This decision is the result of intense criticism and disagreement, mostly from northern governors and traditional leaders who opposed parts of the planned law, especially those that affected the distribution model for the Value Added Tax (VAT).
Sources stated that the planned legislation would be changed and resubmitted to the National Assembly in due time, despite reports yesterday night that the presidency had decided to withdraw the bills.
Vice President Kashim Shettima headed the National Economic Council (NEC), which formally requested the legislation’ withdrawal on October 31.
The NEC’s suggestion is in line with a decision adopted at a meeting in Kaduna by the governors of Nigeria’s 19 northern states.
The governors, accompanied by well-known traditional elders, voiced worries that the proposed tax measures would have a detrimental effect on their region’s
The Northern Governors’ Concerns
The planned changes to the VAT distribution mechanism, which the Northern leaders contend will disadvantage the North, are the main source of their opposition.
The Northern Governors’ Forum chair, Governor Inuwa Yahaya of Gombe State, explained their position, saying that the existing VAT structure unfairly benefits governments with corporate headquarters rather than the areas where goods and services are really used. They argue that this scenario shortchanges subnational regions and threatens the economic equilibrium.
The northern leaders stated that they are not against reforms that benefit Nigeria as a whole in a statement released at the conclusion of their meeting, calling for equity in all national policies. However, they contend that in order to prevent marginalizing particular groups, the suggested adjustments must be equitable and inclusive.
The Presidential Reaction and NEC’s Intervention
Oyo State Governor Seyi Makinde clarified during a media briefing that NEC’s suggestion shows an awareness of the general issues and a wish to permit more thorough consultations.
NEC sees the need to develop consensus throughout Nigeria and unite all stakeholders on the tax reforms, Makinde said, flanked by Governors Babagana Zulum (Borno) and Charles Soludo (Anambra).
Governor Zulum reaffirmed that the goal of NEC’s decision is to enable a more cohesive approach, emphasizing the significance of providing stakeholders and public with clarity regarding the administration’s tax reform strategy.
Position Clarified by the Presidency
The President’s Special Advisor on Information and Strategy, Bayo Onanuga, had already clarified the confusion around the measures.
He underlined that the goal of the proposed VAT derivation model is to establish a more equitable system, not to disadvantage the North.
By changing the VAT distribution mechanism to take consumption location into account, the law aims to fairly compensate the areas that produce items for usage across the country.
The existing paradigm encourages VAT remittance based on company headquarters rather than the location of products consumption, claims Onanuga. All regions, especially those in the North that supply necessities, would be fairly represented in VAT allocations according to the proposed reform.