Nigeria’s tax tightrope: Revenue without relief
By Lemmy Ughegbe, Ph.D
Few issues capture the contradictions of governance in Nigeria today more sharply than the government’s tax drive. The Federal Government, grappling with dwindling oil revenues and mounting fiscal pressures, has intensified efforts to expand the tax net and boost internally generated revenue.
On paper, this is both necessary and overdue. No modern economy thrives on oil dependence alone, and Nigeria’s tax-to-GDP ratio, hovering around 10 per cent, is one of the lowest in the world. It falls well below the African average of 16 per cent and far short of the global average of 33 per cent.
The logic is straightforward: if the country is to fund infrastructure, pay its debts, and invest in education, health, and security, it must raise more money domestically. However, beneath this technocratic reasoning lies a dangerous tension.
The same government that urges citizens to pay more is presiding over a cost-of-living crisis unprecedented in recent history. Food inflation is officially above 35 per cent, transportation costs have tripled since the removal of petrol subsidy, electricity tariffs have climbed beyond the reach of the average household, and the naira continues its uneven battle against global currencies.
For millions of Nigerians, the call to pay more taxes sounds less like a civic duty and more like an unreasonable demand for sacrifice from an already exhausted people. This is the essence of Nigeria’s tax tightrope: a push for revenue without relief. It is a balancing act that risks toppling into widespread resentment and social upheaval if not managed with prudence and empathy.
The recent announcement by Minister of Finance Wale Edun is a prime example. Nigerians had been bracing themselves for the implementation of a fuel surcharge expected to take effect in January 2026.
After weeks of anxiety, the minister confirmed that the measure would not be implemented in January. Yet, crucially, he offered no new date. His reassurance sounded less like a reprieve and more like a postponement of hardship. Nigerians heard the message for what it was: the government still intends to impose the surcharge; it just has not said when.
This uncertainty is almost as punishing as the policy itself. It leaves families, businesses, and workers suspended in a climate of fear. Planning becomes impossible when one is unsure whether next month or next quarter will bring a fresh wave of economic pain.
The government’s approach, therefore, resembles the sword of Damocles hanging precariously above the heads of citizens. Instead of clarity, Nigerians are forced to live under the shadow of deferred hardship.
Here lies the deeper problem with Nigeria’s current fiscal direction. Revenue generation is being prioritised without a corresponding commitment to relief for those who will bear the burden. This is not merely a question of fairness. It is also a matter of practicality.
Tax compliance, in any society, depends on a sense of reciprocity between citizens and the state. People are more willing to pay when they see that their money delivers tangible benefits such as better roads, functioning hospitals, reliable power supply, and quality education.
In Nigeria, however, that link between taxation and service delivery remains broken. The citizen pays but receives little. The state collects but fails to provide adequate services.
To build a sustainable tax culture, the government must first restore this broken contract. It must demonstrate, even in modest ways, that tax revenues will not be swallowed up by corruption or disappear into the opaque accounts of bloated bureaucracies.
It must demonstrate seriousness by cutting the cost of governance, reducing the obscene perks of office for politicians, and channelling resources to areas where ordinary Nigerians can feel the impact. Without such steps, tax will remain, in the eyes of many, nothing but daylight robbery dressed in official robes.
The timing of tax expansion also matters. Citizens are being asked to shoulder more burdens at a moment when their incomes are stagnant or declining. The removal of fuel subsidy, while justified on economic grounds, has already eroded the disposable incomes of households across the country.
Food prices continue to rise daily, wages remain largely stagnant, and unemployment remains uncomfortably high. For the urban poor and rural dwellers alike, survival is the dominant preoccupation. Against this backdrop, every new levy or surcharge imposed by the state appears not only unfair but also inhumane.
This is why the government’s rhetoric of reform often falls flat. Reform, by definition, should lead to improvement. But for most Nigerians, the so-called reforms have meant only pain without promise. If reform becomes synonymous with suffering, it loses legitimacy and invites resistance.
To avoid this fate, the government must rethink its strategy. First, it should invest seriously in broadening the base of economic activity rather than squeezing more out of those already in the tax net.
The informal sector, which accounts for more than 50 per cent of Nigeria’s economy, remains largely untaxed, not because the people in it are unwilling but because the state has failed to create systems that make compliance simple, transparent, and rewarding.
Rather than piling new surcharges on fuel or electricity, the government should prioritise digital platforms, streamlined processes, and incentives that bring small businesses into the fold.
Second, the government must synchronise taxation with targeted relief measures. For instance, any revenue raised through surcharges on fuel or electricity should be transparently earmarked for social programmes that directly cushion the impact on the poor.
Subsidised transport systems, school feeding schemes, or healthcare support for vulnerable households could serve as visible returns on the sacrifices being demanded. Without such measures, taxation becomes a one-way street of extraction rather than a social contract of mutual benefit.
Third, the authorities must communicate clearly and honestly. Citizens can endure short-term pain if they trust that there is a credible long-term gain. But that trust cannot be built on vague promises or indefinite postponements.
The Finance Minister’s refusal to state a new timeline for the fuel surcharge, while politically convenient, has deepened public cynicism. A government that speaks in riddles cannot expect to inspire confidence. Clear timelines, honest explanations, and open consultation with stakeholders are indispensable to sustaining public support for reforms.
The political dimension must also not be ignored. Taxation is not just an economic tool; it is also a test of legitimacy. Governments that overreach in taxing without delivering risk provoking social unrest and political backlash.
History is replete with examples, from the Boston Tea Party in eighteenth-century America to the recent protests in Kenya, where unpopular tax measures ignited wider movements against governments. Nigeria should learn from these lessons.
In a society already fragile from insecurity, inequality, and mistrust of institutions, reckless taxation could become the spark that sets off broader instability.
At the heart of Nigeria’s tax dilemma is a question of justice. Who bears the burden and who enjoys the benefits? If the poor are asked to pay while the rich and powerful continue to live in obscene luxury, the system will crumble under the weight of its own inequities.
A credible reform agenda must therefore prioritise progressive taxation that ensures those with greater means shoulder a fairer share. Luxury goods, speculative financial transactions, and under-taxed multinationals should face stricter measures before additional burdens are placed on struggling households.
Ultimately, Nigeria stands at a crossroads. The need for revenue is undeniable. But revenue without relief is unsustainable. A tax system that extracts without giving back is a recipe for rebellion.
The government has a narrow window to shift course: to match its fiscal ambition with social empathy, to pair its drive for revenue with a visible commitment to relief. If it fails, the tax tightrope will snap, plunging both state and society into deeper crisis.
For now, Nigerians wait under the shadow of postponed hardship, hoping that their leaders will finally understand a simple truth: taxation, without justice and relief, is not reform. It is merely another burden in a nation where citizens are already weighed down by too many.
Lemmy Ughegbe, ANIPR, writes from Abuja
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