President Bola Tinubu has unveiled an ambitious plan to bolster revenue collection and reduce the nation’s heavy reliance on foreign borrowing.
The president plans to streamline revenue collection while broadening the tax base to encompass a larger portion of the population.
Nigeria’s tax-to-GDP ratio is one of the lowest in the world at a mere 10.8% in 2021 and has prompted the administration to target a robust 18% within the next three years as work on aligning more closely with the World Bank’s recommended 15%-20% range for African countries.
The government projects that the reforms could raise $26 billion in revenues separate from those recouped from the scrapping of a gasoline subsidy that cost $10 billion last year and the removal some exchange rate restrictions
This proactive approach, if successful, could catapult Nigeria’s economic standing on the international stage.
Taiwo Oyedele, the visionary leader of the newly established panel charged with reshaping the nation’s fiscal policy.
“There’s a huge tax gap,” Taiwo Oyedele, head of a newly formed panel to revamp the country’s tax system and fiscal policy, said at an event on Tuesday in the capital, Abuja. “What that means is as of today, without introducing any new taxes, if you get everyone that needs to pay their taxes to pay, we will not be where we are.”
His candid assessment highlights the untapped potential within Nigeria’s population and the government’s determination to harness it for the country’s progress.
“Our revenue generation falls below even African standards, yet our collection costs are among the highest,” Oyedele, a former fiscal policy partner and Africa tax leader at PricewaterhouseCoopers LLP, said. The panel plans to slash the number of agencies that collect tax.
Muhammad Nami, the head of the Federal Inland Revenue Service, disclosed that Nigeria’s tax collection has witnessed substantial growth in recent times. In the first half of 2023, the nation amassed a record-breaking 5.5 trillion naira ($9.7 billion) in taxes. Moreover, the government has set its sights on an even more ambitious target of raising 25 trillion naira in 2024, signifying an unprecedented commitment to economic self-sufficiency.
Nigeria has forecast that it will raise about 7.5 trillion naira ($9.7 billion) in taxes in the second half of 2023, after a record haul of 5.5 trillion naira in the first six months of the year. It raised 10.1 trillion naira of taxes last year and set a target to raise 25 trillion naira in 2024, according to Muhammad Nami, head of the Federal Inland Revenue Service.