year visit by the governors to the president’s residence in Lagos.

Tinubu commended the governors, who, under the Nigeria Governors Forum (NGF), announced key adjustments to the tax reform proposals. Less than 24 hours after the governors issued a communiqué on the matter, the president praised their cooperation, stating that their commitment to Nigeria’s progress was evident.

Sources familiar with the discussions revealed that while the governors agreed to support the tax reform bills, they also pushed for concessions from the federal government. Some northern governors expressed concerns that certain provisions could negatively impact their region, leading to further negotiations. Eventually, it was agreed that the governors would return to Abuja to meet with the Presidential Committee on Tax and Fiscal Policy Reform for further refinements.

After their meeting with the president, the governors reaffirmed their commitment to partnering with his administration on national development. Speaking on behalf of the NGF, Lagos State Governor Babajide Sanwo-Olu emphasized the collective resolve to support Tinubu’s leadership. He described the visit as a gesture of goodwill and an opportunity to engage with the president on key governance issues.

Sanwo-Olu stated that while the tax reform bills were not officially discussed during the meeting, extensive consultations had already taken place to ensure that the final legislation would serve the best interests of all Nigerians. However, sources within the discussions confirmed that the matter was addressed informally.

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, had previously defended the consultation process, revealing that multiple meetings with governors were scheduled but repeatedly canceled by the states. He emphasized that the committee had engaged with a broad range of stakeholders, including over 120 Muslim clerics, business representatives, and university students.

Following the Lagos meeting, the governors convened another session with the tax committee, where key areas of contention were addressed. One major issue was the proposed 60% allocation of Value Added Tax (VAT) revenue based on derivation, which many northern governors opposed. Instead, the governors proposed a new sharing formula—50% based on equality, 30% on derivation, and 20% on population—to ensure fair distribution.

NGF Chairman and Kwara State Governor AbdulRahman AbdulRazaq announced that the governors had resolved not to support any immediate increase in VAT rates or a reduction in Corporate Income Tax (CIT), arguing that economic stability must be prioritized. This decision stands in contrast to Section 146 of the Nigeria Tax Bill, which outlines a gradual VAT increase from 7.5% to 15% by 2030.

The governors’ stance has received mixed reactions. The Pan-Yoruba socio-political group Afenifere supported their position, warning that a VAT hike could worsen economic hardship and provoke unrest similar to protests in Kenya. Afenifere spokesperson Prince Justice Faloye argued that VAT disproportionately affects low-income Nigerians, making an increase unjustifiable.

The Academic Staff Union of Universities (ASUU) also weighed in, criticizing the governors for not explicitly addressing funding for tertiary education. ASUU President Prof. Emmanuel Osodeke accused the federal government of attempting to weaken public universities by reducing company tax contributions to education while increasing VAT. He called for alternative funding strategies.

Meanwhile, financial experts and regional leaders have largely welcomed the governors’ recommendations. The Arewa Consultative Forum (ACF) described the adjustments as an improvement but noted that it would release a formal position after further review. The Igbo Elders Forum (IEF) also backed the governors’ rejection of a VAT increase but called for a larger share of tax revenue to be allocated based on derivation to encourage productivity.

Economic analysts have praised the governors’ intervention as a balanced approach. Prof. Uche Uwaleke, Nigeria’s first Professor of Capital Market, said the outcome benefits both the federal and state governments while protecting the public from excessive taxation. He highlighted the endorsement of the broader tax reforms, including harmonization of major taxes and the establishment of a National Revenue Service, as positive steps.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), emphasized that the main issue was not tax efficiency but revenue allocation. He noted that while the tax reform committee had done a commendable job, revenue-sharing debates required political consensus, which the governors had now facilitated.

Chief Economist Dr. Paul Alaje agreed, stating that VAT distribution should reflect consumption rather than production, but any changes must be gradual. He stressed that abrupt shifts in revenue allocation could disrupt the economy.

In his reaction, President Tinubu welcomed the governors’ involvement in shaping the tax reforms and reiterated his commitment to working with them for economic growth and national unity. Presidential adviser Bayo Onanuga confirmed that Tinubu appreciated the governors’ leadership in reaching a compromise and urged other stakeholders to engage constructively with the National Assembly as the legislative process continues.

Tinubu also called on lawmakers to expedite passage of the tax reform bills so that Nigeria can begin to reap the benefits of a more efficient and equitable tax system.