Value Added Tax (VAT) is a regressive tax that disproportionately affects poorer families, who pay a larger percentage of their income. Unfortunately, under President Bola Tinubu’s tax reform agenda, which aims to increase government revenue, the plan to double the VAT rate will place the highest burden on the poor. With manufacturing, employment, and income declining, the expected 100% increase in VAT receipts is primarily targeting the telecoms sector, where the poor market their goods and ideas at relatively affordable rates. The next target is bank charges, with 90% of accounts holding less than N500,000.
In progressive societies that actively pursue equity and egalitarian values, the highest tax receipts typically come from progressive taxes, where the rich contribute a higher proportion of their income, followed by proportional taxes, where everyone pays a similar percentage. Since the telecoms and banking sectors already pay the highest progressive income taxes, why then should their customers be subjected to regressive taxes? Nigeria appears to be a regressive nation, not only in its tax policies but in nearly every aspect of its economy and politics. Since independence, the people have been pushed toward a state of regression, closer to slavery.
Neocolonial elites in Nigeria share the exploitative mentality of their colonial predecessors — governance is seen as an opportunity to exploit the masses with little in return. This warped social contract between the ruling elites and the people reflects a model of taxation without representation. The elites siphon off the country’s human and natural resources, giving back only a pittance. Public funds are largely consumed by the government’s administrative costs, leaving basic services like roads, water, electricity, education, and social housing woefully underfunded. The people are left to fend for themselves, much like slaves.
President Tinubu represents the archetype of a neocolonial elite — an emotionally detached leader who extracts the lifeblood of the people to appease the demands of global financial institutions like the IMF and World Bank. He sees himself as a reformer who can “squeeze blood out of stone” by increasing energy costs (removing petrol and electricity subsidies), devaluing wages through foreign exchange devaluation, and now by doubling regressive taxes. Though he began his political career with Afenifere, espousing the Welfarist ideology of the Action Group, his tenure as Governor of Lagos State saw the implementation of some of the most socially regressive policies in the name of increasing internally generated revenue (IGR).
In Lagos, Tinubu’s tax policies focused on taxing the informal sector through market and transport levies and other flat-rate regressive taxes. The low-wage informal sector bore the brunt of these taxes, but there were no visible benefits, as government investments in education, health, and social services remained neglected. While Tinubu prioritized luxurious housing projects for the super-rich in places like Banana Island and Eko Atlantic City, 70% of Lagosians lived in substandard conditions or were homeless. The majority of Lagosians survived by retailing imported goods, while the food, beverage, and tobacco industries — legacies of colonialism — remained dominant.
Instead of focusing on increasing productive capacity to raise tax receipts, Tinubu’s approach was that of a rentier system — extracting “Owo Omo Onile” from anyone trying to be productive. Instead of building the necessary 160 kilometers of metro rail to support heavy manufacturing, he empowered private transport collectors, or “Agberos.” Rather than fostering industry leaders from potential manufacturers of railway components and energy, Lagos became home to street warlords and transport touts, who acted solely to serve Tinubu’s economic and political interests.
While Governor Lateef Jakande invested heavily in tertiary education, building Lagos State University and several polytechnics, Tinubu did not build any. It is therefore unsurprising that Tinubu’s 2024 tax reforms not only increase regressive taxes but also break the social contract regarding education funding. The government is phasing out the National Education Trust Fund (NETFUND) — designed to fund universities and polytechnics — replacing it with the Tertiary Education Trust Fund (TETFUND), which will redirect tax funds into student loans. The government has no moral right to tax the productive use of skills unless it is a joint investor through subsidized education. If students are forced to take loans for their education, then taxes should also be treated as loans.
The public discourse surrounding the proposed tax reforms has been deliberately skewed by tribal and regional divisions. Northern leaders have protested that the new VAT distribution model unfairly targets their region, while Southern leaders have remained silent, even though the reform will negatively impact Southern states like Ondo, Osun, and Bayelsa. A devolution of power through restructuring is necessary, allowing states to control their economic resources before tax reforms can be considered under a unitary system.
Some Northern leaders claim that Lagos is attempting to colonize them in penury, while Southern leaders counter that Northerners are trying to feed off Southern consumption taxes. They point out that the Islamic North opposes alcohol consumption, which contributes only the seventh-highest VAT, while ignoring the fact that the North leads in tobacco consumption, which is frowned upon by the Christian South. These arguments pale in comparison to the telecoms sector, which suffers from overtaxation. Phone and internet services may soon become as unaffordable as petrol and electricity.
The tribal rhetoric obscures a critical analysis of the moral and economic implications of overtaxing the telecoms industry. Taxation should represent a share of the profits from government investments in productive capacities — from education to infrastructure. The Nigerian government’s failure to invest in telecoms contributed to the collapse of NITEL, but the government has continually used the telecoms sector as a cash cow, starting with exorbitant entry fees for mobile telecoms and continuing today as telecoms contribute the second-highest share of tax receipts, both corporate and VAT taxes.
Telecoms have been a major driver of economic growth, fostering expansion in retail, transport, and banking sectors. If Tinubu continues to overtax this sector, especially as the world shifts towards AI technology and governments lower telecom costs to make them more accessible, Nigeria could undermine its own economic potential. Meanwhile, excessive bank charges and high interest rates are stifling business growth. The government’s decision to remove subsidies for petrol and electricity, coupled with anti-business policies, is deflating economic activity, which has increasingly moved online.
We can criticize and advise the political class all we want, but it seems to fall on deaf ears. It is now up to the masses to rise and demand a favorable social contract, one that recognizes us as free citizens, not slaves. Before Tinubu imposes another tax reform, he must first reform his approach to governance and the social contract between the government and the people. We should not be expected to fund exorbitant government costs but instead pool our resources, in proportion to our income, to secure cheaper education, housing, healthcare, and employment infrastructure. If he cannot deliver this, then he should seek loans from those who helped him gain power.
** Justice J. Faloye, author of The Blackworld: Evolution to Revolution, President of the ASHE Foundation Think Tank, and National Publicity Secretary of Afenifere.
