Removing Barriers to Fiscal Federalism, Sub-national Growth

James Emejo, assesses efforts by the federal government through National Economic Council to enhance states’ capacity and readiness to better contribute to the national economy and create impact at the grassroots

One of the high points of the recently concluded 2nd National Economic Council (NEC) Conference with the theme, “Delivering Inclusive Growth and Sustainable Development: The Renewed Hope National Development Plan”, was the need to enhance fiscal governance –ensuring that subnational governments remain competitive and growth-focused, taking advantage of the ongoing fiscal reforms, particularly clearing obstacles to the implementation of the Nigeria Tax Administration Act, 2025 (NTAA 2025) at the state level.

The meeting was a clarion call to government at all levels to prioritise spending on human capital development, enabling infrastructure and improved accountability to strengthen trust amid unprecedented revenue boost resulting from major reform initiatives including subsidy removal by the administration of President Bola Tinubu.

The recommendations at the end of the two-day conference specifically called on states to enact the harmonised tax law to address multiple taxation and complement the new tax reform laws. NEC, while commending the 12 states for passing the harmonised tax law, further urged 13 others that have their laws at the State Assemblies, and the 11 others that are yet to conclude the process – to accelerate the passage of the new law which promises to usher prosperity to the people.The stakeholder also called for an expedited amendment to the constitution to remove certain inconsistencies in the implementation of fiscal federalism to enable effective rollout of the tax regime at the federal and sub-national levels of government.

To further strengthen interstate strategies and collaboration in a federal system, the meeting concluded that states should institutionalise joint planning, shared resources, harmonised policies, and structured information exchange, supported by formal legal and institutional frameworks, as well as regional cooperation platforms to address shared challenges and promote balanced development.

The Council recommended that federal and state governments should establish regular intergovernmental engagements, capacity-building programmes, and conflict-management frameworks to jointly address insecurity, infrastructure gaps, and economic disparities across the federation.

The federal and state governments are also required to foster strong partnerships with the private sector, civil society, and development partners to achieve inclusive and sustainable national development.

Presidential approval

Meanwhile, President Tinubu said the gathering reflected a collective dedication to national progress, and hailed NEC, chaired by Vice President Kashim Shettima, for sustaining a vital platform for policy coordination and strategic dialogue.

The president said the Council remained a cornerstone of fiscal federalism and economic governance in the country.

He stressed that the economic reforms undertaken since the inception of his administration had helped stabilise the economy and restore confidence.

Tinubu said, “I am pleased to address the second edition of the National Economic Council Conference at a critical moment in Nigeria’s development journey. NEC remains a cornerstone of fiscal federalism and economic governance in our country.

“I must say again at this juncture, the monetary policy that we have embarked on since the reforms has yielded positive results and gained recognition around the world.”

He commended the Central Bank of Nigeria (CBN) under the watch of Governor Yemi Cardoso for restoring confidence in the country’s monetary policy.

The President said state and local governments now receive increased, more predictable federal allocations, enhancing their capacity to pay salaries, invest in infrastructure, and deliver social services. He added that infrastructure development across transportation, power, digital connectivity, housing and irrigation has been prioritised.

Tinubu also highlighted expanded social investment and human capital programmes targeting vulnerable households, youth, women and small businesses, alongside grassroots-focused initiatives under the Renewed Hope Agenda.

He said, “The Renewed Hope Ward Development Project further demonstrates our commitment to grassroots inclusion through a bottom-up approach to national development.

“These successes reflect strong collaboration among the federal and state governments, development partners and the private sector.”

In the Renewed Hope National Development Plan 2026–2030, the President explained that it represents the next phase of Nigeria’s national journey, anchored in inclusive, resilient, and environmentally sustainable growth.

He said, “The Plan prioritises economic diversification and productivity; human capital development; subnational competitiveness based on comparative advantage; private sector-led growth; and climate resilience.

“Its success will depend largely on effective implementation at the state and local government levels, making NEC central to aligning national priorities with subnational realities.

The president stated that, “This Conference has reinforced collaboration, shared accountability and a focus on practical solutions and measurable outcomes.

“We must move decisively from declarations to implementation through data-driven decision-making, peer learning among states and innovative financing models.”

He added that while the task before the nation was challenging, the opportunity is historic, and expressed confidence that resolutions from the conference would advance agricultural diversification, including dairy farming, livestock investment and ranching.

On his part, Shettima, called for deeper collaboration among the three tiers of government, describing the council as a decisive forum for shaping Nigeria’s economic direction through debate and consensus.

According to him, “The relevance of this council lies not in the size of its membership but in the quality of ideas it generates.”

The vice president urged members to prioritise poverty reduction, job creation, fiscal sustainability and stronger inter-regional trade, noting that “inclusive growth must translate into tangible improvements in the lives of our citizens.”

Fiscal Milestones

On his part, the convener of the conference and Minister of Budget and Economic Planning, Senator Abubakar Atiku Bagudu, commended the President’s sustained engagement with the council as symbolic of respect for Nigeria’s federal structure, noting that recent reforms had strengthened fiscal conditions nationwide and boosted international confidence in the economy.

Bagudu, whose ministry also serves as the Secretariat of NEC, specifically hailed Tinubu for strengthening the nation’s federal system, noting that his economic reforms have increased funds for the subnational governments to provide more amenities for their constituents.

He highlighted the president’s support for the NEC, which includes the 36 state governors and the Federal Capital Territory (FCT). Bagudu said the president had fostered greater cooperation among the federal, state, and local governments, referencing his passionate interest in the council, which is the economic advisory body for the president.

The minister added that the president had demonstrated his abiding faith in cooperative federalism, noting that his bipartisan approach to state affairs has softened the divisions that cause friction between federal and subnational governments.

He said, “In the NEC, state governors have been given opportunities to contribute to most of the reform measures, and commendably, most of them — regardless of party — believe the president is pursuing what our country needs and fully support the federal government.

“In fact, some have said they can’t justify being in another party.” Highlighting the concrete gains of the economic reforms, Bagudu stated that the fiscal condition of states and local governments has improved, explaining that the federal government bore the burden of the reforms.

The minister drew the audience’s attention to the president’s prioritisation of the interests of lower levels of government, stating it demonstrated his belief that true federalism lies in recognising the potential of the lowest level of government, which is closest to the people, and in supporting the sustainable generation of value within it.

Bagudu said, “Just last week, a visiting World Bank delegation led by the Managing Director, Operations, told the world that Nigeria’s reforms have become a global benchmark. In fact, an IMF report covering the same period also listed Nigeria among the 10 leading countries contributing most to global economic growth.

“This is in addition to many other statements by leaders of various nations, international organisations, and private sector actors.”

Monetary Policy Successes

However, Cardoso, who is a member of NEC, demonstrated how the apex bank’s reforms, introduced on his assumption of office, have established economic stability. The central bank governor said for a long time, the economy had not achieved the remarkable performances as currently witnessed, stating that a $3.42 billion balance of payments surplus recorded in the third quarter of 2025 represented a significant improvement while inflation has moderated significantly to 15.15 per cent.

He said the banking sector remained sound while external reserves have grown to $49 billion as of February 5, 2026.

Among other things, Cardoso said, “This is a very important statistic. When we took office, net reserves were about $3 billion. By the end of last year, net reserves had increased significantly into the $30 billion range, and as of February 5, 2026, they stand at $49 billion.

“We are now net buyers in the foreign exchange market. By this, I mean that while we allow the market to generally find its own level, the Central Bank also intervenes from time to time to purchase foreign exchange. “The premium between the official and parallel market rates has collapsed to under 2 per cent. You can clap for me. You no longer need foreign exchange to travel—you can use your naira card and pay for whatever you need abroad.

“The naira is now more competitive, and people are no longer afraid to hold it. In the past, even in neighbouring West African countries, no one wanted to accept naira. That has changed.”

Cardoso added that there is now market predictability that allows for opportunity to plan.

He said the CBN under his watch will do whatever is necessary to protect the value of the naira, adding that ongoing banking sector recapitalisation will support financing for the $1 trillion economy.

Cardoso said, “You no longer need to search frantically for foreign exchange or build excessive FX buffers. Those holding unnecessary foreign exchange reserves are, frankly, losing money every day. The banking sector remains resilient, and investor confidence is returning.”

Among other recommendations, the conference also demanded that the macroeconomic reforms so far implemented by the government, including the Renewed Hope Infrastructural Fund, collaboration and cooperation on security, and the mandate of the NEC Ad-Hoc Committee against crude oil theft should be sustained and expanded.

It further agreed that the implementation of the Renewed Hope Ward Development Programme should remain a key programme of the federation. The council urged all tiers of government to move from haphazard growth financing to catalyzing growth by strengthening cooperative federalism, translating macroeconomic reforms into real impact for citizens and driving Nigeria towards a $1 trillion economy.

Governments at all levels are also required to identify and prioritise bankable, growth-generating projects across strategic sectors, including: agriculture, manufacturing, energy, transport and logistics, and digital infrastructure among others.

NEC further called on the federal government to ensure optimal investment in the oil and gas sector, while ensuring effective diversification in domestic refining and non-oil sectors, to enhance energy security, reduce import dependence, strengthen value chains, and create employment.

The council identified the need to strengthen fiscal, monetary and trade policy coordination for effective macroeconomic stability. It stated that the federal government should ensure an efficient public-private partnership framework to drive private sector capital and mitigate investment risks to attract development.

In addition, governments at all levels should endeavour to key into the Renewed Hope Agenda to create and develop skills in technology and artificial intelligence to remain competitive in the global economy and enable Nigeria to realise a $ 1 trillion economy.