INTRODUCTION
Nigeria’s 2025 tax reform and its renewed push for local government autonomy represent one of the most consequential attempts to recalibrate fiscal governance since the 1999 Constitution came into force. The reform is framed around efficiency, coordination, and the mitigation of multiple taxes through harmonization across the federation. Central to this effort is a proposal by the Joint Revenue Board (JRB) for a States’ Harmonized Taxes and Levies (Approved List for Collection) Bill, 2025 (the Harmonization Bill or, the Bill).
As at date, versions of this Bill have reportedly been enacted in at least 10 of Nigeria’s 36 States; they are: Ekiti, Zamfara, Anambra, Plateau, Kogi, Bayelsa, Jigawa, Gombe, Kwara, and Nasarawa States, while legislative processes are ongoing in others.
While on its face, the Harmonization Bill promises order, the devil will be in the detail of its constitutional correctness. The question is not whether order and or harmonization is desirable, but whether State Governments can constitutionally set rates and or determine the process for revenue collection by Local Governments. This brief explores the constitutional limits of State Government control of revenue generation at the Local Government.
FISCAL FUNCTION AND AUTONOMY OF LOCAL GOVERNMENTS WITHIN THE CONSTITUTIONAL FRAMEWORK
The Local Government system as the third tier of government is a creation of the Nigeria Constitution with clearly set out powers and functions. Significantly, it is a service-focused government, hence much of its revenue arises from service-like activities. Section 7(1) of the 1999 Constitution guarantees a system of democratically elected Local Government Councils with the Fourth Schedule assigning core functions, which among others include: the collection of rates, regulation of markets, motor parks and slaughter slabs, and participation in economic planning. These functions are designed to sustain grassroots governance and fiscal independence.
EXAMINING THE HARMONIZATION BILL
Beyond its stated objectives of coordination and efficiency, the Harmonization Bill reshapes how sub-national revenues are defined, administered, and controlled. The Bill consolidates numerous States and Local Government imposts into nine revenue heads, of which Harmonized Levy and User Charge are assigned to the Local Governments, howbeit within a rate-setting framework to be controlled by the State Governments. The Harmonized Levy and User Charge categories aggregate traditional local levies such as market and motor park fees, slaughter slab charges, signage and advertisement fees, domestic animal fees, and daily tickets, reflecting their constitutional allocation under the Fourth Schedule.
The Bill repeals legacy Local Government revenue heads, including entertainment, and merriment levies. This repeal of long-standing Local Government levies without constitutional amendment, amounts to a legislative reallocation of Fourth Schedule fiscal powers, a competence that States do not possess.
The Bill distinguishes between revenue entitlement and control. While Local Governments retain formal entitlement, the Bill centralises rate-setting. Arguably and contrary to the limited powers in Paragraph 9, of Part II of the Second Schedule to the Constitution, the Harmonized Levy rates are determined by the State Government on the advise of the Federal JRB. User Charges and Daily Tickets are determined by the State-controlled Joint Revenue Committee (JRC). Only the State Internal Revenue Services (SIRS) and Local Government Revenue Committees (LGRCs) may assess and collect revenue, with private agents excluded. Significantly, Local Governments may delegate collection of their assigned Harmonized Levy and User Charge to the SIRS.
The power to fix rates is not a procedural incident of taxation; it is the core of taxing authority itself. A Local Government that cannot determine rates over its constitutionally assigned revenue heads is, arguably, no longer fiscally autonomous, regardless of who eventually receives the proceeds. While the Bill allows LGRCs to collect revenue, it contemplates delegation to the SIRS. In practical terms, especially for financially weaker councils, there is the risk of this development becoming functional substitution and not harmonization.
The Bill seeks to reform administration but also creates a substantive shift in fiscal control at the Local Governments level. By determining the rates and facilitating the collection of Local Government revenues through State Government controlled channels, the framework risks reducing Local Governments to passive beneficiaries within a State Government directed revenue system. This structure, in our view, does some violence to Constitutional intent, save and unless the Constitution is amended.
WHERE IS NIGERIA’S TAXES AND LEVIES ACT?
The Taxes and Levies (Approved List for Collection) Act, Cap. T2, Laws of the Federation 2004 (Taxes Act), is (or was), other than the Constitution, Nigeria’s codification of fiscal federalism. Thus, its status, given the National Assembly sanctioned gazette of the Nigeria Tax Act (NTA), gives room for concern. The Taxes Act is not repealed or consequentially amended by Sections 195 and 196 of the NTA. Where the Taxes Act remains, it correctly stands in the way of the Harmonization Bill. Until validly repealed, the Taxes Act continues to reinforce the constitutional allocation of taxing powers and undermines the contradicting Harmonization Bill. Legislative ambiguity on repeal does more than confuse administrators; it exposes the fragility of reforms that attempt to outrun constitutional authority. Where two regimes coexist, one constitutionally aligned, the other constitutionally suspect, the supremacy clause in Section 1(3) of the Constitution must prevail.
CONSTITUTIONAL LIMITS AND JUDICIAL GUIDANCE
The Harmonization Bill is designed as a template for sub-national tax reform. While framed as an administrative reform, its constitutional validity is debatable. It prescribes uniform rates for Fourth Schedule levies or centralized Local Government revenue collection under State Government controlled agencies. This is arguably a constitutional overreach, reducing Local Governments to fiscal departments of State Governments.
Nigerian courts have consistently held that taxing powers must be expressly conferred and exercised by the appropriate tier. In Knight Frank & Rutley (Nig.) Ltd v. Attorney-General of Kano State (1998) LPELR-1694 (SC), the Supreme Court affirmed that Local Governments have exclusive authority over rates on private properties. State Government attempts to intervene, even incidentally, was declared ultra vires. This reinforces that revenue rates fixing at the Local Government level is not an incidental administrative power, but a substantive taxing power reserved for Local Governments unless otherwise expressly stated.
The constitutional line is clear: States may not fix rates, impose levies, or appropriate revenue linked to Fourth Schedule functions. Any State action extending to rate-setting or revenue substitution arguably violates Sections 7 and 1(3) of the Constitution.
Although discussions around constitutional amendments are ongoing, no amendment currently in force authorizes States to appropriate or control Local Government taxing powers. Until such amendment occurs, the Harmonization Bill is arguably constitutionally infirm, regardless of policy merit. A Local Government deprived of fiscal discretion cannot meaningfully exercise political or administrative independence.
CONCLUSION
Nigeria’s tax reform agenda is both necessary and timely. However, reform must operate within constitutional limits, not seek to redraw them through non-constitutional legislation. Efficiency cannot justify erosion, and coordination cannot excuse domination. Local Government autonomy is not an administrative privilege; it is a constitutional command reinforced by statute and judicial authority. The landmark decision of the Supreme Court in Attorney-General of the Federation v. Attorney-General of Abia State & 35 Ors (2024) LPELR-62576 (SC) underscores the relevance of grassroots autonomy, as the aim is to ensure that local governments can survive and administer their affairs without total fiscal dependence on the States or Federal Governments.
Harmonization frameworks that strip Local Governments of rate-setting authority, repeal their revenue heads, or subordinate their collections to State Government control violates both the spirit and letter of the Constitution. The constitutional imperative is clear: reform must harmonize with constitutionally-approved fiscal federalism. Any other approach risks entrenching a system that may be efficient in presentation, but unconstitutional in substance.
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