The North’s Chance to Drive Nigeria’s Economic Turnaround

By Umar Farouk Bala,

In June, President Bola Tinubu signed into law what may be the most quietly consequential fiscal change in Nigeria’s recent history — a reform of the Value Added Tax (VAT) system.

It came without fanfare. No political rallies. No trending hashtags. But buried in the dry language of tax policy is a clear message to Nigeria’s 36 states: the era of lazy dependence on oil wealth is ending.

For decades, Nigeria’s federal structure has run on a flawed model — oil drilled in the Niger Delta, cash pooled in Abuja, and states lining up monthly at the Federation Account Allocation Committee (FAAC) to take their share. This arrangement has rewarded complacency and punished initiative.

The new VAT formula flips that script. States will now get 55% of VAT, local governments 35%, and the federal government just 10%. More importantly, VAT will be distributed based on where goods and services are consumed, not where companies are headquartered. In other words, a state’s revenue will now depend on the economic activity within its borders.

For northern governors, this is not just a policy change — it is an economic summons. The North has the land, labour, and enterprise to thrive, but for too long has been trapped in a narrative of scarcity. That excuse no longer holds.

The smart states will start with sectors they already dominate: agro-processing, textiles, leatherworks, and mining. Crops like groundnut, sesame, maize, rice, and tomatoes should no longer be exported raw. Processing them locally multiplies jobs, raises incomes, and generates more VAT from the increased value of goods.

Nigeria’s vast informal economy is another sleeping giant. With VAT now tied to consumption, every market stall, transport hub, and small workshop is a potential source of revenue — if formalised. States should simplify business registration, digitise market transactions, and take tax offices into communities, not just capital cities.

But VAT reform is not a magic tap. To grow consumption, you must first fix the basics: feeder roads so farm produce reaches markets, power supply for artisans, and functioning local transport systems to drive trade. Every naira of VAT must be seen in tangible projects — not in convoys, inflated contracts, or endless “needs assessments.”

Transparency will be the test. Governors should publish VAT inflows and expenditures monthly, in plain language. Civic groups, traditional leaders, and youth organisations should be part of tracking projects. When people see their taxes building schools and clinics, they will pay more willingly — and more honestly.

Data will separate the serious from the unserious. States that invest in understanding consumption patterns — through digital tax systems, GIS mapping, and revenue analytics — will know where to target investments. Kaduna has already started. Others have no reason to wait.

The reform also mandates e-invoicing and digital compliance tools. This is not red tape — it is the infrastructure of a modern tax system. Northern governors should be first in line to partner with the Federal Inland Revenue Service (FIRS) in rolling these out at the grassroots. Digitalisation not only reduces leakages, it builds trust in the system.

Tinubu’s VAT reform gives states the tools but not the results. That part is up to the governors. They can remain caretakers of dwindling FAAC handouts — or become architects of self-sustaining local economies.

The North is not poor. It is under-led. This reform could change that — if its leaders rise to the occasion.