Table of Contents

THE ADMINISTRATION OF THE MANDATES OF THE THREE TIERS OF GOVERNMENT IN NIGERIA

Nigeria operates a federal system of government with power shared among three tiers: the Federal Government, the State Governments, and the Local Governments. The 1999 Constitution of the Federal Republic of Nigeria establishes this structure and delineates the legislative and fiscal powers of each tier . The administration of these mandates—particularly in the area of taxation and revenue generation—has been a subject of ongoing constitutional debate, legal challenges, and reform efforts.

The passage of the 2025 Tax Reform Acts marked a significant milestone in Nigeria’s efforts to modernise its tax system, strengthen revenue administration, and enhance fiscal coordination across all tiers of government . The reforms replaced the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service (NRS), transformed the Joint Tax Board (JTB) into the Joint Revenue Board (JRB), and introduced new frameworks for tax collection, dispute resolution, and intergovernmental coordination .

This comprehensive guide examines the administration of the mandates of Nigeria’s three tiers of government, covering the constitutional framework, legislative powers, tax collection responsibilities, revenue sharing formulas, and the ongoing debates about fiscal federalism.

The Pain Points: Why the Administration of Government Mandates Matters

The Fragmented Revenue System

Despite modest gains in Internally Generated Revenue (IGR), Nigeria’s tax system has been weighed down by overlapping taxes, inconsistent interpretations of tax laws, and poor data coordination . Data from the National Bureau of Statistics show that Nigeria’s 36 states and the FCT generated N3.63 trillion in IGR in 2024, with Lagos alone accounting for over one-third. Between 2021 and 2024, cumulative state-level IGR totalled N10.88 trillion, highlighting both revenue potential and persistent structural gaps .

The Federalism vs. Unitarism Debate

The 2025 tax reforms have reignited the debate over Nigeria’s fiscal structure. Some legal scholars and tax experts argue that the reforms represent a drift away from federalism toward a unitary system . Professor Sam Erugo (SAN) argued that the Nigeria Tax Administration Act is “guilty of a unitary tax system” and that “Nigeria is moving away further and farther from a federal system of government” .

The Local Government Autonomy Question

The relationship between state and local governments in tax administration has been a persistent source of tension. While the Constitution recognises local governments as the third tier of government, their fiscal autonomy has often been undermined by state governments . The 2025 reforms attempt to address this by mandating the establishment of Local Government Revenue Committees and harmonising taxes and levies .

The Constitutional Validity of the Taxes and Levies Act

The Taxes and Levies (Approved List for Collection) Act has been subject to numerous legal challenges. The Act restricts the taxes collectable by each tier to specific lists, limiting the broad constitutional powers of states and local governments . Courts have consistently held that any tax imposed outside the schedule to the Act is ultra vires the powers of the imposing authority .

The Constitutional Framework

The Federal Structure

Nigeria’s federal system is established by the 1999 Constitution, which tiers governmental power among the Federal Government, State Governments, and Local Governments. The legislative power of the government is also tiered among these tiers .

Key Constitutional Principles:

Exclusive Legislative List: The National Assembly has exclusive legislative powers over matters in the exclusive legislative list, including customs duties, excise duties, export duties, stamp duties, and taxation of incomes, profits, and capital gains .
Concurrent Legislative List: Both the National Assembly and State Houses of Assembly can legislate on matters in the concurrent legislative list, subject to the inconsistency rule. States can collect and administer capital gains tax of individuals, income tax of individuals (PIT), and stamp duties .
Residual List: Matters not in the exclusive or concurrent lists are reserved for the States’ Houses of Assembly. Both states and local governments have legislative competence to impose, administer, and collect taxes on residual matters .

Legislative Powers and Tax Administration

Before a tax can be imposed on a taxpayer, there must be a statute conferring such authority with that power . The Constitution grants:

Federal Government: Power to legislate on “taxation of income, profits, and capital gains” .
State Governments: Power to collect taxes on “capital gains, incomes or profits of persons as against companies” .
Local Governments: Power to impose and collect taxes on residual matters within their localities .

Tax Collection Responsibilities by Tier

The Taxes and Levies (Approved List for Collection) Act

The Taxes and Levies Act clarifies the revenue-collection power of the three tiers of government by classifying the taxes and levies collectable by each . Only the appropriate tax authorities designated for each tier can assess and collect taxes and levies reserved for them .

Federal Government Taxes (Part I of the Schedule)

The Federal Government is responsible for collecting :

Companies Income Tax (CIT)
Withholding Tax on companies, residents of the FCT, and non-resident individuals
Petroleum Profits Tax (PPT)
Value Added Tax (VAT)
Education Tax (now consolidated into the Development Levy)
Capital Gains Tax (CGT) for companies
Stamp Duties on bodies corporate and residents
Personal income of members of the Armed Forces, Nigeria Police Force, residents of the FCT, and staff of the Ministry of Foreign Affairs
National Information Technology Development Levy (since 2015)

State Government Taxes (Part II of the Schedule)

State Governments are responsible for collecting :

Personal Income Tax (PIT) payable through Pay-As-You-Earn (PAYE) or direct assessment
Withholding Tax for individuals
Capital Gains Tax for individuals
Stamp Duties on instruments executed by individuals
Pools betting and lotteries, gaming and casino taxes
Road taxes
Business registration fees
Development levy for individuals
Naming of street registration fees
Right of occupancy fees
Market taxes and levies
Land use charge
Hotel, restaurant, or event centre consumption tax
Entertainment tax
Environmental (ecological) fee or levy
Mining and quarrying fee
Animal sales tax
Slaughter or abattoir fees
Infrastructure maintenance charge
Fire service charge
Property tax
Economic development levy
Social service contribution levy
Signages and mobile advertisement

Local Government Taxes (Part III of the Schedule)

Local Governments are responsible for collecting :

Shop and kiosk rates
Tenement rates
On and off liquor licence fees
Slaughter slab fees
Marriage, birth and death registration fees
Naming of street registration fee outside the state capital
Right of occupancy fee on lands in rural areas
Market taxes and levies (excluding markets where state finance is involved)
Motor park levies
Domestic animal licence fees
Bicycle and other mechanically propelled trucks
Cattle tax payable by cattle farmers only
Merriment and road closure levies
Radio and television licence fees (excluding transmitter)
Vehicle radio licence fees
Wrong parking charges
Public convenience, sewage and refuse disposal fees
Customary burial ground permit fees
Religious places establishment permit fees
Signboard and advertisement permit fees
Wharf landing charge

The 2025 Tax Reform Acts and Intergovernmental Coordination

Nigeria Revenue Service (NRS)

The Nigeria Revenue Service (Establishment) Act replaced the FIRS with the NRS, a strengthened authority with expanded powers . The NRS is now responsible for the assessment, collection, recovery, accounting, and remittance of both tax and non-tax revenues, with broader enforcement tools and a clearer mandate for collaboration with states and local governments .

Key Changes:

Expanded Mandate: The NRS may also, upon request, assist state or local governments in collecting taxes, though such assistance may attract a service fee .
Digital Transformation: Deeper integration of taxpayer data, unified registration systems, and harmonised digital platforms that reduce duplication across the three tiers of government .
Tax ID Project: A unified national taxpayer database using foundational identifiers such as the National Identification Number (NIN) and company registration numbers .

Joint Revenue Board (JRB)

The Joint Revenue Board (Establishment) Act replaced the JTB with the JRB, now backed by explicit statutory powers . The JRB holds a wider mandate :

Driving harmonisation of tax administration across the federation
Supervising data standards
Helping resolve inter-governmental revenue disputes
Promoting harmonisation of taxes, levies, rates, charges and other payments
Ensuring uniformity in revenue administration across the three tiers

Key Priorities:

Harmonised Taxes and Levies Law: The JRB has presented a draft copy of the new Taxes and Levies Bill to governors, which has harmonised taxes and levies at the state and local government levels .
Uniformity: The model Law outlaws and criminalises cash collection and the mounting of roadblocks for the collection of taxes, levies and other statutory charges .

Nigeria Tax Administration Act (NTAA) 2025

The NTAA provides the administrative framework for the assessment, collection, and accounting for revenues accruing to the Federal, State, and Local Governments, clearly defining the powers and responsibilities of relevant tax authorities .

Key Provisions:

Uniform Procedure: Introduces a uniform procedure for administering taxes across all levels of government .
Digital Mandate: Mandates digital tax filing, compulsory taxpayer identification number registration, and imposes monthly returns from tax authorities .
VAT Sharing Formula: Allocates 10% to the Federal Government, 55% to states (up from 50%), and 35% to local governments .
Sub-Allocation: Among states and local governments, VAT revenue is further distributed based on equality (50%), population (20%), and consumption (30%) .
Place of Consumption: “Place of consumption” is the determining factor, not the place of derivation or filing .

Revenue Sharing and Fiscal Federalism

VAT Allocation Under the Reforms

The 2025 reforms significantly altered the VAT sharing formula :

Tier	Old Share	New Share
Federal Government	15%	10%
State Governments	50%	55%
Local Governments	30%	35%

Sub-Allocation Among States and Local Governments:

Allocation Basis	Percentage
Equality	50%
Population	20%
Consumption	30%

This reform aims to correct the historical imbalance where states like Lagos, Rivers, and the FCT receive disproportionately high VAT allocations due to the presence of large corporate headquarters, even though consumption occurred nationwide .

The Debate on Fiscal Federalism

The 2025 reforms have sparked intense debate about Nigeria’s fiscal structure.

Arguments for the Reforms:

Fiscal Decentralisation: Governor Babajide Sanwo-Olu of Lagos State applauded the reforms, describing them as evidence of the administration’s commitment to fiscal decentralisation .
Local Government Autonomy: The administration secured a Supreme Court victory that provided historic legal backing for local government autonomy .
Increased Allocations: Between 2023 and 2024, federal allocations to state governments increased by about 62%, while those to local governments rose by 47% .

Arguments Against the Reforms:

Unitary Taxation: Critics argue the reforms impose a unitary system of taxation, incompatible with Nigeria’s federal system .
Centralised Collection: The Nigeria Revenue Service Act empowers the NRS to collect “all revenues, taxes, levies accruable to federal, state and local governments,” which critics say undermines fiscal federalism .
State Autonomy Erosion: The State Internal Revenue Service remains autonomous only in name; in reality, the federal government remains the main collector .

Local Government Revenue Committees

Under the new framework, each Local Government Area must establish a Local Government Revenue Committee in accordance with Section 93 of the NTAA .

Key Features:

Composition: Each committee must consist of six members .
Authority: Without a committee, local governments have no authority to collect taxes .
Autonomy: The committees are responsible for collecting taxes, fines, levies, and rates within their jurisdiction and operate autonomously of the local government Treasury .
Delegation: Local Governments may choose to delegate the power of assessment and collection of their taxes to states where there is a need, to make collection simpler, seamless, and efficient .

State Joint Revenue Committees

The Joint State Revenue Committee (JOSREC) plays a key role in the effective implementation of the Tax Reform Acts in each state . By January 2026, JOSREC is referred to as The State Joint Revenue Committee .

Legal Challenges and Constitutional Concerns

The Taxes and Levies Act Under Scrutiny

The Taxes and Levies (Approved List for Collection) Act has been subject to numerous legal challenges. The Act restricts the wide tax powers shared by the Constitution among the three tiers of government to specific lists .

Key Concerns:

Constitutional Supremacy: Section 1(1) of the Act arrogates the Act higher than the Constitution, making it unconstitutional .
Restriction of Powers: The Act limits the taxes collectable by the FG, SG, and LG to eight, eleven, and twenty respectively, as against the broad constitutional powers conferred .

Case Law

Mobil Producing Nigeria Unlimited v. (2025) : The court held that local governments have limited power on areas in which they can levy and impose taxes, and any attempt to collect taxes outside the areas specified under Part III of the Act is ultra vires the local government’s powers .

Thompson & Grace Investment Limited v. Government of Akwa Ibom State: The court held that a state government can lawfully impose business premises registration fees as provided in Part II of the Schedule to the Act .

The VAT Collection Dispute

The unresolved dispute over who controls the collection and administration of VAT has been a persistent legal challenge. In 2020, a Federal High Court ruled in favour of Rivers State, declaring that states, not the Federal Government, should collect VAT within their jurisdictions. The ruling was appealed, and the matter remains pending before the Supreme Court .

Practical Implications for Taxpayers

Understanding Tax Obligations

Taxpayers must understand which taxes are collectable by which tier of government:

Federal Taxes: Companies Income Tax, VAT, Petroleum Profits Tax, Education Tax (now Development Levy)
State Taxes: Personal Income Tax, Withholding Tax for individuals, Capital Gains Tax for individuals, road taxes, business registration fees, land use charge, hotel and restaurant consumption tax
Local Taxes: Tenement rates, shop and kiosk rates, motor park levies, market taxes, signboard fees

Compliance and Transparency

No Cash Collection: Under the Harmonised Taxes and Levies Law, cash collection and roadblocks for tax collection are outlawed and criminalised .
Authorised Collectors Only: Revenue officers and accredited tax agents are the only persons allowed to give tax assessments and collect revenue .
Tax Ombudsman: Taxpayers can report over-taxation to the Tax Ombudsman .

Documentation and Record-Keeping

Taxpayers are advised to maintain proper records and be cautious not to pay cash to IRS staff or private accounts .

Frequently Asked Questions

Q: What are the three tiers of government in Nigeria?
A: The three tiers are the Federal Government, State Governments, and Local Governments, as established by the 1999 Constitution.

Q: What taxes are collected by the Federal Government?
A: The Federal Government collects Companies Income Tax, VAT, Petroleum Profits Tax, Education Tax (now Development Levy), Withholding Tax on companies, Capital Gains Tax for companies, and stamp duties on bodies corporate.

Q: What taxes are collected by State Governments?
A: States collect Personal Income Tax (PAYE), Withholding Tax for individuals, Capital Gains Tax for individuals, road taxes, business registration fees, land use charge, hotel and restaurant consumption tax, and entertainment tax.

Q: What taxes are collected by Local Governments?
A: Local governments collect tenement rates, shop and kiosk rates, motor park levies, market taxes, signboard fees, radio and television licence fees, and other local levies.

Q: How is VAT revenue shared among the three tiers?
A: Under the NTAA 2025, VAT is shared as follows: Federal Government 10%, State Governments 55%, and Local Governments 35%.

Q: What is the Joint Revenue Board (JRB)?
A: The JRB replaced the Joint Tax Board and is responsible for harmonising tax administration across the federation, supervising data standards, and resolving inter-governmental revenue disputes.

Q: What is the Harmonised Taxes and Levies Law?
A: It is a model law being domesticated by states that harmonises taxes and levies at the state and local government levels, outlaws cash collection, and criminalises the mounting of roadblocks for tax collection.

Q: What is the VAT collection dispute about?
A: The dispute is over whether the Federal Government or State Governments should collect VAT. A Federal High Court ruled in favour of Rivers State in 2020, but the matter remains pending before the Supreme Court.

The Bottom Line

The administration of the mandates of Nigeria’s three tiers of government is a complex and evolving landscape. The 2025 Tax Reform Acts have fundamentally reshaped the framework for tax administration, revenue sharing, and intergovernmental coordination.

Key Takeaways:

Understand the Constitutional Framework: The 1999 Constitution establishes the federal structure and delineates legislative powers among the three tiers. The exclusive, concurrent, and residual lists determine which tier can legislate on which matters.

Know Your Tax Obligations: Different taxes are collectable by different tiers of government. Understanding which tier is responsible for which tax is essential for compliance.

The 2025 Reforms Are Significant: The NRS replaced FIRS, the JRB replaced JTB, and new VAT sharing formulas allocate 10% to the federal government, 55% to states, and 35% to local governments.

Local Government Autonomy Is Being Strengthened: Local Governments must establish Revenue Committees, and the Harmonised Taxes and Levies Law outlaws cash collection and roadblocks.

The Fiscal Federalism Debate Continues: Critics argue the reforms impose a unitary system of taxation, while supporters point to increased allocations and local government autonomy.

Your job is to be prepared. Understand the roles and responsibilities of each tier of government. Know your tax obligations. Maintain proper documentation. Seek professional guidance.

With the right approach and the right partner, you can navigate the administration of Nigeria’s three tiers of government with confidence.

Reference Links / Sources

Edo State IRS – Harmonised Taxes and Levies Law – Details on the Harmonised Taxes and Levies Law, outlawing cash collection and roadblocks, and the expanded mandate of the Joint Revenue Board
BusinessDay – Nasarawa VAT Opposition – VAT sharing formula of 10% federal, 55% states, 35% local governments under NTAA 2025
Leadership – Cross River Revenue Service – Establishment of Local Government Revenue Committees, church taxation, and PAYE obligations
Mondaq – Taxes and Levies Act Overview – Comprehensive overview of the Taxes and Levies Act, federal/state/local tax lists, and constitutional validity analysis
Punch – Tax Reforms Fuel Unitarism Fears – Analysis of NRS Act, NTAA provisions, and criticism of unitary tax system
Mondaq – NTAA 2025 VAT Distribution – VAT distribution formula, sub-allocation based on equality (50%), population (20%), and consumption (30%)
Cross River State News – CRIRS LGA Engagement – Local Government Revenue Committee establishment, e-filing, and harmonisation of revenue items
Mondaq – Taxes and Levies Act Validity Analysis – Constitutional analysis of exclusive, concurrent, and residual legislative lists, and case law on local government tax powers
BusinessDay – NRS and JRB Replace FIRS and JTB – NRS expanded mandate, JRB powers, unified national taxpayer database, and Tax ID Project
BusinessDay – 2025 Tax Reform Acts Implications – VAT sharing formula and sub-allocation based on equality, population, and consumption
The Sun – CRIRS Clamps Down on Illegal Tax Collection – Prohibition of roadblocks, Local Government Revenue Committee composition, and Tax Ombudsman
FIRS Journal – Taxes and Levies Schedule – Detailed schedule of taxes collectable by local governments and state powers on residual matters
BusinessDay – Sanwo-Olu Hails Tax Reforms – VAT sharing changes, increased allocations to states and local governments, and fiscal decentralisation
Punch – Centralised Collection Undermines Federalism – Criticism of centralised collection powers, unitary system concerns, and local government autonomy issues
Mondaq – Templars Tax Digest February 2026 – Overview of tax reform laws and their effect on fiscal coordination across all tiers of government

Let’s Talk About Your Tax Administration Needs

Navigating the administration of Nigeria’s three tiers of government can be complex. At Qeeva Advisory, we understand the challenges faced by businesses and individuals in understanding their tax obligations across different tiers and complying with the new tax laws.

Whether you need help with tax compliance, dispute resolution, or understanding your obligations, we are here to support you.

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