Nigeria’s Devt Rests on Deeper Fiscal Federalism, Stronger Local Governance, Says Senate Committee

Michael Olugbode in Abuja

The Senate Committee on State and Local Government Administration has called on stakeholders to fully embrace the transformative provisions of the Nigerian Tax Act 2025, insisting that the development of Nigeria is hinged on deeper fiscal federalism and stronger grassroots governance.

The call was made on Wednesday in Abuja at the summit themed “The Nigerian Tax Act 2025: Implications for Fiscal Federalism, Local Government Autonomy, and Internally Generated Revenue of Local Governments in Nigeria,” organized by the Senate Committee on State and Local Government Administration in collaboration with Global Gold Consults Ltd.

In his remarks, the Senate President, represented by Senator Bonus Dauda Yaroe, noted that: “We gather at a moment of national consequence to examine a reform that seeks nothing less than to reshape the fiscal foundation of our republic. The Nigerian Tax Act 2025 is not a mere parchment of processes; it is a bold proclamation that we shall no longer remain captive to obsolete systems, narrow revenue channels, and crippling dependence on federal allocations. It offers Nigeria a fresh pathway to fiscal responsibility, equity, and efficiency.”

He emphasized that Nigeria cannot advance without empowering local governments, describing them as the first custodians of public service and essential pillars of grassroots governance.

The Senate President, in a speech delivered by Senator Yaroe, said: “At the center of this movement are our local governments, the sentinels of grassroots governance, the first custodians of public service. A nation cannot stride into greatness on feeble local institutions. If Nigeria will rise, and she must rise, then her wards, her villages, and her communities must rise with her, for it is at the grassroots that the true test of governance is felt and measured.”

He further stressed the efforts of the 10th Senate in crafting a clearer and fairer tax act, plugging leakages, demanding transparency, and building stronger local governance structures.

Speaking on the efforts of the 10th Senate, he stated that: “Under the 10th Senate, we did not stand idle. We laboured with diligence, consulted widely, and forged broad consensus to craft a tax act clearer in purpose and fairer in burden. We intensified oversight, plugged leakages, and demanded transparency. And importantly, we supported measures designed to equip our local governments with stronger tools to deliver services with honor and competence. These are actions, not aspirations, and we shall press forward with unwavering resolve.”

He stressed that fiscal federalism is not just a catchphrase but a binding contract requiring integrity, cooperation, and vigilance. The Senate pledged to protect and support the implementation of the Tax Act 2025.

The Senate President, through added that: “Let no one be deceived ,fiscal federalism is not a slogan; it is a contract. It demands integrity from every tier of government. For our part, the Senate pledges to fortify this contract, strengthen intergovernmental cooperation, empower our communities, and guard the implementation of the Nigerian Tax Act 2025 with steadfast vigilance. This is our covenant with the Nigerian people, a promise to build a nation where local governments become springboards of development rather than outposts of stagnation.”

The address ended with a charge to grassroots leaders to embrace innovation, responsibility, and long-term thinking that will uplift communities and shape future prosperity.

“As we embark on this new era, I lift a prayer for our leaders at the grassroots, that wisdom may guide their decisions and courage strengthen their hearts. May their stewardship plant seeds of prosperity that generations yet unborn will reap. May our local governments cease to be outposts of stagnation and instead become springboards of development centers of light, not shadows of paralysis. This is the destiny we seek to build together.”

MD, CEO of Global Gold Consults and the consultant to the Senate Committee on State and Local Government Administration, Engr. Kayode Adegbayo, said the annual Nigerian Local Government Development Summit has become a major platform for improving grassroots administration across the country. He explained that the summit brings together key local government officials to address pressing issues affecting development at the grassroots.

He said: “The Nigerian Local Government Development Summit is an annual convergence of local government secretaries across the country where we discuss topical issues affecting grassroots development. Over the years, the summit has yielded significant benefits, because the local government remains the most critical tier of government due to its closeness to the people.”

Adegbayo emphasized that restoring productivity in local governments depends heavily on full financial autonomy. He noted that the Supreme Court’s recent pronouncement on financial autonomy is already improving funding in some states, though full implementation is still pending.

He further noted that: “There is very little local governments can do without adequate funding. The Supreme Court pronouncement granting financial autonomy has already led some states to release 50%, 70%, even 100% of funds due to local governments, while others are still at zero. Full implementation will completely revive the productive capacity of local governments and transform grassroots development.”

He explained that many of Nigeria’s insecurity challenges and high levels of rural–urban migration stem from the neglect of grassroots communities. He stressed that empowered and well-funded local governments are better positioned to address insecurity before it escalates.

He stated: “If our grassroots areas were effectively developed, most of the insecurity we face today would have been nipped at the local level. Once financial autonomy becomes fully operational, our youths will no longer flee to the cities. They will stay in their communities, become productive, and contribute meaningfully to society.”

Adegbayo pointed out that while some states have complied with the autonomy directive, others continue to hold back local government funds. He said the federal government must enforce its own policy to ensure uniform implementation across all states.

He explained that: “The implementation of financial autonomy is not automatic; it requires strong policy follow-through. Some states have done very well by fully releasing funds, while others are still holding them back. It is now up to the federal government to devise effective mechanisms to ensure compliance so that the Supreme Court pronouncement becomes a nationwide reality.”

A co-consultant to the organizers of the programme, Professor Olatunji Alabi, stressed that true autonomy for local governments must go beyond constitutional recognition and include full financial independence. He noted that while the administration is committed to autonomy, its implementation remains incomplete.

He said that: “Autonomy has two implications ,the state of autonomy and fiscal autonomy. The constitution already guarantees that there shall be federal, state, and local governments, but the real teeth is the financial autonomy. The problem is that it has not been fully activated.”

He further explained:” You cannot develop a structure that cannot hold the superstructure. We must build the capacity of local governments so that the autonomy can be supported by fiscal autonomy.”

He highlighted that the summit focuses on how the new tax reform will affect fiscal federalism, internal revenue generation, and the ongoing push for local government autonomy.

He noted: “The fiscal Nigerian Tax Reform Act speaks to three key areas, fiscal federalism, the critical issue of IGR, and local government autonomy. Revenue generation is germane, and this administration is looking toward a reform that will take effect from January.”

Alabi dismissed claims that local governments lack the competence to manage autonomy, insisting these arguments are unfounded. He added that corruption exists everywhere, not only at the grassroots.

He said: “The argument in the past has been that they don’t have the capacity. Who says? Some say they are corrupt. Who says? Corruption is everywhere. Importantly, it is possible for local governments to run effectively if supported.”
“With the Senate committee doing wonderfully well, I think we will get there.”

He explained that some local governments resist autonomy because of political dependency on state governments. He warned that remaining tied to governors weakens their ability to develop effectively.

“Some local governments are refusing to be autonomous because it is political. A local government that is against autonomy may lack capacity and simply seeks an endorsement from the governor.”
“Local government is not an appendage of the state. Autonomy has come to stay. It is in their best interest because autonomy gives them more resources and more power to act,” he stated .

He emphasized that the success of local government autonomy depends on collaboration among local councils, state authorities, and relevant agencies. He highlighted that past summits have already contributed to progress in this area.

He said: “If there is a synergy between the local governments themselves, the state and local government affairs offices, and the executive, they are to work. There is no two-way about it. We have been at this trouble since 2003, and it was summits like this that birthed the local government autonomy in 2018.”

He further explained: “Cooperation and coordination across all tiers are essential. When local governments and states work together, autonomy can be fully realized and grassroots development strengthened.”

Professor of Capital Market and member of the Presidential Fiscal and Tax Reforms Committee, Uche Uwaleke, emphasized that one of the major objectives of the Nigerian Tax Act 2025 is to simplify the local tax system. He said that the current multiplicity of taxes at the local level has constrained businesses and stifled economic activity.

He noted: “Today, people in the local communities are complaining about multiple levies, and that is constraining businesses. What will be implemented next year will be a solution in which, at the local government level and at the state level, you’re not going to have more than nine taxes. All of them will be streamlined into nine taxes, including personal income tax, property tax, stamp duties, haulage fees, and other charges.”

Uwaleke highlighted that simplification of taxes will make compliance easier and also help integrate the informal sector into the formal economy.

He further said: “By simplifying the tax system and harmonizing the taxes, states and local governments will have more revenue. You’re also encouraging voluntary compliance and, one way or the other, helping to formalize the informal sector. The presumptive tax regime will be key in this effort.”

He explained that the tax reforms, alongside changes to VAT and revenue sharing, will enhance the fiscal capacity of sub-national governments.

He noted: “In the case of VAT, the federal government is relinquishing 5% of its share to states and local governments. Alongside adjustments to horizontal allocation and derivation components, these changes will mean more money for states and local governments, enabling them to invest more in local development.”

Uwaleke emphasized that successful implementation of the tax reforms requires states and local governments to align their laws with the national framework.

He said: “This summit is happening so that states and local governments can key in and domesticate the law in their various states. We expect the state assemblies to pass laws that will ensure this harmonization is done as quickly as possible, enabling smooth implementation and revenue generation.”

“Remember too, in the case of VAT, the federal government is relinquishing 5% of its share to states and local governments. Currently, VAT is shared 50% to federal government, 30% to states, and then 5% to states and 15% to federal government. Now the federal government will leave 5% to sub-nationals. And even the horizontal allocation, you also have the derivation components now increased from 20% to 30%. So all of this will mean more money for states and local governments,” he said.