VAT Standoff: Nigeria unravels slowly for good reasons

The fight between the Federal government and its Federal Inland Revenue Service on one hand, and the Rivers State government on another hand over the collection of Value Added Tax reached new heights this week, when on Tuesday, a Federal High Court sitting in Port Harcourt dismissed an application by the FIRS, seeking to stop the Rivers state government from commencing collection of Value Added Tax in the state. The ruling came on a day the Lagos State House of Assembly read for the first and second time, the state’s Value Added Tax, VAT, bill and asked its Committee on Finance which is handling it, to report back on Thursday. Consequent to the court ruling yesterday, Governor Nyesom Wike directed the Rivers State Revenue Service, RSRS, to immediately commence collection of Value Added Tax, VAT, from corporate bodies and businesses in the state.

FIRS had, Tuesday, prayed the court to stay execution on the earlier judgment of its that stopped it from collecting VAT. The FIRS had, following the judgment against it, which held that it is constitutionally the role of state governments to collect VAT, prayed the high court to stop Rivers State Government from executing the judgment. But Justice Stephen Pam, in his ruling, said granting the application will negate the principle of equity. He also noted that in as much as the state government and the state legislature had enacted a law in respect of VAT, courts are bound to recognise such a law.

This has immense implications for anyone who has a fair understanding of Nigeria’s strange federal system. In the first place, “restructuring” has been an important lexicon for no less than six years, with many politicians latching on to that buzzword to curry favour with electorates and abandoning it when they get into office. The All Progressives Congress for instance was elected in 2015 and after years of rancour, finally set up a committee for restructuring headed by Kaduna State Governor Nasir El Rufai. Observers rightly saw through that political gimmick and for many, remarked that it is a face-saving scheme devoid of any true political will and designed to show a manner of working without the important substance thereof. The reports of that Committee are yet to be implemented and have gone the way of Jonathan’s 2014 confab.

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What many commentators who side with the Lagos and Rivers governments note are how Kano’s Islamic Police, the Hisbah, break bottles of alcoholic beverages for being Unislamic while the Kano state government receives monthly shares from the Federal Accounts Allocation Committee–money gotten from a range of earnings that include oil and equally importantly, earnings from value-added tax from alcohol. The hypocrisy is striking.

Nigeria’s federalism is unique in so many ways, and one of which is a bid to foster unity, powers are immensely centralized in the federal government who shares power with the states as sub extensions or mere appendages in what is truly a unitary system of government. The economic tussle in full perspective opens up the reality that restructuring as agitated on by various interest groups especially in the Southern part of Nigeria is happening before our eyes. The pandemic response and the power grab that followed which saw states close off their boundaries with others in a bid to stop the spread of coronavirus in 2020–an action that was constitutionally under the exclusive jurisdiction of the federal government–was one of the clearest indicators. The VAT tussle expresses this fact more: restructuring is not happening as many thought it would–a grand meeting of all of Nigeria’s interest groups where they’d compel the federal government to give more powers to the states. It is happening as a slow moonwalk where state governments are now fighting the federal government for more power and winning in courts.

Nowhere would this have played out more than in the security sector where state and community policing have been an everlasting topic of discourse in the face of mounting security challenges. The federal government continues to hold onto security power especially through the highly centralized Nigerian Police Force, a structure that has been hit with its inability to effectively police the country and have become victims of the lawlessness that permeates every sector of Nigeria. But with the creation of regional policing agencies like Amotekun in the North West, Ebube Agu in the South East and other community initiatives across the country, simply gives one the notion that the day of reckoning draweth near. What is also clear is that the Nigerian state has lost the monopoly of violence, with what the influx of small arms and light weapons in the hands of organized non-state actors have shown. The fact that no fewer than 725 security agents (per SBM Intelligence’s estimates) were killed between January and August 2021 demonstrates this fact. The Nigerian military is currently engaged in an operation to root out terrorism in Zamfara state, which has been terrorizing Turji Kachalla (now arrested), Dogo Gide, Dankaranmi and several others who match the Nigerian military power for power.

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The federal government of Nigeria is obsessed with control–from forex restrictions to propping up the naira, control of information and virtually involvement in every aspect of Nigerian life. What the coming months will show in no small measure is that as the fights get drawn out, more states would be beholden to the responsibilities that they naturally should shoulder. Rivers let the dogs out. Lagos immediately followed. Other states are watching, and while Katsina has come out to disagree with arguments that border on a gaslight, it is no longer a question of if state governments with greater contribution to the FAAC purse will get in on the action. It is now a question of “when”.


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