The Federal Government of Nigeria has announced that tax revenue has become the highest source of income for the country, marking a significant shift in the nation’s revenue generation trajectory.
Oluwatoyin Madein, the Accountant-General of the Federation, made this revelation on May 14 at the 26th Annual Tax Conference organized by the Chartered Institute of Taxation of Nigeria (CITN) in Abuja. The conference, themed ‘Sustainable Tax Culture and Economic Roadmap for Nation Building,’ highlighted the pivotal role of tax revenue in sustaining the country’s economy.
Acknowledging the shift in revenue sources, Madein emphasized the significance of tax revenue, which has become crucial for the Federation Account Allocation Committee (FAAC).
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“Tax revenue as at today is the highest source of revenue accruing to the federation,” she stated. “Therefore, at the federation account allocation committee meetings, we eagerly await the numbers coming from the Federal Inland Revenue Service (FIRS) because the performance keeps on increasing and brings succor to all tiers of government.”
This dependence on tax revenue marks a departure from the country’s historical reliance on oil. Nigeria has faced a dramatic decline in oil output, with production dropping to 1.281 million barrels per day (mbd) as of April, according to the Organization of the Petroleum Exporting Countries (OPEC). This decline has significantly impacted national revenue, forcing the government to seek alternative sources.
Against this backdrop, Madein called on tax practitioners to intensify their collection efforts to further boost government revenue.
“Let us remain steadfast in our commitment to building a better future for all. Together we can harness the transformative power of taxation to create a more prosperous, equitable, and sustainable world,” she urged. She also highlighted the importance of non-oil revenue, which has become a critical lifeline for the nation’s finances.
“To tax practitioners, you are doing so well but we need more of this to be able to deliver on all the areas that the citizens are looking forward to because, for even infrastructure development, it is only through funds that we can get it done,” Madein added.
CITN’s Stance on Tax Culture
Samuel Agbeluyi, the president of CITN, echoed the need for a sustainable tax culture, stressing that it requires involvement from all levels of government. He noted that promoting a tax-paying culture involves the careful and transparent use of tax revenue to build trust between the government and taxpayers, which is essential for nation-building efforts.
Agbeluyi also welcomed the suspension of the cybersecurity levy implementation, a new tax move that had sparked significant backlash.
“The institute will keep advising the government on its policies, taking into account their impact on citizens,” he said.
Declining Oil Output and Economic Challenges
The shift to tax revenue comes amid ongoing issues in Nigeria’s oil sector and a broader economic context characterized by the rising cost of living, which consequently, is crippling economic activities. The weight of the resulting economic hardship is underlined by skyrocketing inflation. As of April, Nigeria’s inflation rate stood at 33.69%, according to the latest data from the Nigerian Bureau of Statistics.
The federal government’s push to widen the tax net has seen attempts to introduce new taxes, despite President Bola Tinubu’s earlier promise to streamline taxation to create a business-friendly environment. The latest was the Cybersecurity Levy, which generated a lot of backlash, forcing the government to suspend it.
Forced to depend on non-oil revenue, the Nigerian government has also sought revenue generation from its agencies, such as the Nigerian Customs Service (NCS). The exchange rate for customs duty collections has risen to N1502.1/$, the highest in seven weeks going back to March 22nd when the figure stood at N1572/$.
Economists have called for tax breaks, warning that increasing taxes now will exacerbate Nigeria’s economic woes. They also note that the federal government’s pivot towards tax revenue underscores the urgent need for a diversified and sustainable economic strategy.
“This is absolute surrender,” Economist, Kalu Aja, said at the news of the NCS’ import rate increase. “There is no law mandating the Nigerian Customs to charge this rate. A way to reduce imported inflation is to fix this rate at $1:N100. IGR is not development.”