Government Revenue is too low, economists highlight Nigeria’s weak revenue collection infrastructure


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Economists said Nigeria’s public debt, at 20% of GDP, is not an issue, but the challenge is government has not created strong infrastructure to maximize its revenue.

The experts agreed that Africa’s largest market is merely facing challenges caused by crumbling revenue collection infrastructure and service. This, they highlighted, has led to an inefficient tax collection system resulting in over-dependence on revenue accruing from sales of crude oil

However, Nigeria’s excess crude oil account has slipped by 78% to $7o million, between January and February 2020, leaving the country exposed to shocks from external economic forces. To prevent the country from falling further due to the decline in savings from oil sales, the Federal Government must provide a buffer through effective tax collection system and export of other commodities.

The experts believed that achieving that audacious target will demand the country restructure its crumbling fiscal infrastructure, especially the system that leaves a crack for tax evasion.

Presently, the country is working to raise its tax revenue from 6% to 15% to meet the World Bank stipulated standard for poverty reduction and economic growth. That is expected to help government meet debt’s interest payments which have swelled to 62% of revenue retained at the central after states in the federation received their allocations.

According to Yvonne Mhango, an economist that works for Renaissance Capital, the swelling interest payment isn’t the problem rather the fact that government has failed to bring in enough money to settle its bills.

She emphasized, “It is not that interest payments are too high; it is government revenue that is too low.”

The Federal Inland Revenue Service (FIRS) reportedly loses $15 billion annually to tax evasion. To tackle that loss the government raised the Value Added Tax to 7.5% from 5% early this month.

Shubham Chaudhuri, the Country Director for World Bank, explained that creating a system to maximize domestic tax collection is critical to economic survival at this point.

He said, “This is clearly one of the things that Nigeria has to get its head round, and it has to be a concerted effort to raise domestic revenues.”

Toyin Afilaka
Toyin Afilaka
Toyin Afilaka writes with simplicity and insight. He aims to enrich the Nigerian small business landscape. Through Hustle24 he connects entrepreneurs with information about new policies, enterprise solutions and opportunities that will aid their 'hustle'. He has written extensively for CobraReview, a product review portal, and served as a lead project manager for MarketingMix where he consulted as PR consultant for MTN Project Fame and Business Next Titan etc.


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