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Eight months after President Bola Ahmed Tinubu presented four tax reform bills to the National Assembly for evaluation and approval, the Senate began discussions on the bills on Wednesday, focusing on the contentious clauses.
After extensive debates, the Senate decided to keep Nigeria’s Value-Added Tax (VAT) rate at 7.5 percent, rejecting a suggested increase to 10 percent, while also approving tax reforms designed to enhance revenue collection and transparency.
The two bills, namely the Nigeria Revenue Service (Establishment) Bill (NRSEB) and the Nigeria Tax Administration Bill (NTAB), were passed after being read for the third time. The other two bills, the Nigeria Tax Bill (NTB) 2024 and the Joint Revenue Board (Establishment) Bill (IRBEB), are slated for discussion later today.
Additionally, the Senate dismissed suggestions to eliminate funding for the Tertiary Education Trust Fund (TETFund), the National Information Technology Development Agency (NITDA), and the National Agency for Science and Engineering Infrastructure (NASENI). Instead, it implemented a four percent development levy to ensure these essential institutions continue to receive funding.
The Senate emphasized the importance of these agencies for human capital and economic growth, warning that cutting their funding could result in stagnation in education and technological progress.
A funding formula for the development levy was approved, with TETFund receiving 50 percent, the Nigerian Education Loan Fund 15 percent, and the National Information Technology Development Fund and NASENI each getting 10 percent. The remaining five percent will go to the National Cybersecurity Fund, while 10 percent will be allocated to the Defence Security Fund.
In adopting a report from Sani Musa, chairman of the Senate Committee on Finance, the Senate maintained the VAT rate at 7.5 percent, clarifying that VAT inputs will now be accepted for fixed assets, overhead expenses, and administrative services. The Company Income Tax rate was also set at 30 percent.
Regarding VAT revenue distribution, the bill specifies that 10 percent will be allocated to the federal government, 55 percent to state governments and the Federal Capital Territory, and 35 percent to local governments. The division of revenue among states and local governments will be based on equity, population, and consumption location.
Key features of the passed bills include the establishment of the Nigeria Revenue Service to succeed the Federal Inland Revenue Service (FIRS) and the appointment of an Executive Vice Chairman to lead the revenue agency, with its board chaired by a non-executive Chairman.
The Service Cost of Collection has been decreased from four percent to two percent for the tax collection agency. The Nigeria Revenue Service Bill also specifies the creation of six Executive Director positions, one from each of Nigeria’s geopolitical zones, and mandates that the Secretary of the Board be a qualified legal or financial expert.
Moreover, the Senate instituted strict penalties for tax-related violations, including fines for failing to register or file returns and imprisonment for up to three years for serious infractions.
However, certain clauses became contentious as the Senate transitioned into the Committee of the Whole to evaluate each clause. Clause 22 attracted immediate scrutiny by proposing that “three percent of the total revenue collected by the service be appropriated by the NASS, subject to periodic reviews depending on the economic context.”
Senator Aliyu Wadada voiced concerns, advocating for an amendment to lower the figure to two percent, citing the substantial revenues involved, which he indicated exceeded the combined budgets of 16 states.
He stressed that such large amounts required careful management, especially as they encompassed both oil and non-oil revenue. The proposed amendment was accepted. Clause 39 also incited discussion as Senator Adams Oshiomhole raised concerns about excessive legislative involvement in operational financial approvals.
“Any actions should be overseen by the Senate, but this shouldn't equate to day-to-day interference, as it would create bottlenecks and delay critical financial decisions,” Oshiomhole articulated.
Senator Musa defended the clause, emphasizing the objective of reinforcing the National Assembly’s oversight to ensure accountability in public fund management.
He explained that the provision was aimed at preventing unauthorized disbursements without restricting prompt financial actions. Nevertheless, the clause was retained.
Senate President Godswill Akpabio declared the successful passage of the bills after a majority of senators endorsed them via a voice vote. “These bills will greatly enhance governance and transform tax collection and distribution in Nigeria,” Akpabio stated. He further promised that the remaining two bills would be finalized today, even if extended sessions were necessary.
“We are focused on concluding the outstanding bills tomorrow (Thursday), even if it means working until 10:00 p.m.,” he remarked. During the plenary, Deputy Senate President Barau Jibrin commended the lawmakers for their maturity in resolving previous disagreements.
“It is time to applaud the entire Senate, especially the Committee on Finance and the Elders Committee for their wisdom and leadership in these bills,” he said.
“Initially, there were differences and tension at times. However, the Senate, upholding its stature as the highest assembly in the land, established this committee committee of elders to examine all dispute areas and consider the views of religious leaders, regional organizations, and other stakeholders.
“Now, we are grateful that the committee also, with its wisdom, engaged all parties, conducted a comprehensive public hearing, and brought us to our current position. Thank God, all these issues have been resolved,” Jibrin concluded.
In the meantime, a university lecturer, Prof Godwin Oyedokun, has encouraged state governments and other stakeholders to back President Bola Tinubu’s tax reform, which he described as a pathway to prosperity for Nigeria.
Oyedokun made this appeal yesterday in Abuja during the 2025 Award of Excellence, organized by the Society of Women in Taxation (SWIT), FCT Chapter. The professor, who teaches at the Department of Accounting and Financial Development at Lead City University, Ibadan, characterized the President's tax reform as one of Nigeria's most significant advancements.
“I am not particularly fond of any government, but when a government makes the right moves, I will acknowledge it; and if they fail, I will point that out as well,” he declared.
“The content of the bill surpasses what we currently have. Therefore, I urge everyone to support the reform. State governments, lower-income earners, and others will immensely benefit from Tinubu’s tax reform, as it will relieve them of burdensome taxes, and we will cease taxing poverty.
“Prosperity will come, and the government will benefit as well. There are incentives for companies, start-ups, the informal sector, and entrepreneurs, who will now be positioned for success.”
Oyedokun highlighted the reform's advantages, particularly in terms of harmonizing taxes nationwide.
“This bill will guarantee the achievement of tax harmonization in Nigeria, eliminating touting in tax practices.
“Beyond that, the various tax laws we currently have will be consolidated into a single document, with each chapter dedicated to a specific tax regulation,” Oyedokun added.
