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By Chinwendu Obienyi and Adanna Nnamani, Abuja
The Federal Government has set an ambitious target to increase the country’s revenue-to-GDP ratio to 30% within the next two to three years.
The initiative is part of a broader strategy to enhance fiscal governance and stimulate economic growth by creating a more conducive environment for business and investment.
At the unveiling of the Nigerian Banking Sector Report by Afrinvest West Africa in Abuja on Wednesday, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, highlighted the government’s plan to reconfigure the tax system. The proposed changes aim to shift the tax burden onto sectors capable of absorbing it, such as the financial and capital markets, rather than on smaller businesses and lower-income individuals.
The 2024 Nigerian Banking Sector Report also showed that the current administration’s ambitious aim of achieving a $1 trillion economy by year 2030 is being hampered by slow policy implementation and external economic pressures.
It also said that key reforms, such as the removal of multiple subsidies and efforts to stabilise the business environment, have yet to yield significant positive results.
“We believe that if we implement the right strategies, it is entirely feasible to elevate Nigeria’s revenue-to-GDP ratio to 30% in the next 2-3 years,” Oyedele stated during a panel session. He emphasized the potential for substantial revenue generation through better management of government assets and improved fiscal structures.
Oyedele acknowledged that many government-owned enterprises, such as the Nigerian National Petroleum Company Limited (NNPCL), are not performing to their full potential. He suggested that Nigeria could benefit from adopting best practices from countries that effectively manage public enterprises, thereby increasing revenue.
He candidly described the current economic situation, noting, “Nigeria is a poor country, even if many do not want to hear it. Our entire national budget, including supplementary budgets for all 36 states and 774 local governments, is less than $40 billion. The revenue is even less, which is a stark contrast to countries like South Africa, with a budget of $130 billion.” He stressed the importance of addressing underlying issues such as corruption, wasteful spending, and inefficiency to boost economic growth and revenue.
Oyedele argued that Nigeria has historically focused its revenue generation efforts on the wrong areas, often targeting the “bottom of the ladder” or taxing essential resources, which he likened to “taxing seed.” He emphasized the necessity of a thriving banking sector and capital market for a $1 trillion economy, noting that these sectors require consistent and supportive economic policies.
He further elaborated that the committee’s philosophy is to avoid taxing capital, investments, production, and poverty. “No country has ever become wealthy by taxing poverty,” he said. Instead, the government aims to invest alongside the Nigerian people and reap the benefits of shared prosperity when these investments mature.
Oyedele highlighted lessons from other countries, particularly South Africa and Kenya, which have successfully broadened their tax bases and enforced compliance. He pointed out that South Africa collected more than twice the amount from personal income tax than Nigeria did from all taxes combined.
Similarly, Kenya, with a significantly smaller population, collected nearly four times more in personal income tax.
Regarding import duties, Oyedele noted that despite Nigeria’s higher import value, Kenya collected three times more in duties. “This indicates that Nigeria has the potential to increase its revenue from import duties by up to nine times with proper reforms and enforcement,” he stated.
The Federal Government’s fiscal reform agenda, including the proposed tax system reconfiguration, is seen as a critical step towards realizing a $1 trillion economy. By fostering a more equitable and efficient tax system, Nigeria aims to stimulate growth, attract investments, and ultimately improve the standard of living for its citizens.
By Chinwendu Obienyi and Adanna Nnamani, Abuja
The Federal Government has set an ambitious target to increase the country’s revenue-to-GDP ratio to 30% within the next two to three years.
The initiative is part of a broader strategy to enhance fiscal governance and stimulate economic growth by creating a more conducive environment for business and investment.
At the unveiling of the Nigerian Banking Sector Report by Afrinvest West Africa in Abuja on Wednesday, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, highlighted the government’s plan to reconfigure the tax system. The proposed changes aim to shift the tax burden onto sectors capable of absorbing it, such as the financial and capital markets, rather than on smaller businesses and lower-income individuals.
The 2024 Nigerian Banking Sector Report also showed that the current administration’s ambitious aim of achieving a $1 trillion economy by year 2030 is being hampered by slow policy implementation and external economic pressures.
It also said that key reforms, such as the removal of multiple subsidies and efforts to stabilise the business environment, have yet to yield significant positive results.
“We believe that if we implement the right strategies, it is entirely feasible to elevate Nigeria’s revenue-to-GDP ratio to 30% in the next 2-3 years,” Oyedele stated during a panel session. He emphasized the potential for substantial revenue generation through better management of government assets and improved fiscal structures.
Oyedele acknowledged that many government-owned enterprises, such as the Nigerian National Petroleum Company Limited (NNPCL), are not performing to their full potential. He suggested that Nigeria could benefit from adopting best practices from countries that effectively manage public enterprises, thereby increasing revenue.
He candidly described the current economic situation, noting, “Nigeria is a poor country, even if many do not want to hear it. Our entire national budget, including supplementary budgets for all 36 states and 774 local governments, is less than $40 billion. The revenue is even less, which is a stark contrast to countries like South Africa, with a budget of $130 billion.” He stressed the importance of addressing underlying issues such as corruption, wasteful spending, and inefficiency to boost economic growth and revenue.
Oyedele argued that Nigeria has historically focused its revenue generation efforts on the wrong areas, often targeting the “bottom of the ladder” or taxing essential resources, which he likened to “taxing seed.” He emphasized the necessity of a thriving banking sector and capital market for a $1 trillion economy, noting that these sectors require consistent and supportive economic policies.
He further elaborated that the committee’s philosophy is to avoid taxing capital, investments, production, and poverty. “No country has ever become wealthy by taxing poverty,” he said. Instead, the government aims to invest alongside the Nigerian people and reap the benefits of shared prosperity when these investments mature.
Oyedele highlighted lessons from other countries, particularly South Africa and Kenya, which have successfully broadened their tax bases and enforced compliance. He pointed out that South Africa collected more than twice the amount from personal income tax than Nigeria did from all taxes combined.
Similarly, Kenya, with a significantly smaller population, collected nearly four times more in personal income tax.
Regarding import duties, Oyedele noted that despite Nigeria’s higher import value, Kenya collected three times more in duties. “This indicates that Nigeria has the potential to increase its revenue from import duties by up to nine times with proper reforms and enforcement,” he stated.
The Federal Government’s fiscal reform agenda, including the proposed tax system reconfiguration, is seen as a critical step towards realizing a $1 trillion economy. By fostering a more equitable and efficient tax system, Nigeria aims to stimulate growth, attract investments, and ultimately improve the standard of living for its citizens.
