Public enlightenment typically precedes the introduction of new policies to facilitate understanding, acceptance, and implementation. This is why companies seeking to go public on the Nigerian Stock Exchange (NSE) prepare an information memorandum to educate stakeholders and the general public.
Unfortunately, the current government has repeatedly overlooked this fundamental principle, as seen in several instances. These include the abrupt removal of the petrol subsidy on May 29, 2023, the unification of the dual foreign exchange regime, inadequate awareness of the Nigerian Education Loan Fund (NELFUND), and the ongoing debate over tax reform bills currently before the Senate. This lack of proactive communication has fueled widespread public discontent.
It seems no lessons were learned from the strong resistance Nigerians mounted following the subsidy removal and the naira’s devaluation. The tax reform initiative is now being pursued without adequate public sensitization, resulting in growing resentment and criticism of the administration.
What makes this backlash even more surprising is that these policies, including the reform initiatives, are intended to serve the long-term interests of the masses.
Historically, inadequate communication about taxation has had dire consequences, such as the infamous Aba Women’s Riots of 1929, sparked by opposition to taxes imposed by the colonial government. To prevent a repeat of such events, today’s leaders must address misinformation and disinformation that could derail the noble intentions behind the tax reform bills under consideration.
A comparison between the Aba Women’s Riots and later instances of resistance to government policies highlights the importance of effective communication. For example, during General Ibrahim Babangida’s administration in 1984/85, the Structural Adjustment Program (SAP) gained public acceptance largely because it was preceded by a nationwide debate. This debate informed citizens about SAP as a viable alternative to an IMF loan, earning their buy-in.
This demonstrates the power of communication as a tool for bridging the gap between leadership and followership. Nigerians’ acceptance of SAP is largely credited to the exceptional work of the National Orientation Agency (NOA) under the leadership of Professor Jerry Gana. His efforts to align Nigerians with the government’s agenda stand as a testament to the critical role of public enlightenment in ensuring policy success.
The recent debates in both the House of Representatives and the Senate over the proposed tax reform bills highlight a troubling lack of alignment among lawmakers. The discord within the legislature raises questions about how much the public understands these bills, given that even lawmakers appear divided.
A striking example is the apparent contradiction among principal officers of the Senate. Deputy Senate President Jubril Barau claimed the debate on the tax reform bills had been suspended, while Senate President Godswill Akpabio and Senate Leader Opeyemi Bamidele indicated otherwise. This public display of inconsistency undermines the credibility of the Senate, exposing it to ridicule and unnecessary criticism—damage that could easily have been avoided if the leadership had presented a unified stance.
Ideally, internal deliberations should have harmonized their positions before addressing the public. For instance, Barau’s statement could have been clarified as a directive for the Senate committee to temporarily pause its work while the 10-member ad hoc committee consulted with the executive branch, where the bills originated. Instead, the lack of cohesion made the debate resemble a regional contest between the South and the North, creating unnecessary tension.
This situation reflects a broader issue: politicians often dedicate immense effort to campaigning and engaging with the public before elections, only to neglect meaningful communication after securing office. Andrew Cuomo, a former governor of New York, captured this irony with the phrase, “Campaign in poetry, govern in prose.” While campaigns are filled with aspirational rhetoric designed to captivate voters, governance requires clear, detailed communication about policy implementation—something Nigerian politicians frequently fail to deliver.
The contrast between poetic campaigning and prosaic governing becomes clear when examining the nature of poetry versus prose. Poetry is characterized by its evocative, imaginative qualities, while prose relies on straightforward, factual language. This shift from inspiration to practicality often leaves politicians reluctant to engage deeply with constituents during their tenure, perhaps to avoid accountability for campaign promises.
This lack of effective communication is one of the core challenges of governance in Nigeria. Chinua Achebe famously attributed Nigeria’s problems to leadership deficiencies in his seminal work “The Trouble With Nigeria,” and the ongoing debate on tax reforms is yet another example of this shortfall.
The tax reform debate has been unnecessarily framed as a regional battle for dominance, overshadowing the actual merits of the proposed reforms. Instead of focusing on the technical and legal aspects, my interest lies in reframing the narrative to emphasize the importance of effective communication in fostering unity and shared prosperity. As a democracy advocate and development strategist, I believe a holistic approach is critical for addressing national issues.
Effective communication is the cornerstone of any successful partnership, whether in governance, business, or even marriage. It serves as the lubricant that keeps relationships functioning smoothly—a quality Nigeria desperately needs in its multi-ethnic, multi-regional context.
As the legislative process continues, it is crucial to evaluate the tax reform bills through the lens of national unity and collective progress, rather than as a divisive contest between the North and the South. By prioritizing effective communication and collaboration, lawmakers can steer the debate toward outcomes that benefit all Nigerians, reinforcing the vision of One Nigeria
It is encouraging to note that, according to tax experts, the proposed reforms could bring significant relief to ordinary Nigerians, particularly those disproportionately affected by Value Added Tax (VAT). As experts point out, VAT—commonly referred to as a consumption tax—impacts the poor most heavily because they spend a larger portion of their income on basic needs like food. Under the new tax regime, small and medium-scale enterprises with capitalization below ₦50 million and individuals earning less than ₦80,000 monthly are exempt. Meanwhile, large corporations and high-income earners will shoulder the burden through Company Income Tax (CIT) and Personal Income Tax (PIT).
Ironically, the very groups that stand to benefit the most from these reforms are largely unaware of the relief measures, leading them to resist rather than embrace the changes. This lack of awareness underscores the failure of effective advocacy and communication around the bills, leaving the nation divided over whether to accept or reject the reforms currently before the legislature.
To address the impasse, a political solution is being pursued through the establishment of a Senate ad hoc committee led by Minority Leader Abba Moro. This committee is tasked with engaging the Attorney General of the Federation, Lateef Fagbemi, to resolve contentious issues. This collaborative approach aims to clarify “grey areas” and build consensus, similar to how the “Doctrine of Necessity” was invoked in 2010 to stabilize governance after the sudden death of President Umaru Yar’Adua.
Unfortunately, before this attempt at resolution, the debate over the reforms had taken on a divisive tone, with some lawmakers framing it as a North versus South issue. A key point of contention lies in the proposed VAT sharing formula. For instance, data from the Nigerian Bureau of Statistics (NBS) shows that while Lagos generates approximately 55% of VAT, the entire northern region contributes only about 25%.
This disparity highlights the untapped economic potential of northern states. For example, Nasarawa State, located near Abuja, is rich in solid minerals like lithium and tin, as well as agricultural produce such as citrus fruits. If properly harnessed, these resources could drive industrialization and significantly boost VAT contributions. Lithium and tin, for instance, could be processed into batteries and other high-demand products for electric vehicles and advanced technologies. Similarly, agricultural processing facilities for citrus fruits could mirror Florida’s thriving juice industry in the United States.
Zamfara State provides another example, with its substantial gold deposits attracting illicit mining operations. With the proposed VAT reforms, states will retain 60% of the VAT generated within their borders, incentivizing governments to formalize and secure these industries. By establishing local processing plants, states can not only create jobs but also earn additional CIT and PIT revenues, alongside VAT.
Despite these opportunities, many state governments have been reluctant to attract investors. States like Lagos, which hosts a significant share of Nigeria’s industrial and service sectors, have reaped substantial benefits from being business-friendly. In contrast, most states impose burdensome taxes on startups, stifling economic growth. A few exceptions, such as the former Edo Governor Godwin Obaseki, current Nasarawa Governor Abdullahi Sule, and Enugu Governor Peter Mbah, have taken proactive steps to foster business-friendly environments.
If the tax reform bills are passed into law, states will likely intensify efforts to attract both local and foreign investors. For example, governors could elevate the role of the Corporate Affairs Commission (CAC) in their states to ensure businesses register locally and establish headquarters within their jurisdictions. By doing so, they can maximize their VAT derivation and other tax revenues.
Lagos’s dominance in VAT generation stems from factors like superior infrastructure, multiple ports, and its position as Nigeria’s economic hub. However, underutilized ports in states like Delta could benefit from partnerships with nations like Singapore, which specialize in blue economy development. Similarly, addressing insecurity in northern states would encourage farming and entrepreneurship, unlocking their vast economic potential.
Ultimately, the tax reform bills offer an opportunity to accelerate national development by incentivizing states to harness their unique resources. Rather than viewing the reforms through a divisive lens, lawmakers and stakeholders should adopt a more pragmatic perspective, focusing on shared prosperity and regional economic growth. By leveraging these reforms to attract investment and boost local production, Nigeria can create a more balanced and inclusive economy.
How can we forget the horrifying act of terrorists who ruthlessly killed eleven farmers in Sokoto State for daring to work on their farms? Or the disturbing incident in Bauchi, where a tomato factory partnership between Nigerian and Spanish entrepreneurs faced terrorist threats, with expatriates narrowly escaping with their lives? What happened to the once-thriving cotton and textile mills in Kaduna, established to process cotton from the Funtua region and groundnut oil from the north?
In the past, there was healthy competition between Nigeria’s regions—North, West, and East—each region aggressively cultivating and processing cash crops like cotton and groundnuts in the North, cocoa in the West, and oil palm and coal in the East. This was possible because states could retain 50% of their earnings. However, when the system transitioned to a federal structure in 1978, local production slowed drastically as states became overly dependent on the federal government’s allocation, neglecting their internal revenue generation efforts.
This trend worsened as insecurity ravaged northern Nigeria, further hindering industrial activities. In addition, government policies, such as import substitution, made local textile and oil production uncompetitive, allowing foreign products to flood the market and stifle local industries. Consequently, the poor business environment contributed to the North generating only 25% of the nation’s VAT, a disproportionately small share given that the region has 19 states compared to 15 in the South, where the majority of VAT is generated. Lagos, in particular, contributes the lion’s share.
Despite these challenges, the North need not despair. The current situation should serve as a wake-up call for northern governments and entrepreneurs to revive the industries that once flourished. This is especially important as the Supreme Court is likely to rule in favor of Lagos and Rivers States, which are in court seeking to retain 100% of the VAT generated within their borders.
Rather than adopting a defeatist, combative approach, northern leaders should embrace the impending changes and think entrepreneurially. After all, Kano was once the heart of the prosperous trans-Saharan trade. The north should abandon its divisive mindset and instead focus on collective progress. Northern leaders should intensify efforts to address insecurity, which has stifled the establishment of industries, and engage citizens in a dialogue about the importance of industry for economic growth.
Religious and traditional leaders in the North have a critical role to play in educating the public. They must help their communities understand that local industries will create jobs and generate the tax revenues (CIT, PIT, and VAT) needed to combat poverty, disease, and illiteracy. This is particularly important given the alarming number of out-of-school children, especially in the North, as reported by UNICEF.
Unfortunately, both the federal government and northern leaders have fallen short in raising public awareness about key policies and programs. Effective communication is essential for the success of government initiatives. Just as politicians aggressively campaign to secure votes, they should also passionately advocate for government programs post-election to ensure effective governance.
Take, for instance, the National Education Loan Fund (NELFUND), a program designed to provide financial support to Nigerian youth pursuing education. The current television campaign about NELFUND, launched by the National Orientation Agency (NOA), comes too late. The target audience—youth—should have been informed about the initiative well in advance of its launch, not after the fact. This late-stage campaign is a reminder of the crucial need for timely communication in driving national programs and ensuring their success.
Even so, the message is being communicated through a cartoon character designed for children between the ages of one and ten, which is an odd choice, given that the target audience for the initiative—young adults seeking to enter university—are typically 16 and older. Even more concerning is the fact that the jingle is airing on regular TV stations, rather than on programs and channels that truly capture the attention of young people, such as music channels like SoundCity and HipTV, or popular talent and reality shows like Big Brother Naija.
At present, there’s little to no presence of NELFUND on social media, a platform where Nigerian youths—who are active netizens—primarily interact. These platforms were pivotal in mobilizing for the #EndSARS protests in 2020 and the #EndBadGovernance movement just a few months ago.
Given the lack of proper outreach, it’s not surprising that the Executive Secretary of NELFUND, Mr. Akin Sawyer, has expressed concern over the low interest in one of the Tinubu administration’s key initiatives—providing loans to students for their education. He has been touring various higher institutions in an effort to increase awareness. With 162 higher institutions in Nigeria, a recent report from Punch revealed that only students from 136 of these institutions applied for NELFUND, leaving over 88,000 students from the remaining schools unengaged. The lack of participation can be attributed to insufficient awareness campaigns or perhaps the fear surrounding loans due to past negative experiences.
However, these concerns could have been alleviated with more extensive publicity, stressing that the student loan program is interest-free, so there is no danger of falling into a debt trap. It’s important to emphasize that the NELFUND initiative aims to democratize education by providing loans to disadvantaged students, enabling youth—who could have become innovators or entrepreneurs like Elon Musk, Jeff Bezos, or Sam Altman—to access education instead of being stranded as street urchins due to financial constraints.
Now, turning to the core focus of this discussion—tax reform—one of the most debated issues is the proposed new VAT distribution formula. To explore this, let’s examine VAT tax administration in three countries: the UK, the USA, and China.
In the UK, the standard VAT rate is 20%, which is more than double Nigeria’s 7.5% rate, though there are reduced rates for certain goods. For instance, food and drink for human consumption are typically zero-rated, and some items like children’s car seats and home energy are taxed at a reduced rate of 5%. Like Nigeria, some goods and services are exempt from VAT, such as postage stamps and certain health and education services.
The United States, on the other hand, does not have a federal VAT system. Instead, it operates a sales tax system, which varies from state to state. Some states have no sales tax, while others have rates ranging from 2.9% to 7.25%. A few states may have specific taxes that resemble VAT, but there is no nationwide VAT system.
In China, the standard VAT rate is 13%, with reduced rates of 9% and 6% applying to specific goods and services. Like the UK, the 9% rate applies to retail, entertainment, hotels, and restaurants, while the 6% rate applies to financial services, insurance, and technology. The VAT system in these countries aligns with Nigeria’s policy of exempting food from VAT.
In my assessment, Nigeria’s proposed VAT reforms are in line with global best practices. Therefore, the debate surrounding these reforms, particularly the North-South divide, is unfortunate and avoidable. Without a doubt, the proposed tax reforms could benefit Nigeria’s growth and development. In fact, if the reform bill passes, it is likely that Lagos will lose some of its benefits, because it will vitiate the Supreme Court’s judgement which was expected to be in favor of the 100% VAT allocation for Lagos and Rivers state that had sued the federal government that currently collects VAT which the states are against. As a result of the improvement in VAT tax derivation ratio from 20% to 60% , the scramble for investors , as it happens in ths USA for instance where states jostle for fims like Tesla, Microsoft, GM, etc to be located in their domain to boost jobs creation and tax benefits, other states may start aggressively emarking on adoption of ease of doing business policies to attract businesses into establishing their operations locally to benefit from CIT, PIT, and VAT, which Lagos currently enjoys due to its business hub status.
Furthermore, as Nigeria looks to implement tax reforms, oil-rich states like those in the Niger Delta might push for international oil companies (IOCs) to relocate their headquarters to the region to ensure that host communities benefit from the 60% VAT allocation in the reform. I have discussed this point of view with Osagie Okunbor, Chairman of Shell Petroleum Development Company (SPDC), in Nigeria who supports the idea, provided there is peace and security in the region.
Invariably, just as the North must tackle insecurity to unlock its potential as a center for commerce and industry, the same goes for the Niger Delta, which requires an end to militant activities to attract IOCs back to the region. In the East, the actions of the proscribed Indigenous People of Biafra (IPOB) which have stifled entrepreneurial activities, further hindering progress , has to end if they must enjoy the benefits of the proposed formula for sharing VAT.
In the light of the above, if the tax reform bills are passed, they could have a multiplier effect on Nigeria’s development, particularly by addressing the insecurity that hampers businesses across the country simply because all state governors will have reasons to embark on more innovative and dynamic ways of returning peace to their dormain so that businesses can thrive to generate income internally . In effect,these proposed tax reforms offer far more benefits than they might initially appear, including tackling insecurity, which remains one of the most significant barriers to Nigeria’s socio-economic progress.
Therefore, instead of framing the tax reform as a North-South conflict , we should view it as a strategic opportunity to lift Nigeria out of its socio-economic stagnation. As such ,I urge our lawmakers to look beyond temporary political concerns and pass the bill after addressing the outstanding issues through continued dialogue.
Magnus Onyibe, a public policy analyst, author, democracy advocate, development strategist, alumnus of the Fletcher School of Law and Diplomacy, Tufts University, Massachusetts, USA, and a former commissioner in the Delta State government, (2003-2007) sent this piece from Lagos, Nigeria.
To continue with this conversation and more, please visit www.magnum.ng.