Big Three or Big Thief?
The bulk of your taxes have been going to only three states
Good morning, Big Brains. I have a product proposal, feel free to pitch it to Chowdeck’s CEO. Imagine if Chowdeck had a feature that helps indecisive eaters decide what to eat based on their previous orders and preferred vendors. Maybe they can call it “Help Me Chow” or something corny like that.
- Margaret
Word count: ~ 1,000
Reading time ~3 mins
Let’s get into today’s edition:
Lagos, FCT and Rivers are eating good.
Delta’s governor hasn’t gotten off EFCC’s radar
The Big Deal
Lagos, FCT and Rivers are eating good
Who needs Santa’s gifts when there’s Value-Added Tax? Definitely not Lagos, the FCT or Rivers State.
These three states have the biggest seats at the VAT table, eating the biggest and leaving other states to settle for crumbs. According to Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS), the three states currently keep over 70% of VAT revenue because that’s where most corporate head offices are based. If you’re wondering where that leaves the other 33 states, you’ll be bummed to know they’re all sharing the remaining 30%.
Speaking at a public hearing on tax reform bills in the House of Assembly on Monday, November 18, Adedeji broke down the problem: VAT is a consumption tax, but under the current setup, the revenue is allocated based on where companies are headquartered, not where their goods and services are actually consumed. For example, if MTN generates billions from Nigerians making calls across the country, Lagos gets most of the allocation simply because that’s where its head office is located.
In October alone, Lagos got to keep 42% of VAT revenue. Rivers got 16%, and the FCT claimed 9%. Adedeji says this is a slap in the face for federalism and doesn’t reflect where Nigerians are actually consuming goods.
Why is this a big deal?
This is a big deal because VAT money isn’t small money, certainly not small enough to be spent on just three states. In 2023 for instance, the government made ₦3.64 trillion from it alone
For states outside the “VAT big three,” this imbalance isn’t just unfair, it’s hindering growth because many of these states are struggling with high poverty rates and could really use the money. According to the National Bureau of Statistics, states like Sokoto, Bauchi, and Zamfara have poverty rates exceeding 80%. These are places where even the smallest increase in revenue could go a long way in improving access to healthcare, education, and basic infrastructure.
Adedeji said that President Tinubu’s tax reforms will change how VAT is distributed as it will mandate it to be distributed based on where goods and services are consumed, not just where company HQs are based.
For example, if a state produces or consumes alcohol, it will keep the VAT generated from that consumption. Similarly, if a bank collects VAT in Sokoto, the money won’t be sent to the bank’s headquarters in Lagos. Instead, it will remain in Sokoto to benefit the state. If FG sticks to the plan, it could make things slightly better for underfunded states.
But Northern governors are not impressed because they believe the proposed changes might not favour their region. They argue that it’s unfair to distribute VAT revenue on an earn-as-you-consume basis because a lot of states in the region have had their economic strength wiped away. “There are regions, especially in the North, that are not economically viable due to security challenges. The proposed VAT allocation formula would treat these states unfairly,” said Ahmed Jaha Babawo, a lawmaker from Borno State.
But the Presidency has assured them that the reforms will benefit all Nigerians, reflecting fairness and giving struggling states a fighting chance if passed. For now, though, Lagos, Rivers, and the FCT are still winning the VAT jackpot while the rest of the country watches from the sidelines.
Delta’s governor hasn’t gotten off EFCC’s radar
Delta State’s former governor, Ifeanyi Okowa, is currently facing allegations of misappropriating funds amounting to ₦1.3 trillion, among other financial misconducts. While nobody really knows if Okowa did what the EFCC claims he did, there have been interesting conversations surrounding the case.
Chiedu Ebie, Delta State’s Secretary to the Government, started one of those conversations on Tuesday, November 19, when he said that the allegations against Okowa were politically motivated and aimed at tarnishing his image before the 2027 elections. Ebie believes that Okowa’s achievements, from infrastructure development to fiscal transparency, are too good for him to be accused of corruption.
Ebie is right about one thing—Okowa has not been proven guilty yet and can still contest elections. The catch is that even if he is later found guilty of the crimes he’s been accused of, he can still find his way to political office if he’s really about it. At least, history has proven that much.
How do you know this?
We know this because it has happened before. Take the case of Orji Uzor Kalu, former governor of Abia state, for example. In 2007, the EFCC charged Orji Uzor Kalu and his finance director, Jones Udeogu to court for misappropriating ₦7.65 billion in state funds. For 11 years, Kalu and his finance director didn’t face any real consequences. In 2019, Uzor got a 12-year prison sentence and Udeogu a 10-year sentence.
But they barely spent one year in prison because, in 2020, Kalu and Udeogu were released after they argued that the verdict against them was invalid because the judge who gave it had already been promoted to the Court of Appeal when he handed it down.
In true Nigerian fashion, the Federal High Court blocked the EFCC from restarting Senator Orji Uzor Kalu's trial. Not one to back down, the commission appealed the decision in March 2024—but lost again. The Court of Appeal dismissed the case over “missing documentation,” giving Kalu another free pass.
Meanwhile, the EFCC says it’s “fixing” its paperwork system and promises to pick up where it left off. But for now, Kalu remains free and comfortably seated in the National Assembly.
After Okowa’s widely publicised arrest on November 4, the EFCC released him on November 14, but his passport has been confiscated pending the conclusion of the anti-corruption agency's investigation.
While we wait for the findings of EFCC’s investigation on his case, we can only hope that this won’t be a repeat of Kalu’s case.
This Week’s Big Question
“What does the Nigerian dream mean to you?”
Ayomide response - “The Nigerian dream is nonexistent. All of us just want to travel.”
You can also share your response here, and if it’s as interesting as Ayomide’s , we’ll feature it in the next edition.
The Big Picks
Tinubu Writes NASS, Seeks Approval For N1.77tn Fresh External Borrowing: President Bola Tinubu has asked the National Assembly to approve a new loan of ₦1.767 trillion (about $2.2 billion) as part of the 2024 budget.
Boko Haram Attacks Military Camp In Borno, Kills Soldiers: Islamic State fighters launched a heavy attack on a Nigerian military camp in northern Nigeria, leading to casualties and serious damage to equipment and supplies.
If you enjoyed this edition of the newsletter, don’t forget to subscribe and share. You can also leave feedback for us in the comments or by filling out this form.