Nigeria Struggling Tax Revenue Rises By 29% in 2021

Nigeria’s tax receipts in 2021 rose by 29.4% to 6.41 trillion naira ($15.5 billion), the head of Federal Inland Revenue Service (FIRS), Muhammad Nami, said on Thursday.

Nigeria’s government has repeatedly said it wants to boost non-oil revenues since oil sales make up 90% of foreign exchange receipts. But raising more money from taxes has proved difficult in a country where so many small business are not registered.

It plans to prioritise tax collection from its digital economy in 2022 and focus on non-resident firms with significant economic presence that generate turnover in the country.

Nami said the final number had come in slightly higher than the initial forecast of 6.40 trillion naira, thanks to digitization which facilitated collections in 2021. Value-added taxes contributed the most followed by corporate taxes, he said.

“The deployment of the new automated tax administration system in June 2021 was a game-changer,” Nami said in a report.

Tax receipts dropped to 4.95 trillion naira in 2020 after a COVID-19 induced lockdown impacted businesses and a recession that year hurt economy. The FIRS collected 5.27 trillion naira in 2019, it said.

The World Bank said last year that Nigeria needed to boost non-oil taxes to at least 12.75% of gross domestic product to boost growth. It said tax collection sits at around 4.5% of GDP, one of the lowest rates in the world.

The FIRS said non-oil sector contributed 69% to total taxes in 2021, as much as in 2020, and up from 60% in 2019.

($1 = 414.90 naira)