If there’s one thing that can support Nigeria’s economic growth, it’s improving how the government manages taxes, not by increasing the burden but by making the system more rewarding and transparent. A good place to begin is with tax incentives and ensuring tax refunds are processed quickly and fairly.
Today, Nigeria collects less tax than many comparable countries. Our tax-to-GDP ratio stands at just 10.6 percent. This means that for every ₦100 the country earns, only ₦10.60 comes from taxes. In contrast, South Africa stands at 28 percent and Kenya at 16 percent.
These numbers show that Nigeria still has great potential to grow its revenue, especially from non-oil sources. Encouragingly, the current administration aims to surpass the African average of 16.5 percent by achieving 18 percent by 2025.
Importantly, Nigeria’s tax system is not designed to stifle economic activity. Rather, it seeks to make citizens and businesses more responsible partners in development and to ensure everyone enjoys the benefits of contributing.
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When you pay your tax and I pay mine, development becomes easier to achieve. Revenue increases, borrowing can decline, and we build a more sustainable economy together.
That said, many Nigerians remain cautious about engaging with the tax system. One reason is that some do not feel adequately rewarded for doing the right thing. Others face hurdles when trying to get refunds, especially when processes appear slow or unclear. These challenges can reduce confidence in the system.
However, the path forward is promising.
Providing clear tax incentives such as deductions or credits for investments in education, health, or infrastructure can encourage more voluntary compliance.
These kinds of incentives already exist in Nigeria, but more effort is needed to raise awareness among taxpayers. Strengthening public education around tax benefits will help more people understand that the system is designed to support, not burden, them.
Globally, this approach has worked well. Singapore and South Korea use targeted incentives and reliable refund systems to improve tax compliance and raise revenue without raising rates. The UK and Canada have also built trust through quick and transparent refund processes. Nigeria can adapt similar principles to suit our context.
The Federal Inland Revenue Service (FIRS) is already implementing reforms to expand the tax base and increase transparency. Ongoing efforts to bring the informal sector into the formal tax net and improve processes are signs of progress. These steps can go even further if taxpayers experience fairness and efficiency when dealing with refunds and incentives.
Let’s be clear: Nigeria’s tax system is not meant to punish. It is built to promote growth and shared responsibility. A tax system that treats people fairly and delivers on its promises is one that earns trust.
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When Nigerians see that paying taxes leads to visible benefits like better roads, schools, healthcare, and job creation, more people will engage willingly. And with greater compliance, Nigeria will need to rely less on borrowing, keeping our economy more stable and resilient.
Let’s champion a tax culture built on trust and transparency, empowering us all to build, to grow, and to collectively prosper in a truly sustainable way.
Abayomi Fashina (Fash): Tax and Risk Professional | BSc, MSc, AAT, ACA
