Taxing Powers of the State and Local Government (2)


In our last article, we discussed the taxing powers of the Federal Government of Nigeria. We also defined taxation to mean the various methods and ways by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. We also examined the evolution of taxing powers in Nigeria.

In this article, we will explore the taxing powers of the state and local government.


The state government shares certain powers with the Federal government. These are provided for under the concurrent legislative list. However, issues such as Federal government inefficiency and disparities in the Constitution on State Authority, have sparked debate on the need to delegate certain powers to the State alone. ’68 items on the exclusive legislative list are numerous and the list contains matters which the state governments can legislate on independently. Also, the Federal government still has an overriding power over the state governments under the concurrent legislative list’.[1] For example, the ‘omission’ of Value Added Tax (VAT), has caused problems in recent times on what tier of government should be responsible for the collation of VAT for the country. In fact, ‘recently, Rivers State Government won by a High Court judgment the right to collect VAT in its state in the Nigerian federation’.[2] Other states have followed suit, based on the fact that there is no constitutional provision for Federal collection of VAT-meaning that such power belongs to the State.

It is evident that whilst the concurrent list was enacted to promote harmony and possible checks and balances between the Federal and state government, the discrepancies in taxing powers call for a restructuring of the legislative list in its entirety. Just as the Federal government administers taxation through the Federal Inland Revenue Service (FIRS), the state governments also have their respective State Internal Revenue Service (SIRS) to administer taxes at their own level. The SIRS remits taxes collectible by the state to the State Board of Internal Revenue (SBIR). With regards to the specific taxing powers of the state, it should be noted that ‘under the 1999 Constitution of Nigeria (as amended), no tax is specifically reserved for the State Government’.[3] Item 9 of the Concurrent Legislative List only infers that:

A State Legislature may: (i) by law, prescribe conditions under which its own tax authorities may charge and collect any tax, fee or rate (other than those that had been expressly reserved for the Federal Government under the Exclusive Legislative List; (ii) delegate to Local Government Councils the collection of any such tax, fee or rate upon conditions prescribed by the State Legislature.[4] This provision enables the state governments to delegate their taxation powers to the local government in a way that would prevent double taxation.

Thus, whilst state governments have the authority to make taxing laws in certain instances, this power is quite restrictive as there is no express provision for taxes they are allowed to charge and collect. In addition to the provision of the concurrent legislative list, Item D7 states that ‘the National Assembly may authorize states to administer the law imposing tax on Capital Gains, stamp duties, income and profits of persons other than companies. More specifically, this means that the taxing powers of the state governments include:

  • Capital Gains Tax on individuals only.
  • Stamp Duties on instruments executed by individuals.
  • Withholding Tax of only Individuals.
  • Pools Betting and Lotteries, Gaming and Casino Taxes.
  • Personal Income Tax.
  • Pay-As-You-Earn (PAYE); and
  • Direct Assessment[5].

‘In practice, the Federal government and state governments are usually at loggerheads as to who can tax what. The most prevalent areas include; Stamp Duties, VAT vs Sales Tax, Capital Gains Tax, Petroleum Profits Tax and so on’.[6] Although the Constitution made attempts to allow the taxing powers of the authorities, it is still imperative that these provisions be reviewed so as to resolve all identifiable discrepancies and broaden the horizon of the taxing powers of state governments.


The Local Government is the third level in Nigeria’s Federal Government structure. It is this structure of Government that addresses the affairs of the people, at the grassroots. Unfortunately, the Local governments experience difficulty when attempting to raise the funds that are required for effective service delivery. Although the Constitution is ineptly drafted with respect to the tasking powers of Local governments, the writer believes that they are constitutionally empowered to tax.[7] The functions that have been conferred on Local Government Councils include the collection of rates, radio and television licenses, and the assessment of privately owned houses or tenements for the purpose of levying such rates, as may be prescribed by the House of Assembly of a State.

Local Government Councils are not given any direct legislative powers under the Constitution but are made to look up to the Federal and State Government for their sustenance, via statutory allocations as stated in Section 7(6) (a) & (b) and Section 162 (5) & (8) of the 1999 constitution. In getting these statutory allocations furthermore, a State Government must first enact appropriate enabling law, which will determine the taxable persons, assessment procedure and method of collection, recovery and penalties for tax delinquency. And where such a law has been enacted, a Local Government Council must exercise its power within the limits prescribed by the law. Any exercise of power beyond the units allowed by the Constitution or the enabling law, according to the Court in Shell Petroleum Development Company of Nigeria Limited v. Burutu Local Government Council[8], will be ultra vires, null and void.

However, the lack of clear taxing power for the Local Government in the Nigerian Constitution, since section 7(1) of the Nigerian Constitution guarantees the system of Local Government, for their sustainability and running of the Local Governments, the Local Government Council is allowed to generate revenue through the levying of certain categories of rates to wit; the collection of radio and television licenses, and carts, establishment, maintenance and regulation of births and deaths etc. All these functions are specified in the fourth schedule of the Nigerian Constitution.

More so, the Taxes and Levies Approved List for Collection (Amendment) Order of 2015 has provided in detail, taxes collectable by Local Government Councils in Nigeria. They include the following: Shops and kiosks rates; Tenement rates; On and off liquor license fee; Slaughter slab fees; Marriage, birth and death registration fees; Naming of street registration fee, excluding any street in the state Capital; Right of occupancy fee on lands in rural areas, excluding those collectable; Federal and State Governments; Market where State Finance is involved; Motor park levies; Domestic animal license fees; Bicycle, truck, canoe, wheelbarrow and cart fees, other than mechanically propelled truck; Cattle payable by cattle farmers only; Merriment and road closure levy; Radio and television license fee (other than radio and television transmitter); Vehicle radio license fee (to be imposed by the Local Government of the state in which the car is registered; 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; and Wharf landing charge, where applicable.[9]


Regulations in Nigeria’s tax system are overly complex, distorted, and generally unfair because they apply only to certain parts of the economic system. If the tax framework across all levels of government is to be efficient and effective, it should create authorities that are generously compensated, constantly motivated, appropriately coordinated, adequately prepared, highly focused, and expertly oriented. It is essential to have clear, unambiguous financial rules; evaluation methods should be direct, direct, and client-friendly. Nigeria should also prepare extraordinary duty judges and layout unique assessment councils; ensure that charge consistency costs are insignificant; and embrace the mentality of ‘the taxpayer being the king’.


  1. Blessing Anya, ‘Nigeria: The Exclusive Legislative List And The Concurrent Legislative List – A Case For Restructuring Or Constitutional Defect?’ (, Nov. 28, 2021)–a-case-for-restructuring-or-constitutional-defect-#.
  2. Bayo Ogunmupe, ‘Why states should collect VAT in Nigeria’ (The, Oct. 15, 2021)
  3. Nwoke, ‘Taxing Powers Of The Three Tiers Of Government In Nigeria: An Extrapolative Appraisal’ ( Accessed Aug. 24, 2022.
  4. Ibid
  5. O. S. Obatola, The Rudiments of Nigerian Taxation (ASCO Publishers 2013).
  6. ‘Taxation Powers: Matters Arising’ ( accessed Aug. 24, 2022.
  7. Orifowomo O.A. (2010) ‘Fiscal Federation and Taxing Powers under the 1999 Nigerian Constitution’ in Olugbenga F. (eds.) (2010) Law, Politics and Development, ‘The Challenges of an Emerging Mega-City, N.B. A Ikeja Branch.
  8. (1989) 9 NWLR (pt. 165) 318 CA.

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