Impact of President Tinubu’s Tax Reforms on Northern Nigeria and Revenue Enhancement Strategies
By Yasir Shehu Adam
President Bola Ahmed Tinubu’s tax reform, while difficult, offers northern states a chance to reimagine their economic approaches. Through fair taxation, better governance, and stronger community partnerships, the North can gradually reduce its dependence on federal allocations.
Challenges of the Tax Reform in Northern Nigeria
The recent tax reform introduced by President Tinubu’s administration has raised significant concerns, particularly in northern Nigeria. This reform shifts revenue allocation from a focus on population size or equal distribution to a system based on each state’s tax contributions. While this approach rewards productivity, it places northern states at a disadvantage compared to southern states like Lagos and Rivers, which already excel in tax generation.
For decades, northern states have depended heavily on federal allocations to fund essential services such as education, healthcare, and infrastructure. The reform threatens to reduce their share of federal revenue, making it harder to sustain these critical services. The likely consequences? Increased poverty and a growing development gap between the North and the South.
The Informal Market Challenge
A significant portion of the northern economy revolves around informal markets, including livestock trading, small-scale farming, and food sales. These markets primarily operate outside formal tax structures, relying on cash transactions and traditional practices. Introducing taxes in this sector may face resistance, as many traders are unaccustomed to formal taxation and may not immediately perceive its benefits. If poorly implemented, the reform risks driving small-scale traders out of business, further aggravating the region’s economic challenges.
Adapting and Thriving Under the Reform
To turn this challenge into an opportunity, northern leaders must adopt strategic measures to boost tax revenue while safeguarding livelihoods. Below are actionable strategies:
- Organizing Markets
Governors should focus on formalizing markets by establishing well-structured trading hubs. These hubs should offer secure and organized environments where traders can operate. Charging small, reasonable fees in exchange for improved facilities and services can encourage compliance without overburdening traders. - Collaborating with Community Leaders
Traditional and market leaders play a crucial role in fostering trust between governments and local communities. Their involvement can help traders feel more comfortable with the taxation process and contribute willingly. - Showcasing Tax Benefits
Collecting taxes is not enough; people need to see the impact. Revenue should be invested in visible projects, such as repairing roads, providing clean water, upgrading market infrastructure, and enhancing security. When traders see these tangible improvements, they are more likely to support the tax system. - Educating and Engaging Citizens
Public awareness campaigns are essential. Governments should explain the importance of taxes in simple terms that resonate with ordinary citizens. Highlighting how taxes directly benefit communities and businesses can help change perceptions and encourage compliance.
A Path Forward
President Tinubu’s tax reform, though demanding, creates an opportunity for northern states to rethink their economic strategies. By adopting fair taxation, strengthening governance, and building community trust, the North can gradually reduce its dependence on federal allocations.
While the journey will be challenging, effective leadership can help northern states rise to the occasion. By transforming these reforms into opportunities for economic growth and development, the region can move toward becoming more self-reliant and prosperous.
Yasir Shehu Adam (Dan Liman) is a young journalist and writer from Bauchi.