The Nigerian Government has tasked the Federal Inland Revenue Services, FIRS, to significantly increase tax revenue for 2024 to the tune of N19.4 trillion.
This target represents a nearly 60 percent jump from the N12.3 trillion collected in 2023 and forms part of a broader strategy to raise overall government revenue as a percentage of GDP to 25 percent.
The 2024 projection relies on several key assumptions, including a stable crude oil price of $77.96 per barrel and production of 1.78 million barrels per day.
Furthermore, the exchange rate is expected to remain around N750 per US dollar, and tax policies will stay unchanged.
The rationale behind this target stems from the recognition that Nigeria’s current tax-to-GDP ratio is far lower than many other African countries, let alone developed nations.
The Minister of Finance and Coordinating Minister for the Economy, Wale Edun, emphasized this point, stating, “Ours is still around 10 percent of GDP. At the highest level, it goes to about 55-60 percent, where the government has a lot to spend to provide social services as well as basic infrastructure.”
“To achieve this ambitious goal, the government plans a two-pronged approach. Firstly, it has started directly collecting its share of revenue from January 2nd, 2024, utilizing advanced technology and improved methodologies from Government Owned Enterprises (GOEs). This move aligns with the global trend of prioritizing domestic resource mobilization over expensive debt.
“Secondly, the government aims to significantly increase revenue from government-owned enterprises. These entities are mandated to spend only 50 percent of their earnings, with the remaining surplus contributing to the Treasury which is the Consolidated Revenue Account (CRA). The Finance Minister urged these enterprises to comply with regulations and the Fiscal Responsibility Act to effectively achieve this goal, The Nation reports.
“While the goals are ambitious, challenges lie ahead. Ensuring efficient collection processes, minimizing leakages, and maintaining public trust are crucial for long-term success. The Minister of Finance acknowledged these stating that, “People in Nigeria, taxpayers, the general public, what they want to see is that their money is faithfully collected as it should be and properly spent and accounted for with minimal excess waste and leakage.”
“Beyond simply collecting more taxes, the government also recognizes the importance of fostering economic growth and formalizing the informal sector.”
FIRS chairman, Zacch Adedeji, stated: “We are going to tax prosperity, not poverty. We are going to focus on the fruit and not the seed.” This approach emphasizes creating a thriving economic environment that naturally generates higher tax revenue as opposed to simply burdening existing taxpayers.
“The focus lies on expanding the tax base by formalizing the numerous individuals and businesses currently operating within the informal sector. Initiatives like mandatory National Identification Number (NIN) registration aim to identify and connect with these potential taxpayers, facilitating their transition into the formal economy. This process goes beyond mere taxation, encompassing skill development and registration support to empower and integrate informal businesses into the mainstream system.
“Our focus is to drive voluntary compliance and in a few minutes by God’s grace we will be unveiling the new organisational structure we have, and what we have done in general is to move from functional or unit type of tax to customer-centric and what this means is that today, we have VAT or stamp duty offices, the way we are structured today does not allow us to develop expertise in what we want to do so we are moving from that kind of functional or unit tax to customer-centric.
“So we have large small and medium tax offices, what that would mean is that instead of having VAT, withholding tax etc office, we would have a one-stop shop for tax payers, we will have one tax office, when you go to the office, these categorizations will be done by the threshold of your turn over, all types of taxes will be done at that one-stop shop.
“And we want to use that to drive voluntary compliance because the focus cannot be on litigation investigation, those ones will just be 10 percent of all our strategy and the way to drive this voluntary compliance is that there will always be consequences for noncompliance.
“Our duty is to provide an effective tax collection system, we are not a revenue generating agency but a revenue collecting agency.”
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