PREVIEW
Desperately trying to balance the books, Abuja is centralising control of all federal revenues
President Bola Tinubu has rejected opposition calls to delay the implementation of a new tax regime, as the government pins its hopes on streamlining administration and collection to increase revenues.
The new taxes and authorities came into force on 1 January despite opponents, primarily lawmakers from Tinubu’s own All Progressives’ Congress (APC) and from the poorer northern states, claiming that the final four bills are different to the versions passed by lawmakers in June. In response, the National Assembly has ordered the release of Certified True Copies of the four bills.
Tinubu wants to increase Nigeria’s tax-to-GDP ratio of 13.5% one of the lowest across Africa, to 20% by 2027. But most headline rates are either staying the same or being cut. With income tax being tweaked to introduce a top rate of 25% and exempt those earning less than US$830 a year, and Value Added Tax – the country’s primary source of tax revenue – remaining at 7.5%, improving collection will be critical to increasing receipts. Corporate tax has also been reduced from 30% to 25%; certain categories of businesses will no longer be taxed on losses.
Under the new regime, the Federal Inland Revenue Service (FIRS) has been replaced by the Nigeria Revenue Service (NRS), which will have the power to collect all receipts on behalf of the government (AC Vol 66 No 10, Tinubu’s tax revolution tightens his grip). That has stripped dozens of state agencies of their own right to collect levies, with Nigeria Customs Service, losing its power to collect excise duties on imports, and the Nigerian Upstream Petroleum Regulatory Commission losing its authority to collect signature bonuses on oil blocks to the NRS. Tinubu’s Treasury says that more than $2.6 billion in state agency receipts were not remitted in 2024.
The NRS will also have the authority to collect taxes on behalf of state and local governments, should those sub-national entities choose to delegate the responsibility. The collection fee for the NRS is expected to be at least 2%. The new super-agency will be led by Tinubu’s protégé, Zacchaeus Adedeji, who has overseen the FIRS since stepping down as the president’s advisor on revenue in 2023 (AC Vol 66 No 9, Tinubu exudes confidence as opposition starts to fold).
Adedeji’s influence will expand as the new law takes effect. He will control more funds than any other official in Abuja, rivalling the managing director of the national oil company and the governor of the central bank.
Centralising tax collection in Abuja caused a major backlash last year, stalling the bills for six months in parliament (AC Vol 65 No 25, Reforms spark a national tax revolt). Tinubu, having started his presidency by scrapping subsidies, has won another fiscal battle.
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