The Federal Government of Nigeria is advancing significant tax reforms with the goal of increasing the tax-to-Gross Domestic Product (GDP) ratio to 18 percent by 2026. Currently, Nigeria’s tax ratio is a mere 10 percent, among the lowest in Sub-Saharan Africa.
In August 2023, President Bola Tinubu established the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele, to implement these reforms. During the committee’s launch, President Tinubu highlighted the necessity for a fairer tax system, stating that his administration would “tax the fruits and not the seed.” The committee’s key tasks include tax harmonization, revenue enhancement, and overhauling the tax framework.
To meet the ambitious target, Nigeria needs to generate approximately N44.34 trillion in tax revenue. Current data from the National Bureau of Statistics shows the country’s nominal GDP at N246.35 trillion, with the Federal Inland Revenue Service (FIRS) projecting a revenue target of N19.41 trillion for 2024—a 56.91 percent increase from the previous year’s actual revenue of N12.37 trillion.
Although the FIRS has shown strong revenue growth—surpassing its 2023 target by N816 billion and achieving 107 percent of its goal—recent figures indicate the agency fell short of its first-quarter 2024 target of N4.8 trillion, collecting only N3.94 trillion.
Despite these efforts, several northern state governors have expressed strong opposition to the proposed Value Added Tax (VAT) reforms. Governors from Bauchi, Kano, Yobe, Plateau, Gombe, and Katsina have emphasized the need for broader consultations before any legislation moves forward.
Bauchi State’s Senior Special Adviser on Media, Mukhtar Gidado, reaffirmed the unified stance of northern governors against the VAT reform, calling for more extensive discussions. Officials from Kano and Yobe States echoed this sentiment, awaiting a formal response from the Northern Governors’ Forum.
In contrast, the Gombe State Government urged calm, framing the bill’s initial presentation in the National Assembly as a standard procedural step. Ismaila Misilli, Gombe’s Director-General of Press Affairs, assured constituents that the matter would be thoroughly debated in the legislative process.
Additionally, the Senate Finance Committee has called for an ambitious tax revenue target of N30 trillion for 2024 and highlighted the need to review existing tax waiver policies, which have reportedly led to an estimated N17 trillion in revenue losses over the past five years.
As the Federal Government navigates these crucial reforms, it must address the concerns raised by regional leaders. The coming months will be critical in shaping the future of Nigeria’s tax system and its broader economic outlook.
