VAT: This jamboree has to end

With Nigeria’s scariest fault-line shaken by the brewing legal war over jurisdictional responsibility for collecting value-added tax (VAT), the reality of the long-avoided restructuring may finally be upon us. The debris already in the spotlight is the overlooked question of fiscal federalism, and we must thank Governor Nyesom Wike for the gathering storm.

Whatever the eventual outcome of the court case between Rivers State and the federal government, the wave has reached the slumbering policymakers in the North in a way it never did, and some of their reactions have been predictably embarrassing. In Gombe State, the commissioner for finance, Magaji Muhammad, acknowledged that the “VAT issue will have adverse effects not only on Gombe State but almost all the states of the federation,” and then begged the rebellious states—led by Rivers and Lagos for now—to “put sentiments behind and work towards a federation that is one, by being our brothers’ keepers.”

Kogi state’s reaction is rather a thinly-veiled threat. The commissioner for information and communication, Kingsley Fanwo, having noted that the state is geographically advantaged on the basis of sharing borders with ten states, bragged that “When you look at our advantages, we should even be at the forefront of fighting for VAT to be completely retained in the state.” Then, like his Gombe State counterpart, he said, “We are not created equally, and God that created us did not give us equal potentials, and we have to support one another.”

The South has had enough of spoon-feeding the North and the polarization that undercuts national politics in the past few years was powered by this disdain. If northern policymakers were paying attention to the countenance of their southern colleagues, and the indignity of being serially singled out as the stumbling block of Nigeria’s progress even by southern states that aren’t doing well, a roadmap for escaping this parasitism stereotype would’ve been long designed.

Despite the bad press and blame game, many northern states fare better than the very southern states quick to ridicule them and have demonstrated more capability in generating internal revenue. In its latest Annual State Viability Index (ASVI), the Economic Confidential developed the viability index of states based on each state’s Internally Generated Revenue (IGR) as a percentage of its Federal Accounts Allocation (FAA) for the year and the results were interesting.

It’s unsurprising that only two northern states are among the top 10 most viable states, with Kaduna generating N50 billion compared to FAA of N124 billion representing 40 percent, and Kwara generating N19 billion compared to FAA of N77 billion representing 25.4 percent. What’s shocking is that even terrorist-ravaged states like Zamfara generated more internal revenues than most southern states. Zamfara State ranks 12th, ahead of Ebonyi 16, Abia 20, Imo 21 and, unbelievably, oil-rich Bayelsa 36!

The viability index is a testament to the North’s refusal to take advantage of its demographic and topographic size in generating revenues. Malam Nasir El-Rufai’s example in Kaduna state is a shocking reminder of such possibilities. He reformed the state’s tax structure, blocked leakages, created more revenue streams, and enforced compliance, and the outcome is not a miracle.

In 2018, Kano state featured as the sixth on the viability index ahead of Kaduna state, which was ninth. In this 2020 index, Kaduna takes the fourth position and Kano is longer among the top 10. Kano state ranks 17th on the list, and it’s a shame that the much-glorified “centre of commerce” is less viable than even Zamfara, a state under grisp of terrorists.

Kano State’s descent is the metaphor of the North’s place in Nigeria. Despite its economic advantages, it lacks ambition. Its large population, which ought to have been a goldmine, has become a prime setback. The region’s failure to educate and train this population and prepare them for a sociologically demanding time has prevented it from building socially responsible and taxable residents. Today, this price of indifference is being paid as the almajirai, illiteracy, drug epidemic, Boko Haram, kidnapping, among other vices, overwhelm its policymakers.

The VAT debate is the catalyst the North needs to break away from this parasitic attachment to the South’s resources. The endless flow of “freebies” has only proven to be a curse. Instead of competing to make ends meet, the region has “invested” the unceasing fat allocations from Abuja in sectors that only yield liabilities. The bloated civil service structures across northern states, which consume the bulk of their resources, would’ve since been resolved through pragmatic right-sizing and creation and diversification of revenue streams if the resources expended were being settled by their internally generated revenues.

The North is capable of functioning independently. The example of Kaduna overtaking Kano in that ranking of viable states is a theory easy to analyze. While Kaduna was enforcing tax compliance, sacking redundant workers, and hiking tuition fees to raise revenues, Kano was busy balkanizing centuries-old emirate and, thus, multiplying the costs of managing them. If Ganduje were tasked with generating the fund intended to run the new emirates internally, he would’ve thought twice before such a self-serving decision. And this is why we need to be unplugged from the South’s seeming largesse.

Before oil rents distracted northern political elites, the Native Authority system had far-reaching tax-collecting structures and a flourishing agrarian economy servicing the needs of the region. What the North achieved in that system is unfortunately still the high-point of the region today. Without oil rents, they built Ahmadu Bello University, which is still the largest in sub-Saharan Africa and Ahmadu Bello Stadium, one of the best sports facilities then. They also set up New Nigerian Development Company, the largest black-owned conglomerate in Sub-Saharan Africa then.

The North of that agrarian era was an industrial hub, as the policymakers built new cities, textile factories, hospitals and distinguished institutions, one of which was the prestigious Kaduna Polytechnic, which was also the largest of its kind in Africa south of the Sahara then. Their overly spoon-fed successors, unfortunately, lack this ambition and the reason is this jamboree bankrolled by the South which, evidently, is not sustainable.