VAT struggle: Lessons for the North





The current Value Added Tax (VAT) struggle between the federal government and two southern states of Rivers and Lagos, is sending strong signals to the slumbering North. Obviously, the northern states have abandoned the agriculture sector which could put the region on a global radar as a formidable exporter of cash crops to the international community.

At the state level, the North is unfortunate to find itself under different clueless regimes. The governors’ overdependence on the federal allocations has finally forced the region to its knees, begging for alms to survive. It is incontestable that most northern states would be completely on their knees should Rivers and Lagos states succeed in accomplishing their noble dream of becoming revenue collectors.

VAT is a consumption tax that is being exploited by many developed and developing countries to great advantage. In any clime where consumption is key, VAT cannot be evaded. The truth is that the economic development and growth of any nation depends on its government’s ability to generate adequate revenue in order to effectively provide various infrastructural facilities and amenities to meet the growing needs of its population.

Success in meeting its population’s needs enables a nation to maintain its pride of place among the comity of nations. Proceeds from VAT have brought about wonders of socio-economic progress and infrastructure development in America, United Kingdom and France, etc.

Governor Nyesom Wike of Rivers state is taking the bull by the horn. A trained lawyer cum economist and former Minister of Education, the iconoclastic Wike, by his resilient stance on making VAT count in Rivers state, seems to have jarred some of his counterparts in other Nigerian states from sleep.

And such stance has the potential of phasing out unproductivity on the part of many state governors who contribute little or nothing to the federation account. It is also capable of discouraging mediocres with knowledge deficit on how economy works from contesting political leadership positions like governorship.

With the development in Rivers, the installation of VAT will increase the blessings already existing in the oil-rich state. but Rivers is not alone in this radical but promising move. Governor,Babajide Samwo-Olu of Lagos state  has followed suit with the signing, into law, a bill that will empower the State of Excellency to collect its VAT.

This move will, no doubt, justify the clamour for the replacement of economically tactless state gobernors with enterprising and visionary ones who have the will to generate productive ideas as well as translate such to resources for the overall good and interest of their people. Leadership, it must be stressed, is not a walk in the park. It entails responsibility. And to be responsible, a leader must be constructively creative.


In Nigeria, tax collection has become practically impossible, given the uninspiring reality that both the tax collectors and the tax payers share different sentiments in relation to VAT. The current global oil glut has adversely affected the revenue generation status of Nigeria.

The over 60% drop in oil price to less than $40 per barrel was unanticipated by the President Buhari government. And this has resulted in over 80% fall in the yield (spread) per barrel of oil produced in Nigeria. This steep decline in the country’s revenue accounted for the 2016 budget deficit of over N2trillion. An untoward development like this has precipitated the continuous devaluation of the naira, while the Gross Domestic Product (GDP) growth is slow, inflow of foreign direct investments has been low, bringing about rising inflation and growing unemployment. 


The federal government has suspended capital projects while allocation to the states of the federation has reduced. This has resulted in the inability of many state governments in the nation to honour the social contract (between them and the populace) which constrains their provision of critical infrastructure and pay workers’ salaries. It is, therefore, very clear that there is the need to diversify the revenue base of the nation, and VAT is the option. As a major revenue source for advanced nations, VAT is not well exploited to great advantage by the Nigerian government.


Section 46 of the VAT Act introduces new definitions for animal feed and commercial aircraft spare parts and components. The definition of goods and services has been reviewed, as animal feed now refers to any raw, semi-processed or processed product which is fed to domesticated and other animals raised and slaughtered for human consumption as beef, goat, lamb, pork, chicken, fish and other kinds of meat. Such feed is also given to animals cultivated and raised for the production of milk or eggs as well as other sources of protein and nutrients useful to humans.

Commercial aircraft spare parts and components, according the review, now refer to engines, propellers, radio apparatus, instruments, appliances, furnishing, parts of any of the foregoing, and generally any other article of whatever description maintained for installation in a commercial aircraft in substitution for parts or articles removed. All forms of tangible properties, movable or immovable, but which do not include land and building, money or securities.


Our northern governors must begin to see government and governance beyond addressing gatherings and making public speeches. Political leaders in Nigeria have, for decades, been riding on the coattails of family privileges to acquire wealth by faulting, on many occasions, our constitution.

It is obvious that politics in Nigeria is now becoming a business of the weak-minded who lack the vision to see beyond their noses to create ideas and innovations to generate income for infrastructure developments and create jobs. We all witnessed the plight of states’ legislations across the country, which mandates payment of huge amount of money to former governors and their deputies to the detriment of the electorate.


Since there is pegged monthly allocation coming from the federal purse which is not determined by the amount contributed by the federating states, many governors are lazy in contributing to the pool of fund expected to be shared monthly. But they are quick to claim glory for voting figures during general elections.

Indeed, it is high time each state government learnt to steer its population towards contributing resources for the development of the state. We read from our archives about how the late Premier of the defunct Northern Region, Sardauna of Sokoto, and his counterpart in the Western region, late Obafemi Awolowo, exploited this capability to great advantage in building very solid economic and educational structures which still remain the pride of the country.


The founding fathers of Nigeria were never this lazy. While Nigeria operated regional system of government, it became healthy competition among regional leaders, striving for development of their respective regions and people.

While multiple streams of income generation were initiated, no one went to bed and waited for monthly allocations as is the case now. On a personal note, I see Wike and Nasir El-Rufai as the most radical political leaders in this country. Late Maitama Sule (Dan Masanin Kano) described such breed of politicians as responsible rascals because they are exactly the crop of leaders Nigeria needs now. They have been courageous to speak and implement policies and programmes which they consider right for their states and people, no matter who their decisions may hurt.


On arriving Kaduna from Abuja on Saturday for a function, I, while passing through the busy Mando express way,  saw young men. They were well dressed in uniform. And I kept wondering whether or not they were security agencies. But they were officers of Kaduna State Transport and Environmental Law Enforcement Agency (KASTELEA).

This is one of the sundry boldly taken by Kaduna state to take the youths off the street. The major bye-product of this radical move is the emergence of a new Kaduna state under El-Rufai’s watch. It is true that Wike and El-Rufai are pacesetters while others follow.

This is because they have set standards in terms of revenue generation. The cities of Kaduna and Port Harcourt currently wear a new look, as flyovers are beautifully scattered all over just because these two states are able to develop capacity for finding an alternative method of revenue generation rather than rely on the federation account.


According to records of internally generated revenue (IGR) in the 36 states in 2020, Lagos topped the list, followed by Rivers, Delta, Ogun and Kaduna. These states generated more than what other 31 states generated as IGR combined, which is why other states are financially dependent on the federation account. 


In conclusion, it is evident that, should the governors of Rivers and Lagos states succeed in their plan then, like Governor Inuwa Yahaya of Gombe state said, many states will collapse. It is not time for begging for alms but this is critical time for the northern states that are left behind to find ways to improve their IGR.

Though, the Appeal Court has ordered for the stay of execution of the earlier judgment secured by the governors of Rivers and Lagos states with respect to the laws empowering the state governments to collect VAT, the wounds are not yet healed. Anyone accusing Wike or Sanwo-Olu on this needs urgent reorientation. Otherwise, he or she can be said to share the same lazy mindset with the northern political elite.


Mohammed, National President, Arewa Youths Advocate for Peace and Unity Initiative, writes from Bauchi.