JUST IN: Governors Reject VAT Increase, Back Tax Reform Process

The Nigeria Governors’ Forum (NGF) has firmly opposed the proposed increase in Value Added Tax (VAT), calling the move untimely. Rising from a meeting in Abuja on Thursday, the governors emphasized the need for economic stability and fairness in tax policy.

The proposed VAT increase, from 7.5% to 10%, was initially recommended by the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele. Speaking last year, Oyedele highlighted Nigeria’s fiscal challenges, arguing that revenue from taxes and other sources remains critically low. He noted that the law being proposed to the National Assembly outlines gradual VAT increments beyond 2025.

Minister of Finance and Coordinating Minister of the Economy, Wale Edun, also reiterated the government’s stance at the IMF/World Bank Annual Meetings in Washington, D.C. He explained that the VAT hike would primarily target luxury goods, while essential items consumed by vulnerable Nigerians would either remain VAT-exempt or attract a zero rate.

However, in a communique released after Thursday’s meeting, the NGF reaffirmed its opposition to any VAT increase at this time. The governors expressed their support for ongoing legislative processes aimed at reforming Nigeria’s outdated tax system but stressed the importance of maintaining current tax rates to avoid economic disruptions.

The Forum also proposed a revised VAT sharing formula, recommending that revenue be distributed as follows: 50% based on equality, 30% based on derivation, and 20% based on population. Additionally, the governors advocated for the continued exemption of essential goods and agricultural produce from VAT to protect citizens’ welfare and encourage agricultural growth.

Furthermore, the NGF recommended that the terminal clause for TETFUND, NASENI, and NITDA be removed in the proposed development levies, ensuring sustained funding for these institutions. The Forum concluded by endorsing the legislative process at the National Assembly, expressing confidence that the eventual passage of the Tax Reform Bills would align Nigeria’s tax policies with global best practices while safeguarding economic stability.