Nigeria’s tax reform and its impact on businesses

Jul 21, 2023|Adesola Afolabi

Key questions this article answers:

The Nigerian government recently proposed digitising revenue collection to improve revenue flows. How will the implementation of this policy affect Nigerian businesses?
Rwanda is an economy that has implemented similar changes in its revenue collection process. What can we learn from the country?

Gone are the days when heads of state in Africa commented that money was not a problem; but how to spend it.

Today, the news is that there is a funding squeeze in Africa as governments need to earn more to support public services or meet responsibilities like paying off debt and interest on existing loans.

As a result, the Nigerian government has become innovative. Recent news reports suggest the Tinubu-led administration aims to roll out tax and revenue reforms. One notable mention is the digitisation of revenue collection to increase and accurately monitor overall earnings. Nigeria’s revenues have shrunk in recent years, becoming insufficient to meet interest payments on debt obligations. In the first half of 2022, interest payments surpassed revenue (108%) in Nigeria, meaning the country had to borrow to pay interest on existing debt.

According to Nigeria’s special adviser on revenue, Zacchaeus Adedeji, the FG aims to harmonise how it collects revenue using technology to help the government deepen and better monitor revenue collection.

Mr Adedeji’s explanation essentially suggests that revenue collection from businesses and individuals will change. So what will this decision mean for businesses often affected by such policies if implemented?

Nigeria's revenue reform drivers

When successfully implemented, the Nigerian government’s policy will have far-reaching impacts beyond expected government revenue changes. We (Stears) expect second-order effects on businesses.