Taxing Powers of Local Governments in Nigeria over Companies

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Chinecherem O. Ubaka


The Nigerian Constitution has roughly delienated taxing rights and powers between the tiers of governments in Nigeria. The National Assembly makes laws that confers on the Federal Government of Nigeria the power and rights to collect certain taxes in Nigeria. These laws include, the Companies Income Tax Act(CITA), the Personal Income Tax Act(PITA), the Capital Gains Tax Act amongst others.

The foregoing means that where a power to impose a tax has not been EXPRESSLY listed in the Constitution, it becomes a residual matter. The nature of residual matters have been clearly expatiated in Attorney General of Ogun State v. Aberuagba (1985) 1 NWLR (Pt. 3) 395, 405;

“By “residual legislative powers” under sec 4 of the 1999 Constitution, it means what was left after after the matters in the Exclusive and Concurrent legislative lists which the Constitution expressly empowered the Federation and the States to legislate upon…The Federation has no powers to make laws on the residual matters” .

I believe that it is against the foregoing backdrop that the States in Nigeria are clamouring for their taxing rights on Value Added Tax(VAT). See the case of AG Rivers v. AG Federation.

What then are the taxing rights of local governments in Nigeria?

Taxing Powers of Local Governments in Nigeria

By virtue of the Nigerian Constitution, local governments in Nigeria do not have taxing powers. However, they have the REGULATORY POWER to impose rates, fees and levies.
See the Taxes and Levies (Approved List for Collection) Decree, 1998.

Can local Governments in Nigeria impose taxes? 
Taxing Powers of Local Governments in Nigeria
Lumenar Legal Advisory
Chinecherem Ogodimma Ubaka

In the case of Ikenne Local Government v. W.A.P.C Plc, (2011) 2 NWLR Pt. 1261; the main question was whether the Ogun State High Court has the jurisdiction to hear and determine disputes on cases arising from Item 7 in Part III of the Schedule to the Taxes and Levies (Approved List for Collection) Decree, 1998. The Respondent’s Counsel contended that

the claim of the Appellant for the “Right of Occupancy Fee” is connected with company taxation and as such only the Federal High Court (FHC) has jurisdiction to hear the matter…..

The Court held that the suit was for recovery of occupancy fees by virtue of Item 7 in Part III of the Schedule to the Taxes and Levies (Approved List for Collection) Decree, 1998.
The Right of Occupancy Fee is not a tax on the profits of a company neither is it a revenue accruing to the Federal Government. Furthermore, the liability to pay Right of Occupancy Fees is a deductible expenses of the company. Moreso, since the Federal Government of Nigeria does not own land outside the Federal Capital Territory (FCT), they cannot grant Certificate of Occupancy to the residents in other states apart from the FCT and cannot be entitled to collect ground rents.


Item 32 of the Exclusive Legislative list does not confer jurisdiction on the Federal Government over all aspects relating to Companies. The said item is indeed clear on the power of the Federal Government to regulate the incorporation, regulation and winding up of the company. This in practical terms is carried dutifully by the Federal Government through the Corporate Affairs Commission (CAC) by virtue of the Companies and Allied Matters Act, (CAMA) 2020. Thus, just because it is a company that is paying ground rent does not transform the ground rent payable into a Corporate tax.

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