May 31, 2023

Nigeria has revised its tax-to-GDP ratio for 2021 to 10.86% from 6% following an adjustment to include revenues collected by other government agencies, the Federal Inland Revenue Service, FIRS boss said on Wednesday.

The FIRS boss Muhammad Nami noted that tax collection rates have hovered between 5%-6% of gross domestic product over the past 12 years, adding that revenues collected by other agencies were previously left out of the calculation.

Africa’s biggest economy has one of the lowest tax collection rates in the world, though tax receipts did rise by 56% in 2022 to a record 10 trillion naira ($22 billion).

Previous governments pledged to boost non-oil revenues since oil sales make up 90% of foreign exchange receipts, but raising more money from taxes has proved difficult in a country where many small business are not registered.

Nami said Nigeria’s tax-to-GDP ratio could be higher if tax waivers and gaps in its fragmented tax system were plugged. He added that a 2014 GDP rebasing had worsened the tax ratio.

Nigeria has been struggling to raise revenues since recovering from a recession caused by previously low oil prices. The revenue situation worsened with the COVID-19 pandemic.

The government has said it will prioritise tax collection from its digital economy and focus on non-resident firms with significant economic presence that generate turnover in Nigeria.

REUTERS