Low VAT Doesn’t Mean Low Economic Contribution: The South East Nigeria Case

I’ve been seeing repeated posts comparing VAT contributions from different regions, with some arguments implying that higher VAT automatically equals higher economic contribution. That conclusion is misleading, and it needs clarification NaijaChoice News report.

In the U.S., for example, there is this well-known pattern: Republican-controlled states generally prefer lower income taxes and smaller government, while Democrat-controlled states tend to impose higher taxes to fund more public services. Neither of these models is superior — they simply reflect different economic structures and policy priorities.

The same logic applies when discussing VAT contributions in Nigeria, especially in the South East.

The South East contributes heavily to the economy through low unemployment driven by entrepreneurship, not through heavy consumption or large government-funded spending. The region’s economy is dominated by traders, manufacturers, transporters, artisans, and small business owners who are actively producing, distributing, and creating value that circulates throughout the country.

To be clear, VAT is a consumption tax, not a productivity tax. It is generated when goods and services are purchased through formal retail channels. Regions with large retail chains, high consumer spending, and concentrated government expenditure will naturally generate more VAT.

Regions with more emphasis on production, capital reinvestment, informal and semi-formal trade networks, and business expansion will generate less VAT — even when economic activity is high.

This clarification is important.

Many Nigerians on the one hand have been arguing in favor of resource control so that states with more natural resources can develop locally, while states with fewer natural resources compete through tourism, hospitality, trade, and business incentives. That diversity of economic models is normal in any federation.

VAT figures alone cannot — and should not — be used to rank economic value or contribution.

Low VAT is not evidence of low economic activity. It is evidence that economic activity is structured differently.

Finally, we must move away from this persistent attempt to demonize the South East and Igbos, usually orchestrated by a well known group of people. Economic debates should focus on facts, not stereotypes or selective metrics designed to push a an agenda.

By Givedemwotowoto