As debates continue over Nigeria’s new Value Added Tax (VAT) sharing formula, a Nigerian academic has suggested a scientific method to address long-standing disputes among states.

The House of Representatives recently approved a new distribution framework that allocates 55 percent of VAT revenues to states and 35 percent to local governments. The formula further divides allocations equally (50 percent), by population (20 percent), and by consumption (30 percent). Lawmakers say the structure aims to balance fairness and contribution, but critics argue it leaves room for renewed conflict over revenue rights.

In response, Olamide Ayodele, a Nigerian researcher in Financial Services Analytics at the University of Delaware, has proposed adapting cooperative game theory to Nigeria’s federal system. His work applies the Shapley value—a mathematical tool for dividing payoffs in coalition games—to the distribution of tax rights.

“The same logic applies here,” Ayodele said. “Lagos generates substantial VAT through commerce, Kano adds value through population-driven consumption, and Bayelsa contributes via oil derivation. The Shapley framework evaluates each state’s marginal contribution and distributes revenues accordingly. It ensures fairness isn’t just political—it’s measurable.”

Ayodele has previously used the model to study international tax disputes, where countries negotiate over taxing rights of multinational companies. He argues that the same method could replace ad hoc bargaining in Nigeria’s VAT allocation with a replicable formula grounded in mathematics.

According to him, the approach offers three advantages. First, transparency: states can see their allocation justified by a formula. Second, equity: both high-revenue and high-need states are recognized. Third, stability: a scientific benchmark could reduce disputes and litigation.

“This isn’t about replacing politics,” Ayodele added. “It’s about giving policymakers a tool that reduces suspicion and builds trust in the system.”

Analysts note that Nigeria’s VAT reform is part of broader fiscal adjustments aimed at strengthening non-oil revenue. However, public confidence depends on whether revenue distribution is accepted as fair. Ayodele argues that his framework could help policymakers avoid repeated disputes over what each state deserves.

The researcher also linked his proposal to global debates. The Organisation for Economic Co-operation and Development (OECD) is currently negotiating how to divide taxing rights over multinational companies under its Pillar 1 and Pillar 2 reforms. Ayodele said the same fairness principles used internationally can guide Nigeria’s domestic policy.

“This is one of those rare cases where ideas tested in finance and global tax debates can be directly applied to Nigeria’s pressing challenges,” he said.

With the VAT formula already generating mixed reactions, Ayodele believes Nigeria has an opportunity to pioneer a science-based model of fiscal federalism. “Fairness in tax sharing need not be left to compromise alone,” he argued. “It can be calculated, explained, and defended.”