Nigeria has embarked on what is being described as a 'generational reset' of its tax system, a high-stakes gamble that could redefine the nation's future. The ambitious reforms, enacted in January, aim to transform the state's finances but are landing in a climate of deep public suspicion and a decades-long failure to deliver basic services.
A Grand Theory Meets a Harsh Reality
The rationale for change is, on paper, undeniable. Nigeria's tax-to-GDP ratio languishes between a paltry 9% and 13%, a figure so low it renders the government functionally insolvent without oil revenues or borrowing. The new Nigeria Tax Act introduces progressive rates, exempts the lowest earners, and offers incentives for small businesses. Its architects envision it as the foundation for a self-reliant Nigeria, finally able to fund its own schools, hospitals, and infrastructure.
Yet, this elegant theory collides with a stark reality. For millions of Nigerians, the state is an absentee landlord. The social contract is not merely broken; it is a distant memory. Citizens endure daily gridlock, unreliable power, and under-resourced public schools. The pressing question from a middle class already squeezed by inflation is simple: what exactly are we being asked to pay for?
The Informal Sector: The Real Taxpayers of Nigeria
The reform faces its most profound challenge in engaging the informal sector—the drivers, market traders, and artisans who form the backbone of the economy. Research from SBM Intelligence reveals a crucial truth: an estimated 98% of Nigerians already pay 'taxes' daily. These are not remittances to the newly renamed Nigeria Revenue Service, but arbitrary cash payments to local union bosses, council touts, and street hustlers known as 'agberos'.
This parallel system offers no public services, only the threat of violence for non-compliance. Therefore, when Abuja announces a pro-poor exemption for annual incomes under 800,000 naira (approximately £400), a tomato seller in Lagos's Oyingbo market is unmoved. Her fiscal burden comes from the man collecting the daily 'ticket', not from a distant federal agency. The state is not introducing her to taxation; it is asking her to switch loyalties without offering a compelling reason.
Contradictions and Colonial Echoes
The government's mixed messaging has further eroded trust. While promoting a digital-first agenda to modernise compliance, another state arm signed a controversial memorandum of understanding with France. This deal, for Paris to assist in mining Nigerian taxpayer data, has been labelled 'digital colonialism' by critics like the Northern Elders Forum. At a time of rising anti-French sentiment in West Africa, the optics feed a damaging narrative that the reforms are designed for more efficient extraction, not national development.
Similarly, panic ensued over hints of reintroducing physical tax stamps on goods—a move the Manufacturers Association of Nigeria warned would be a bureaucratic nightmare, eroding the new act's gains. For formal businesses and remote workers now in the tax net, such schizophrenic policymaking breeds deep scepticism about the true intent behind the reforms.
The Regional Lesson: Permission to Tax Can Be Revoked
Looking at neighbouring nations provides a stark lesson. In Ghana, the government retreated from imposing VAT on electricity after fierce public backlash. In Kenya, President William Ruto was forced to tear up his finance bill following widespread, youth-led protests. Organised public resistance proved that the permission to tax is revocable.
Nigeria's administration has ploughed ahead, perhaps calculating that public discontent remains too fragmented or exhausted to coalesce into a unified force. The success or failure of this gamble will resonate across West Africa. If it works—if increased revenue translates into tangible improvements in public goods—it could become a blueprint for African self-reliance. If it fails, it will confirm the cynics' belief that the core issue is not revenue collection, but integrity and competence in spending.
Ultimately, success will not be measured in quarterly revenue reports. It will be gauged by whether a motorcycle taxi rider in Surulere registers his business because he trusts the state more than his union. It will be seen in whether a professional in Abuja feels her higher tax deduction results in a smoother commute or a better clinic. Nigeria's path is set, but it must now navigate a landscape of deep distrust and heightened expectations. The state has asked its people to pay up. The nation now waits to see what, finally, it will deliver in return.
