By Jennete Ugo Anya
Nigeria is hemorrhaging approximately $18 billion annually due to profit shifting, aggressive tax avoidance, and other illicit financial practices by some multinational corporations operating within its borders, according to Dr. Doris Uzoka-Anite, the Minister of State for Finance.
Speaking recently at a national conference on Illicit Financial Flows in Abuja, she described these practices as a “hydra-headed monster” that undermines the nation’s ability to fund critical public services.
The minister highlighted the federal government’s commitment to tackling tax evasion and avoidance under President Bola Tinubu’s administration, which is spearheading strategic fiscal reforms to build a resilient, self-reliant economy driven by revenue rather than debt or grants. For decades, Nigeria’s heavy reliance on volatile oil revenues has proven unsustainable, prompting a shift toward diversifying the revenue base, with a particular focus on non-oil sources like taxation.
Dr. Zacch Adedeji, Executive Chairman of the Federal Inland Revenue Service (FIRS), echoed the minister’s concerns, noting that aggressive tax avoidance by multinationals exploiting global arrangements threatens Nigeria’s fiscal stability. To counter this, FIRS is simplifying its system by promoting voluntary compliance through taxpayer education and streamlined processes.
A Transformative Tax Overhaul
The urgency of addressing these challenges has culminated in the recent signing of Nigeria’s sweeping tax reform bills, which experts suggest could be as consequential as a general election. Dr. Samson Abanni, an alumnus of the School of Politics, Policy and Governance (SPPG) in Abuja, described the reforms as a “quiet but profound shift” in fiscal power dynamics. In a media chat, Dr. Abanni likened the changes to “heart surgery on a nation,” noting that they have largely flown under the radar of state governments, which may have missed a critical opportunity to shape the debate over resource control.
At the core of the reforms is the establishment of the Nigeria Revenue Service (NRS), a centralized authority that consolidates the powers of the FIRS and streamlines federal tax collection under a single administrative umbrella. The NRS introduces a uniform system for tax registration, filing, audits, and enforcement, including a single Taxpayer Identification Number system. While states retain some revenue-collection powers—such as individual-resident taxes and stamp duties—their operational discretion has been significantly curtailed. Changes to tax rates now require consultation with the Joint Revenue Board, chaired by the NRS, and disputes are resolved in federal fora rather than state courts.
A Shift in Power Dynamics
Abanni emphasized that these changes, while not inherently negative, represent a significant realignment of fiscal control. The NRS now serves as the “clearing house” for tax-related revenues, extending its mandate to include fees and levies previously collected by agencies like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Maritime Administration and Safety Agency (NIMASA), and Tertiary Education Trust Fund (TETFund). These agencies retain their regulatory roles but must now rely on the NRS for collection, with funds channeled through the Treasury Single Account.
“When one man issues punishment and has to depend on another to effect it, it is clear who owns power,” Abanni said, illustrating the diminished authority of these agencies. Once key players in Nigeria’s fiscal landscape, they are now “tightly guided pieces in a centrally orchestrated game,” with the NRS emerging as the dominant force.
Promises and Trade-Offs
The reforms, championed by the presidential committee, are presented as a win for businesses, the poor, and even states. By addressing Nigeria’s estimated 70% tax gap and reducing the burden of multiple, overlapping levies, the system aims to create a healthier business climate and more stable revenues. The private sector, long frustrated by fragmented taxation, has welcomed the promise of clarity and efficiency, with over 200 taxes merged into just 10.
However, Dr. Abanni cautioned that the trade-offs must not be overlooked. While states’ revenue rights remain intact on paper, their practical authority has been significantly reduced. Tax complaints against states are now adjudicated by a federally appointed Tax Ombudsman, and agencies have lost the political leverage once afforded by direct revenue collection. “The channels through which money flows in a nation are the channels through which power flows,” Dr. Abanni said, noting that these reforms represent a “profound, massive, yet imperceptible” reordering of Nigeria’s fiscal system.
