An opinion on the legality of the Federal Government to receive value added tax amongst all taxes instead of the state government.


This article intends to lend its legal perspective amidst the pool of salient viewpoints in this ongoing tax jurisprudential issue. I’ll discuss the meaning of value added tax, functional extant laws, its administrative body. Also, sharing constitutional formula basis the of three operation tiers of government VAT in Nigeria. As well as, a review of the court’s decision in AG Rivers v. FRN (Supra); legality or otherwise of the Value Added Tax law of Rivers State following the court decision. Also, I will subsequently summarize this essay and gives recommendations on the legal issue.

In recent times, there has been a clamor by southern states chiefly led by Governor Nyesom Wike of Rivers State. Asking that all taxes be remitted to the state government instead of the federal government. Starting from value added tax, a consumer tax. This whole clamor boils down to the claims by the south of marginalization and restructuring. Ordinarily, states remit all their revenues to the federal government which then allocate funds to various states. However, States now want to be able to collect their own tax without remitting it to the federal government.

Before I delve into the nitty gritty of my opinion on the legality or otherwise of the federal government being the sole tax collector in Nigeria hammering on the recent developments on Value added tax. I would like to give an insight on the meaning of Value added tax, what it entails, the laws that back it up and how it operates in Nigeria.

A value-added tax (VAT) is collected on a product at every stage of its production during which value is added to it, from its initial production to the point of sale. The amount of VAT that the user pays is based on the cost of the product. Less any costs of materials used in the product that have been taxed earlier.

VAT is governed by VALUE ADDED TAX ACT Cap V1 LFN 2004 (as amended) and Finance Act 2020. It is from this standpoint that the body recognized to administer and manage the VAT in Nigeria is the Federal Board of Inland Revenue through its executive arm the Federal Internal Revenue Services. VAT is a consumption tax paid when goods are purchased and services rendered, it is a multi-stage tax. VAT is borne by the final consumer.

All goods and services (produced within or imported into the country) are taxable except those specifically exempted by the VAT Act. In Nigeria VAT rate is 7.5%. It is a norm that all taxable persons are required to file VAT monthly returns not later than 21st day following the month of transaction.

Under the Nigerian VAT regime, three groups of taxpayers are obligated to deduct VAT at source and remit directly to the tax authority. These are:

  1. Nigerian companies that are carrying on VATable transactions with non-resident companies within the country.
  2. Government ministries, statutory bodies, and other agencies of government; and
  3. Companies operating in the oil and gas sector.

The VAT is generated in each state of the federation, and it is remitted to the federal government of Nigeria by remitting the 7.5 percentage through

the FIRS. Accordingly, the generated monies from these states are distributed amongst the central government, the 36 state governments, and the 774 local governments in the country. Hence, the sharing formula amongst these three levels of government are;

1. 15% to the Federal Government

2 50% to the State Government and

3. 1% to the Local Government.


The Constitution of the Federal Republic of Nigeria remains valid and subsisting. Both Item 59 to the second schedule, part I (Exclusive Legislative list), and Item 7 of Part ll (Concurrent Legislative List) are express provisions of the Constitution on legislations on taxation in Nigeria.

Under the exclusive list, the constitution provides that the National Assembly can legislate on Taxation of incomes, profits, and capital gains.

Further, under Item 7 of the concurrent legislative list to impose any tax or duty on capital gains, incomes or profits or persons other than companies and documents or transactions by way of stamp duties. A community reading of both the exclusive list and concurrent list under the aforesaid provisions stated dearly the areas of taxation which the National Assembly can legislate. However, the 1999 constitution does not make a provision for legislation on Value Added Tax. This implies that there is a lacuna in the constitution regarding administrative frictions between the tiers of government, especially as to the imposition and collection of Value Added Tax in Nigeria.

The issue of the legality of the federal government collection VAT has been subject to many judicial decisions. Like the cases of Ogun state v Aberuagba Lagos state v Eko hotels. However, the case of AG Rivers State v FRN have proven to be notorious and is very much recent.


In the Judgment delivered by Justice Stephen Pam of the Federal High Court, Port Harcourt Division, Rivers State, it was held that the Rivers State Government and not the Federal Government is empowered to impose and collect Value Added Tax (VAT), Personal Income Tax (PIT) in the State.

The court held that there was no constitutional provision backing the collection of VAT, Withholding Tax, Education Tax and Technology Levy in Rivers State or any other State of the Federation by the FIRS, because the Federal Government is restricted by the Constitution of the Federal Republic of Nigeria, 1999 (As Amended) to taxation of Incomes, Profits, and Capital Gains, and these do not in any way include VAT or any other levy rather than those specifically mentioned in Items 58 and 59 of the Exclusive Legislative of the Constitution.

This implies that the administration of FIRS over VAT over the years had been unconstitutional. Yet, their unconstitutional operations have been unchecked until recent matters. The previous matter being E.C Ukala v FRN had challenged the unconstitutionality of the collection of the VAT by the Federal government through FIRS. Yet, the operation continued regardless until the recent judgment that popularized the unconstitutionality of FIRS over VAT collections.


After the judgment of the Federal High Court sitting in Port Harcourt, the Rivers state House of Assembly took the initiative to enact the Value Added Tax Law of Rivers State under the principle of covering the field in a vacuum under the constitution. Since the constitution did not expressly give the National Assembly the power to enact Value Added Tax Act, and the court has affirmed the same in A.G Rivers state’s case, the enactment of the Rivers State House of Assembly on Value Added Tax is valid.

On this assertion, recourse is made to the provision of Section 47) of the 1999 Constitution (as Amended). It reads:

The House of Assembly of a State shall have the power to make laws for the peace, order, and good government of the State are any part thereof with respect to the following matters, that is to say;

a. any matter not included in the Exclusive Legislative List set out in Part i of the Second Schedule to this Constitution

b. any matter included in the Concurrent Legislative List set out in the first column of Part l of the Second Schedule to this Constitution to the extent prescribed in the second column opposite thereto and

c. any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution.

Hence, Rivers State enacting its Value Added Tax Law does not in any way contravene the aforesaid section of the Constitution. It is trite in law, that statutes or any instruments on taxation are strictly construed. Since there are omissions of value added tax under provisions of Item 59 and item 7, exclusive and concurrent legislative lists respectively both second schedule of the constitution, it will not be imputed that the constitution impliedly suggests the addition of a missing subject. It is a notorious principle of law that the express mention of one thing is to the exclusion of another-expresso unios non exclusio alterus.


  1. I recommend that if the Federal government intends to continue to lay claim over the administration and collection of VAT, it is imperative to revisit the Constitution to make necessary amendments. Otherwise, the enactment of VAT ACT is itself inconsistent with Item 59 of part one, second schedule and item 7 part two of second schedule of the constitution. And just as the court has pronounced the VAT ACT is unconstitutional, null and void.

2. Value Added Tax should be location-specific. Consumption Tax should not be consumed in proxy. Ideally there are economic activities peculiar to each state or region of the country. Businesses will not thrive in some regions the way they will thrive in other regions. It is, therefore, inequity to extend the tax levied on the consumption of the business’s goods or services from a state or region to other regions where the reservations and policies by the latter region towards that business will disallow the business to yield sufficient profit. It is like robbing Peter to pay Paul despite Paul’s disapproval of Peter’s illegitimate money. Thus, if each state levied value added tax on businesses within its territory, and use proceeds to develop the state. It would encourage other business investments and contribute speedy growth of the state and the advancement of the whole country.

A perfect example is that REVENUE derived from Value Added Tax (VAT) on alcoholic beverages made up a significant portion of about N525.74 billion received by Kano State in federal allocations since 2015.Checks by The ICIR shows that Kano is among the top 10 states that receive the highest monthly allocation from the Federal Government, part of which is derived from alcohol tax.

This is despite the state government’s policy of confiscating and destroying alcoholic beverages in line with the stipulations of Sharia law. I strongly believe that this should be a give and take situation, whatever it is you contribute to the economy should be what you receive. In the same vein, states who aren’t oil producing states should not be seen collecting higher taxes than the oil producing states no matter the size of such state.

3. From the preceding recommendation, I believe that the economic progress or regress of Nigeria is solely determined by the performance of each state. Each 36 state of the federation constitute the Nigerian polity. The central government should encourage a healthy competition amongst the state towards economic development of the country. The weaker state can only be supported through interstate relations and bilateral trades. Otherwise, the over-reliant of each state on federal allocations from collected VAT, inter Alia, will only guarantee further regress of the countries economy.

4. The Nigerian courts should not be a tool to prevail political intentions. If the law is crystal clear on a matter, you can either amend that law or adhere to it as it is. The society should not be exploited by using the pronouncement of the court to alter a vivid law under the guise of political motives.


  1. People’s gazette –
  2. The Guardian Newspaper –
  3. Value added tax by the Investopedia team. Facts checked by Amanda Jackson on August 29th 2021, reviewed by Brian Barnier
  4. Value Added Tax (VAT) –