Nigeria’s President, Bola Tinubu, is spearheading an ambitious fiscal initiative to revamp the country’s tax regulations and improve revenue efficiency. The leader’s decisive action signifies a concerted effort to wean Africa’s largest crude oil producer off its borrowing dependency while boosting infrastructure, healthcare, and education investments.
To enhance revenue transparency and utilization, Tinubu has rallied a top-tier committee led by Taiwo Oyedele, Africa tax leader and fiscal policy partner at PricewaterhouseCoopers LLP. Tasked with the herculean job of overhauling Nigeria’s fiscal system, this hand-picked team aspires to drive Nigeria’s tax revenue to a minimum of 18% of GDP within a three-year period.
In the recent release, the Special Adviser to the President on Revenue, Mr. Adelabu Zacch Adedeji, emphasized the significance of a sound fiscal policy environment and an effective taxation system for the functioning of the government and the economy. He further added that Nigeria currently has one of the lowest Tax to GDP ratios in the world and ranks very low on the global ease of paying taxes.
Challenging the status quo: Aiming for a competitive business environment
The urgency for reform is underpinned by Nigeria’s tax-to-GDP ratio, which stood at 10.9% in 2021, significantly trailing the 34.1% average of the OECD member nations. This, coupled with burgeoning public debt—up seven-fold since 2015 to a staggering 77 trillion Naira ($100 billion)—has intensified the need for a strategic fiscal recalibration. As of 2022, a whopping 96% of government revenue was consumed by debt servicing, according to Nigeria’s Debt Management Office.
But Adelabu Adedeji is optimistic about the transformative potential of these tax reforms. In his view, these changes will fortify Nigeria’s revenue profile and foster an internationally competitive business milieu.
These tax alterations dovetail with President Tinubu’s aggressive economic revitalization measures since taking office on May 29. His bold actions have included the termination of a costly $10 billion fuel subsidy, the dismissal of a controversial central bank governor, the relaxation of foreign-exchange controls, and the much-needed overhaul of Nigeria’s perennially underperforming power industry.
In tandem with these measures, Tinubu also suspended excise taxes on telecommunications services and selected locally produced goods a day prior to the committee’s inception, further signaling his commitment to reducing business costs and energizing Nigeria’s economy.
