The Gombe State Commissioner for Finance and Economic Development, Gambo Magaji, has voiced deep concerns over the Federal Government’s proposed changes to the Value Added Tax (VAT) distribution formula, which he warned could deliver a severe blow to state revenues. Speaking at a consultative meeting on the state’s 2025 budget preparations, Magaji cautioned that the new VAT derivation principle, currently before the National Assembly, risks cutting state VAT income by as much as 40%, posing a dire financial challenge.
Under the present VAT Act, the Federal Government claims 15% of VAT revenue, states (including the Federal Capital Territory) receive 50%, and local governments take 35%. However, the proposed derivation model would redirect substantial VAT revenue to the areas where it is generated, reducing Gombe’s monthly VAT intake from ₦4.6 billion to around ₦2.5 billion, according to Magaji. “Such a drop would shock our finances and place immense pressure on our fiscal health,” he noted.
Magaji also criticised the proposed 2025 exchange rate of ₦1,400 to the dollar outlined in the Federal Government’s Medium Term Expenditure Framework, describing it as alarmingly close to the current market rate of ₦1,700. The 2024 budget had set the exchange rate at ₦750, providing states a financial cushion that may disappear next year. “This differential has been cushioning our revenue allocations; losing it could bring further strain,” he added.
Rising inflation, which Magaji warned may not ease soon, presents another pressing challenge, likely necessitating tighter fiscal policies and intensified budget constraints in 2025.
On project financing, Magaji clarified that state-funded projects rely primarily on grants and institutional support, dispelling misconceptions about borrowing for day-to-day expenses. “Federal law bars us from borrowing for recurrent costs like salaries, but we can fund development projects through loans,” he explained, underscoring that legal frameworks restrict borrowing for non-project spending.
Representing Governor Muhammadu Yahaya at the meeting, Professor Ibrahim Njodi, the Secretary to the State Government, highlighted that the administration has so far delivered on 48 of 71 citizen-prioritised projects for 2024, ranging from education and healthcare to water and rural infrastructure.
Also speaking, Salihu Alkali, the Commissioner for Budget and Economic Planning, praised Gombe’s citizen engagement initiative, introduced by Governor Yahaya in 2019, as a groundbreaking reform that integrates public input into budgeting. “This model of citizen-led budget planning has been commended and is now a benchmark for other states,” he said, reaffirming Gombe’s commitment to public-driven resource allocation.
