The Nigerian government plans to waive tax penalties, outstanding penalties, and interest for companies, in a move that is part of changes to make it easier to conduct business and boost revenues.
Investors often cite Nigeria’s many taxes, debatable penalties, and multiple revenue collection agencies as major factors adding to the cost of doing business and discouraging investment.
Nigeria has one of the lowest tax collection rates in the world at approximately 10.8 percent of gross domestic product, though tax receipts did rise by 56 percent in 2022 to a record N10 trillion. Still, only 47 percent of this year’s budget will come from revenues and the rest from borrowing.
President Bola Tinubu’s predecessor, Muhammadu Buhari, left a N77 trillion debt to local and foreign creditors. Already, 96 percent of the government’s revenue is being used to service debt and there have been fears that the government’s cash crunch could worsen if additional revenue is not generated.
To change the narrative, the government has set up a committee to reform the tax system, which suffers from high levels of evasion; enhance collection efficiency; and remove barriers impeding business growth as it tries to widen the tax base and achieve the target.