April 19, 2025

President Bola Tinubu’s effort to drive economic reform through a proposed increase in the Value-Added Tax (VAT) has suffered a major blow following rejection by the House of Representatives. The development not only exposes long-standing geopolitical tensions but also poses a threat to Nigeria’s fiscal outlook in 2025. The rejected plan sought to raise VAT from 7.5% to 10% in 2025 and further to 15% by 2030. Lawmakers pushed back over proposed adjustments to the VAT-sharing formula, fearing that the new revenue allocation would disproportionately favor the more industrialized southern states. Currently, VAT is distributed 50% equally among the 36 states, 30% by population and 20% by contribution to the pool. Tinubu’s plan sought to revise this to 20% equally, 20% by population and 60% by contribution. Northern lawmakers opposed this formula citing a potential loss in revenue, given the higher contribution from states like Lagos and Rivers. This fiscal pushback comes at a time when Nigeria’s budget is under increasing pressure and oil prices are dropping below the government’s benchmark of $75 per barrel due to global market disruptions tied to the US trade war, revenue shortfalls are imminent. Oil accounts for nearly half of government spending and is the main source of foreign exchange for the country. The VAT hike was the third pillar in Tinubu’s reform strategy following the removal of fuel subsidies and the floating of the naira. Nigeria’s tax-to-GDP ratio stands at approximately 11%, one of the lowest globally. The proposed increase was designed to bolster non-oil revenue. Experts say the rejection of the VAT increase highlights the persistent divide between the north and south on revenue allocation and governance. The northern region, more populous but less industrialized, relies heavily on federal allocations and opposes reforms that appear to benefit the south. Vice President Kashim Shettima defended the broader economic reforms in a recent statement, asserting that “governance must deliver water, electricity, schools, roads and hospitals” rather than focus solely on federalism theory. He emphasised the government’s commitment to a bold but necessary path of reform. Despite the legislative hurdle, the government plans to intensify income tax reforms. The National Assembly has already approved measures to close loopholes and improve compliance. New rules target tax evaders and high-income earners while initiatives like rewarding renters for reporting landlords are expected to improve property tax collection. Abiodun Kayode-Alli, a senior manager in PwC’s tax and strategy unit, noted that “there’s a lot of wealthy Nigerians literally not paying taxes.” He said increasing enforcement and closing gaps in compliance could help offset VAT shortfalls. Analysts believe that while the VAT rejection represents a temporary fiscal obstacle, successful implementation of income tax reforms and enhanced enforcement may provide alternative revenue streams. However, with Brent crude trading at about $65 per barrel, $10 short of budget expectations, Nigeria’s fiscal space remains constrained. The Senate is expected to deliberate on the VAT proposal after Easter. Analysts anticipate a similar rejection unless major compromises are introduced. Meanwhile, Tinubu’s economic team must reassess its strategies to sustain fiscal stability amid weakening oil revenues and geopolitical pushback from within the National Assembly. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

The Federal Inland Revenue Service (FIRS) has announced a projected revenue target of N25.2 trillion for 2025, reflecting a significant increase from the N21.6 trillion collected in 2024. This ambitious target highlights the Service’s ongoing efforts to strengthen government revenue through improved tax administration and strategic reforms. FIRS Executive Chairman, Dr. Zacch Adedeji, made this known during the opening of a two-day workshop themed “Tax Expenditure and its Effects on Government Revenue.” Represented by Bola Akintola, Coordinating Director of the Corporate Services Group, Adedeji noted that the FIRS continues to face mounting pressure to generate more revenue, especially as contributions from certain Ministries, Departments, and Agencies (MDAs) continue to decline. He revealed that the Service currently contributes an average of over 60 percent of the total monthly inflow to the Federation Account, attributing this performance to a range of proactive policy decisions and reform initiatives that have been implemented in recent years. However, he also pointed out the growing concern over revenue loss linked to tax incentives, which he said remain difficult to quantify due to a lack of reliable data. This issue underscores the importance of developing stronger mechanisms for tracking and evaluating tax expenditure. In a paper titled “Nigerian Experience in Tax Expenditure Reporting – Achievements and Challenges,” Ikata Oyekuodi John, Head of Tax Expenditure Management at FIRS, explained that effective fiscal policy requires a delicate balance between offering tax incentives and maintaining consistent, sustainable revenue generation. He emphasized that tax expenditure reporting plays a crucial role in assessing the cost and impact of incentive policies, helping to guide better decision-making. As FIRS looks toward 2025, its focus remains on enhancing transparency, improving data-driven reporting, and ensuring that Nigeria’s tax system supports long-term economic stability. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction In a strong statement of intent to strengthen investor confidence in Nigeria’s financial ecosystem, the Institute of Chartered Accountants of Nigeria (ICAN) and NGX Regulation Limited (NGX RegCo) have reaffirmed the pivotal role of transparency and accountability in attracting both local and foreign investment. The message was clear: without open and responsible corporate reporting, sustainable economic growth remains elusive. This position was emphasized during the second edition of the ICAN-NGX RegCo Corporate Reporting Award, held recently in Lagos. Transparency: A Key Driver of Economic Integrity During the event, ICAN’s 59th President, Davidson Alaribe, highlighted the growing demand for businesses to go beyond traditional financial disclosures. According to Alaribe, the health of a nation’s economy is deeply tied to the openness and integrity of its corporate reporting standards. “Our economy’s credibility hinges on transparent reporting practices,” Alaribe stated. “We must continue to foster a culture of openness and accountability, not only to meet regulatory obligations but to build a more resilient future for Nigeria’s corporate sector.” Recognizing Excellence in Reporting The ICAN-NGX RegCo Corporate Reporting Award celebrates companies that exemplify best practices in financial reporting, governance, and sustainability. This year’s edition assessed Nigeria’s 30 most capitalised listed companies, evaluating them on the basis of financial transparency, ESG metrics, and corporate governance. Award Highlights: Additional recognitions were presented for sector-specific excellence and most improved performance in reporting and compliance. A Call for ESG Accountability Alaribe emphasized that environmental, social, and governance (ESG) disclosure has evolved from a corporate trend into a business imperative. He urged companies to commit to ethical, sustainable business practices that go beyond profit-making. “As we honour today’s winners, we must also recommit ourselves to the principles of transparency and sustainability—values that will shape the next chapter of Nigeria’s economic journey,” he said. NGX RegCo: Guardians of Market Integrity Olufemi Shobanjo, CEO of NGX RegCo, reinforced the centrality of corporate reporting in maintaining market stability and building investor trust. “Corporate reporting is more than a compliance requirement,” Shobanjo explained. “It is the heartbeat of a transparent market, instilling confidence in investors, shareholders, and the wider public.” He added that this year’s award recipients have set a benchmark for others to follow, demonstrating the positive impact of transparency on corporate reputation and investor appeal. Conclusion The message from the ICAN-NGX RegCo Corporate Reporting Award is loud and clear: transparency, accountability, and sustainability are not optional—they are the bedrock of a thriving capital market. As businesses navigate a more complex global landscape, their commitment to these principles will determine their relevance, resilience, and long-term success. Companies across Nigeria are encouraged to take this call seriously—not just to win awards, but to lead responsibly and earn lasting trust in the eyes of the world. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: The Oyo State Government has recently introduced a new tax law that will require traders and artisans to pay taxes. This new regulation aims to generate revenue for the state, while also ensuring that all sectors contribute to the development and growth of the region. The implementation of this law is expected to have a significant impact on the local economy, as it will now include more businesses, particularly small and medium-scale traders and artisans. The New Tax Law: In a move to boost the state’s economy, the Oyo State Government has mandated that traders, artisans, and other small-scale businesses begin to pay taxes under the new legislation. The law is designed to streamline the taxation process and make it more inclusive of the various informal businesses that are prevalent within the state. This new law aims to promote fairness, as it ensures that all businesses, big or small, contribute their fair share to the state’s resources. Traders and artisans will now be expected to register with the appropriate tax authorities and pay the taxes levied on their income and business activities. Why the Law Was Introduced: The introduction of this tax law is a response to the need for increased revenue generation within the state. By including traders and artisans in the tax net, the government seeks to improve public infrastructure, provide essential services, and boost the overall development of Oyo State. This law is part of the state’s broader strategy to modernize its tax system, improve governance, and ensure the equitable distribution of resources across different sectors of the economy. How It Will Affect Traders and Artisans: Traders and artisans in Oyo State will need to understand the details of the new tax requirements to ensure compliance. The government is expected to provide guidelines on the tax rates and processes for registration. This could also provide an opportunity for many small businesses to access government services and programs aimed at boosting their operations. For traders and artisans, paying taxes can also lead to certain benefits, such as greater access to public services and infrastructure improvements, which can, in turn, support their businesses. Conclusion: As Oyo State continues to evolve and grow, the introduction of the new tax law represents an important step towards a more structured and sustainable economy. Traders and artisans are encouraged to familiarize themselves with the law’s provisions to ensure smooth compliance and contribute to the development of the state. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.