Constitution amendment: Nigeria seen shifting attention from resource sharing to generation

One key take-away from the ongoing amendment of the 1999 Nigerian constitution by both chambers of the National Assembly- Senate and House of Representatives is the fact that Nigerians have realized that it is time attention was shifted from sharing national resources to generating the resources to meet the ever-increasing demands.

Indeed, with the ravaging effects of COVID-19 pandemic, high inflation, skyrocketing fuel subsidy, high cost of governance, insecurity, reduction in agricultural and manufactured products, fluctuation in the international crude oil market and mounting local and external debts amongst other challenges, Nigeria cannot but devise other means of solving her problems

Unlike other democracies where true federalism is practiced, in the case of Nigeria, the paradox of our fiscal federalism is that it focuses more attention on ‘sharing’ than ‘generating’. In other words, increased revenue generation has attracted less attention than revenue distribution prompting a former deputy senate president Ike Ekweremadu to describe Nigeria as a “feeding bottle democracy”.

For years, resource allocation and management as well as fiscal federalism/decentralization have remained contentious issues in a federal state such as Nigeria. This is because the essence of government at all levels is to bring about rapid economic development through adequate provisions of social and economic infrastructure for the citizenry. The fiscal arrangement within the federation should, therefore, adequately cater for the federating units to enable them to discharge their constitutional responsibilities.

The good news however, is that the people of Nigeria has now come to the realization that this flawed system must stop and that states and local governments otherwise called the federating units must be giving their pride of place in the country. They displayed this resolve through their representatives at the national when they voted overwhelmingly for devolution of power to the states and local governments.

First was the massive rejection by the lawmakers to allow the Federal Government to retain the collection of Value Added Tax (VAT) despite a subsisting Federal High Court ruling

They did this by voting against a proposal seeking to shift the collection of VAT from the concurrent to the exclusive legislative list, effectively leaving the decision to the Supreme Court which is hearing the matter.

It will be recalled that a Federal High Court sitting in Port Harcourt had last year ruled that states had the powers to collect VAT. However, the Federal Government opposed the ruling and continued to collect VAT while it projected that it would collect N2.2tn in 2022 through the Federal Inland Revenue Service.

The federal government also incorporated VAT collection in its Finance Act 2021 and included it in its 2022 budget, a move that put the government on a collision course with the Southern Governors’ Forum.

On Tuesday, a Bill for an Act to Alter Part I of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999 to include Value Added Tax on the exclusive legislative list failed at the both chambers.

A total of 95 senators registered to vote and 85 voted. While 41 voted in favour of VAT being collected exclusively by the Federal Government, 44 voted against it while no one abstained. In the end, the bill failed because it did not meet the minimum 73 votes. In the House of Representatives, 209 lawmakers voted to retain VAT on the concurrent list while 91 voted for it to be placed on the exclusive list.

The house also passed a bill to “abrogate the State Joint Local Government Account and provide for a special account into which shall be paid all allocations due to local government councils from the Federation Account and from the government of the state.”

It also passed Bill 2 to “establish local government as a tier of government and guarantee their democratic existence, tenure and for related matters.”
Bill 9 which sought to “provide for the financial independence of state Houses of Assembly and state Judiciary” also passed.

The lawmakers also passed Bill 17 which sought to “establish the federal revenue court and the revenue court of a state.”
In a related development, state governments were empowered to generate their own electricity, run prisons and airports

Specifically, bills 30, 31, 32 and 33 which sought to move airports; fingerprints, identification and criminal records; prisons (and re-designate it as Correctional Services); railway; and power generation, transmission, and distribution from the Exclusive Legislative List to the Concurrent Legislative List, respectively were all approved by the lawmakers.
Also passed was Bill 39 to “empower the Revenue Mobilisation Allocation and Fiscal Commission to enforce compliance with remittance of accruals into and disbursement of revenue from the Federation Account and streamline the procedure for reviewing the Revenue Allocation Formula.”

Lagos, Akwa Ibom, Gombe state governments react

The positive outcome of these developments is already manifesting in the response from state governments and other stakeholders in the Nigeria enterprise.
Lagos State Government which like Rivers state, has passed a law on VAT collection and is a party to the case before the Supreme Court said the National Assembly deserves commendation.

Commissioner for Information Gbenga Omotoso, said any decision that would promote federalism should be commended.
Said he: “I think the lawmakers have done well. If they have said now that the states have the right to collect VAT, it is good omen because that has been the question that the judiciary has been asked to answer, and if the Lagos State Government and some other state governments are pushing for this.

“It is the right way to go. I think they deserve kudos; they deserve applause because in my own view, it is a ‘no victor, no vanquished’ situation. It is good for democracy. It is a victory for the rule of law. It is a victory for equity, for justice. It is a victory for what is right as against what is not right.”

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In the same vein, his Akwa Ibom State counterpart Ini Ememobong expressed support for the action by the lawmakers.

He said “ My state government, like other forward-looking private and corporate citizens, is supportive of every attempt to increase the speed of our travel to true federalism. This act by the National Assembly is a march in the right direction. The government of Akwa Ibom State led by Governor Udom Emmanuel has been at the lead of this advocacy and therefore welcomes this development.”

However, the Gombe State Government, which had previously kicked against states collecting VAT, said on Tuesday that the issue of VAT collection still needed to be reviewed further.
The state Commissioner for Information, Julius Ishaya, said the latest development was more complex than people would understand.
“For us aside from passing it as a law, there will be a need for states to sit down and sort out things.

“For instance, VAT is a value-added tax on goods and services. If you buy airtime, instead of it being done at the organisation’s head office, it is meant for them to separate it to know cards used around the Gombe area and remit the VAT to the state unlike what was obtained in the recent past.

“That is the complicated issue, there is more than meets the eye but it is not a simple thing as people expect. We will increase our productivity and other economic activities to make sure we attract value addition.”, he stated
However, it is not yet uhuru for these resolutions as they would be further subjected to ratification by at least 2/3rd of the 36 states’ houses of assembly and assented to by Mr. President before the bills would become law in Nigeria.
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