The North’s Likelihood to Drive Nigeria’s Financial Turnaround
By Umar Farouk Bala,
In June, President Bola Tinubu signed into regulation what could be the most quietly consequential fiscal change in Nigeria’s latest historical past — a reform of the Worth Added Tax (VAT) system.
It got here with out fanfare. No political rallies. No trending hashtags. However buried within the dry language of tax coverage is a transparent message to Nigeria’s 36 states: the period of lazy dependence on oil wealth is ending.
For many years, Nigeria’s federal construction has run on a flawed mannequin — oil drilled within the Niger Delta, money pooled in Abuja, and states lining up month-to-month on the Federation Account Allocation Committee (FAAC) to take their share. This association has rewarded complacency and punished initiative.
The brand new VAT formulation flips that script. States will now get 55% of VAT, native governments 35%, and the federal authorities simply 10%. Extra importantly, VAT might be distributed primarily based on the place items and companies are consumed, not the place corporations are headquartered. In different phrases, a state’s income will now depend upon the financial exercise inside its borders.
For northern governors, this isn’t only a coverage change — it’s an financial summons. The North has the land, labour, and enterprise to thrive, however for too lengthy has been trapped in a story of shortage. That excuse now not holds.
The sensible states will begin with sectors they already dominate: agro-processing, textiles, leatherworks, and mining. Crops like groundnut, sesame, maize, rice, and tomatoes ought to now not be exported uncooked. Processing them domestically multiplies jobs, raises incomes, and generates extra VAT from the elevated worth of products.
Nigeria’s huge casual financial system is one other sleeping large. With VAT now tied to consumption, each market stall, transport hub, and small workshop is a possible income — if formalised. States ought to simplify enterprise registration, digitise market transactions, and take tax workplaces into communities, not simply capital cities.
However VAT reform just isn’t a magic faucet. To develop consumption, you will need to first repair the fundamentals: feeder roads so farm produce reaches markets, energy provide for artisans, and functioning native transport programs to drive commerce. Each naira of VAT have to be seen in tangible initiatives — not in convoys, inflated contracts, or infinite “wants assessments.”
Transparency would be the take a look at. Governors ought to publish VAT inflows and expenditures month-to-month, in plain language. Civic teams, conventional leaders, and youth organisations must be a part of monitoring initiatives. When individuals see their taxes constructing colleges and clinics, they are going to pay extra willingly — and extra actually.
Information will separate the intense from the unserious. States that put money into understanding consumption patterns — by digital tax programs, GIS mapping, and income analytics — will know the place to focus on investments. Kaduna has already began. Others haven’t any purpose to attend.
The reform additionally mandates e-invoicing and digital compliance instruments. This isn’t pink tape — it’s the infrastructure of a contemporary tax system. Northern governors must be first in line to companion with the Federal Inland Income Service (FIRS) in rolling these out on the grassroots. Digitalisation not solely reduces leakages, it builds belief within the system.
Tinubu’s VAT reform offers states the instruments however not the outcomes. That half is as much as the governors. They’ll stay caretakers of dwindling FAAC handouts — or grow to be architects of self-sustaining native economies.
The North just isn’t poor. It’s under-led. This reform might change that — if its leaders rise to the event.
