The Federal High Court in Abuja has declared the five per cent consumption tax imposed by Delta State on transactions already covered by the Value Added Tax (VAT) regime as unconstitutional. This ruling, delivered by Justice Peter Lifu on October 9, 2026, has significant implications for businesses operating in the state, particularly those in the hospitality and retail sectors.

The court's decision came in response to a lawsuit filed by the Nigeria Employers’ Consultative Association (NECA) and Retail Supermarkets Nigeria Limited, the operators of Shoprite stores. The plaintiffs argued that the Delta State Hotel Occupancy, Restaurants and Departmental Stores Consumption Tax Law, enacted in 2017, created overlapping tax obligations that unfairly burdened businesses and consumers alike.

Justice Lifu specifically set aside Sections 3 and 4 of the state law, along with Section 7(b), Item 13 of the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order No. 77 of 2015. He further issued a perpetual injunction preventing the Delta State Attorney-General and Commissioner for Justice, as well as the Delta State Board of Internal Revenue, from enforcing these provisions.

The plaintiffs contended that Delta State lacked the legislative authority to impose a separate consumption tax that overlapped with the federal VAT framework. They maintained that such a tax would not only increase the overall tax burden but also create confusion for businesses trying to comply with tax regulations.

In his ruling, Justice Lifu referenced the Supreme Court’s earlier decision in the case of Attorney-General of Lagos State v. Eko Hotels Limited, which clarified the relationship between federal VAT and state consumption taxes. The court rejected arguments from the defendants that the two taxes were distinct, asserting that the imposition of an additional levy on goods and services already subject to VAT was unjustifiable.

The judge emphasized that the 1999 Constitution stipulates that where state laws conflict with valid federal laws, the federal law prevails. This constitutional provision played a crucial role in the court's determination that the Delta consumption tax was inconsistent with the federal VAT law.

Prior to addressing the main issues, Justice Lifu dismissed preliminary objections raised by the Attorney-General of the Federation and the Delta State defendants regarding the court's jurisdiction. He affirmed that the plaintiffs’ challenge to the validity of the federal amendment order fell within the Federal High Court’s constitutional jurisdiction.

NECA, representing over 480 corporate members, argued that the additional consumption tax imposed a significant financial burden on businesses, particularly in a competitive market. The legal team for the plaintiffs, led by Dr. Joseph Nwobike, SAN, expressed satisfaction with the ruling, which they believe will alleviate the tax pressures faced by businesses in Delta State.

This ruling is expected to set a precedent for similar cases across Nigeria, as it reinforces the supremacy of federal tax laws over state legislation, ensuring a more standardized tax regime for businesses operating nationwide.