For decades, we have diagnosed our fiscal anaemia as a failure of tax policy. We were wrong. The real crisis is a failure of state.
If the Nigerian state were a patient, its persistent fiscal weakness would have been misdiagnosed for a generation. The symptoms are clear: an inability to fund basic infrastructure, a debilitating reliance on debt and oil, and a revenue-to-GDP ratio that languishes among the world’s lowest. The prescribed cure, repeated like a mantra, has been “tax reform” – new levies, broader bases, fiercer collection. Yet each round of treatment leaves the patient weaker. The reason is profound and unsettling.
Nigeria does not have a revenue problem; it has a state capacity problem. Our crisis is not that citizens won’t pay, but that the state has not earned the right to collect.
This is not a semantic distinction; it is the core of our national fiscal dilemma. A tax problem suggests technical fixes. A governance problem indicts the entire system. Until we shift the debate from accountancy to accountability, from tax codes to institutional credibility, we will continue to pour effort into reforms that are destined to underperform. The evidence is not in our tax laws, which are often adequate, but in our outcomes, which are perennially dismal.
The failed prescription – chasing taxes in a governance vacuum
For years, the narrative has been comforting in its simplicity. “Our tax base is narrow,” the experts say. “Compliance is low.” The solutions follow logically: introduce new taxes like the telecoms excise or the proposed cybersecurity levy; empower the Nigeria Revenue Service (NRS) with digital tools; set ever-higher collection targets. This approach is politically convenient – it focuses on technical measures and citizen obligations, sidestepping harder questions about state performance.
But this prescription is built on a flawed premise: that revenue can be legislated into existence. It cannot. Revenue is a consequence. It is the product of a social contract, where citizens and businesses consent to part with their money in exchange for public goods, security, and the rule of law. Where that contract is broken – where the state is seen as extractive, inefficient, or corrupt – compliance becomes an act of folly, not citizenship. Nigeria has spent decades designing the perfect tax lock while wilfully neglecting to build the door of governance it is meant to secure.
The three pillars of failure – where governance breaks down
Our revenue shortfall can be traced directly to three catastrophic failures of governance.
1. The enforcement abyss: Rules without rule
Nigeria is a graveyard of good policies. We possess volumes of tax legislation and regulations. What we lack is the impartial, consistent will to enforce them. Enforcement is not a system; it is a spectrum of discretion. For the small business, it can be relentless and suffocating. For the politically connected conglomerate or the opaque informal sector giant, it is negotiable. This selective application of law is poison. It signals that compliance is optional for the powerful, transforming tax payment from a civic duty into a strategic calculation. Why comply when the system is demonstrably unfair? The state’s first failure is its inability to project a basic, uniform authority – the foundational prerequisite for any tax system.
2. The fragmentation trap: A state at war with itself
Imagine a national effort where the left hand not only ignores the right but actively competes with it. This is Nigeria’s revenue architecture. Federal, state, and local agencies operate in siloed fiefdoms, with overlapping mandates, poor data sharing, and zero strategic alignment. The result is a taxpayer’s nightmare and an evader’s paradise. Compliant entities are harassed by multiple agencies for the same liability, while sophisticated actors exploit the jurisdictional gaps. This bureaucratic cacophony is not an accident; it is a direct failure of political and administrative coordination – a core function of competent governance that remains utterly elusive.
3. The trust deficit: The broken social contract
This is the most critical pillar. Taxation is ultimately an act of faith. Citizens pay because they believe, however grudgingly, that their money will be managed responsibly for the collective good. In Nigeria, that faith has been obliterated. Years of opaque budgeting, scandalous procurement revelations, and a glaring disconnect between tax burdens and service delivery – be it power, water, or security – have severed the link between payment and benefit. The public sees a state that is quick to collect but slow to deliver. When people ask, “What do we pay taxes for?” and the answer is a crumbling road, a dark classroom, or a ransom payment, the moral and practical foundation for taxation collapses. No enforcement drive can overcome this deep, justified cynicism.
The digital mirage – technology as a mask, not a solution
In recent years, a new saviour has been proclaimed: technology. Data analytics, integrated digital platforms, and automated systems are hailed as game-changers. They can be, but only when deployed into a functioning institutional environment. Deploying advanced technology into a broken governance system is like installing a Ferrari engine in a cart with no wheels and a drunk driver. It merely digitises inefficiency and corruption. “Garbage in, garbage out” becomes “corruption in, corruption out”, but faster and with a login screen. Without meritocratic staffing, robust internal audits, and a culture of integrity, digital tools become new avenues for rent-seeking and exclusion. We are chasing tech solutions before solving the human and institutional problems they are meant to serve.
The path to a cure – building the state that can collect
Acknowledging that our crisis is one of governance is the first, vital step. The second is committing to the long, hard work of rebuilding. This requires a fundamental pivot in strategy:
· From tax targets to institutional integrity: Stop measuring success solely by collection figures. Start measuring the professionalism of agencies, the fairness of audits, the transparency of processes, and the reduction in compliance costs for honest businesses.
· Invest in the bureaucracy, not just the software: Build a career-based, well-paid, and highly trained revenue service insulated from political patronage. Protect whistleblowers. Celebrate and promote officers known for integrity and competence.
· Launch a “visible returns” initiative: Government must consciously and loudly link specific tax streams to specific, delivered projects. “This road was built with company income tax.” “These hospital beds were funded by VAT.” Reforge the broken link between payment and benefit with brutal transparency.
· Create a national revenue consensus: A high-level, public council involving all tiers of government, the private sector, and civil society to harmonise collection, share data, and end the predatory multi-agency harassment that stifles business.
· Make one high-profile example: Apply the law, without fear or favour, to one major, politically insulated evader. A single, undeniable demonstration of impartial enforcement would do more for compliance than a hundred new tax circulars.
Conclusion: Revenue follows governance.
The history of successful fiscal transitions globally, from post-conflict Rwanda to reform-era Georgia, shows a constant: they fixed the state first. They established basic order, demonstrated impartial authority, and showed citizens that public resources were managed accountably. Then revenue followed.
Nigeria’s pursuit of revenue without governance is a chase for shadows. We cannot tax our way out of a crisis created by our inability to govern. Every new levy imposed on a distrustful populace in a system seen as unfair deepens resentment and fuels avoidance.
Kingsley Eiguedo Okoeguale is a fellow of the Institute of Chartered Accountants of Nigeria and a public policy analyst.
