Tax Reform:Governors and Presidential Committee Agree on New 50% VAT Sharing Formula

After several weeks of discussions, the governors of Nigeria’s 36 states and the Presidential Tax Reform Committee have agreed on how to share the Value Added Tax (VAT).

They decided to keep the current method where 50% of VAT is shared equally among the states, increase the portion based on where the money is made (derivation) from 20% to 30%, and allocate 20% based on the population of each state, which is a decrease from the previous 30%.

Meanwhile, the Senate is looking at a big increase in the national budget, aiming for N100 trillion in spending for 2026. This plan was discussed during a public hearing on the 2025 budget, which focused on restoring peace and rebuilding prosperity in Nigeria.

During the hearing, different opinions were shared about the proposed changes to tax laws. Senator Natasha Akpoti-Uduaghan pointed out that some areas, especially in the north, are not ready for these changes.

She mentioned the importance of using the North’s rich agricultural history, which included big exports like groundnuts and cotton, to improve its economy today.

Some northern groups also expressed worries that politicians might use the tax reform discussions to push their own goals for the 2027 elections.

The Academic Staff Union of Universities (ASUU) also shared their concerns, particularly opposing the new Nigeria Tax Bill 2024. They believe this bill could damage public universities because it plans to move funds from the Tertiary Education Trust Fund (TETFund) to a new fund called the Nigeria Education Loan Fund (NELFUND).

The agreement on VAT sharing by the governors is meant to make sure the system is fairer, taking into account how much each region contributes and what needs it.

They also want to update Nigeria’s tax laws to meet global standards, which they think will help the country’s economy grow in a balanced way.