Nigerian government projects N44 trillion revenue, northern governors oppose tax review

• The Federal Government aims to raise Nigeria's tax-to-GDP ratio from 10% to 18% by 2026, requiring N44.34 trillion in tax revenue
• Northern state governors express strong opposition to proposed VAT reforms, calling for more consultations before moving forward
• The Senate Finance Committee sets a target of N30 trillion in tax revenue for 2024, emphasising the need to review tax waivers

The Federal Government of Nigeria is pursuing ambitious tax reforms that aim to raise the country's tax-to-Gross Domestic Product (GDP) ratio to 18 percent by 2026. 

Currently, Nigeria's ratio stands at just 10 percent, one of the lowest in Sub-Saharan Africa.

In August 2023, President Bola Tinubu established the Presidential Fiscal Policy and Tax Reforms Committee, led by Taiwo Oyedele, to spearhead these changes. 

During the inauguration, President Tinubu emphasised the need for a more equitable tax system, stating his administration would “tax the fruits and not the seed.” 

The committee's objectives include tax harmonisation, revenue enhancement, and overall transformation of the tax system.

Achieving the proposed target means Nigeria must generate approximately N44.34 trillion in tax revenue, a significant increase from the current figures. 

As per the National Bureau of Statistics, Nigeria's nominal GDP is N246.35 trillion, with the Federal Inland Revenue Service (FIRS) projecting a revenue goal of N19.41 trillion for 2024. 

This figure reflects a 56.91 per cent rise from 2023's actual revenue collection of N12.37 trillion.

While there has been notable revenue growth FIRS exceeded its 2023 target by N816 billion, achieving 107 per cent of its goal recent performance data shows that the agency fell short of its Q1 2024 target of N4.8 trillion, having generated only N3.94 trillion.

Despite the optimistic outlook from the FIRS regarding the reforms, there is considerable pushback from northern state governors who have voiced their opposition to the proposed Value Added Tax (VAT) reforms. 

Governors from states including Bauchi, Kano, Yobe, Plateau, Gombe, and Katsina have expressed that the bill requires further consultation before moving forward.

Bauchi State's Senior Special Adviser on Media, Mukhtar Gidado, reiterated the northern governors’ united stance against the VAT reform, emphasizing the need for comprehensive discussions. 

Meanwhile, officials from Kano and Yobe States have indicated their alignment with this position, awaiting a formal response from the Northern Governors’ Forum.

In contrast, the Gombe State Government urged calm, framing the bill's first reading in the National Assembly as a routine procedural step rather than an imminent threat. 

Director-General of Press Affairs Ismaila Misilli reassured constituents that the matter would be addressed during the debate stages of the legislative process.

The Senate’s Finance Committee has also called for an ambitious tax revenue target of N30 trillion for 2024, while emphasising a review of existing tax waiver policies that have reportedly resulted in N17 trillion in lost revenue over the past five years.

Inflation: Nigerians to spend 54.9% income on food in next 6 months, projects CBN

Meanwhile, TheRadar reported that according to a recent survey by the Central Bank of Nigeria (CBN), the escalating inflation rate in Nigeria is expected to lead households to dedicate the largest portion of their earnings to food expenses over the next six months.

The survey, conducted from July 22 to 26, 2024, reveals that the inflation rate has surged to 33.40 per cent, with food inflation exceeding 40 per cent.