February 25, (THEWILL) – Nigeria’s non-oil revenue, known for its tardy, clay-footed performance in previous years, has recorded exponential growth in the post-COVID-19 period. Data from the Federal Inland Revenue Service (FIRS) showed that the nation’s non-oil revenue soared from N6.4 trillion in 2021 to N12.37 trillion in 2023, representing an increase of 93.2 percent.
Before then, it had dipped from N5.3 trillion in 2019 to N4.9 trillion in 2020; crawled up to N6.4 trillion in 2021, before sprouting into a record peak of N10.1 trillion in 2021 to hit the all-time high of N12.3 trillion in 2023.
Behind this massive transformation is the aggressive policies of the FIRS which saw the revenue agency fire from all cylinders at a time the nation’s oil fortune had begun to dwindle considerably.
The oil revenue decline was due to a combination of extraneous factors such as volatile energy prices at the international oil market, and severe domestic distortions emanating from unyielding corruption, mismanagement and oil theft.
Although initial strategic policies such as the Voluntary Assets and Income Declaration Scheme (VAIDS) and the digitalisation of the tax clearance process set the pace, the nation’s revenue agency has maintained a continued tempo in the transformation of its operations to achieve optimum results.
VAIDS is a time-limited opportunity for taxpayers to voluntarily regularise and remediate their tax status with respect to previous tax periods that the taxpayer had been in default by making a full, fair, complete, honest and verifiable declaration of their assets and income. It waived the stipulated penalties against non-compliance and allowed tax payers to structure their liabilities for better compliance.
The former Executive Chairman of FIRS, Babatunde Fowler, disclosed that the federal government recovered about N30 billion from individuals and corporate establishments through the VAIDS tax amnesty scheme.
According to him, 90 percent of the amount was collected by the FIRS, while the remaining 10 percent was recovered by the states. Mr Fowler, who was also the chairman of the Joint Tax Board, stated that the national taxpayers’ database increased from 14 million in 2016 to over 19 million in 2018. He expressed optimism that the number would translate into a positive growth in the country’s Tax Revenue to GDP ratio.
“The VAIDS policy was a watershed in the annals of the nation’s tax history. It provided a platform for FIRS and the state revenue agencies to build upon and expand their tax base while their tax revenue soared,” said Macaulay Akamikor, a tax expert.
Akamikor noted that the continued reforms by the FIRS to enhance tax revenue through the introduction of cutting-edge technology and capacity building programmes was based on the huge success of the VAIDS initiative. According to him, this gave the FIRS the confidence to project high revenue targets every year and that is why the story is now different from what it used to be concerning the non-oil revenue stream.
Stressing on the importance of growing non-oil revenues to tackle Nigeria’s chronic financial distress, the Budget Office said, non-oil revenues are more stable and sustainable sources than oil revenues.
The budget office noted in its 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper. that Nigeria’s oil revenues remained low even with the passage of the Petroleum Industry Act largely due to PMS subsidy, oil theft, low investment, and generally weak management of the sector.
“These factors have resulted in a decline in oil revenues, putting pressure on the government’s finances and widening the budget deficit, the budget office said.
This appears the focus of the current executive chairman, FIRS, Zacch Adedeji who disclosed in January that FIRS collected N12.3 trillion non-oil revenue in 2023 which accounted for a 74 percent of the FIRS tax performance for that year.
Speaking on revenue generation in 2023 during a management retreat organized by the agency last January, Adedeji said the agency’s revenue collection increased by over N2 trillion compared to a target of N10.17 trillion that the service had in 2022.
Adedeji, who attributed the increase to the impressive performance of the non-oil sector, said revenue from that sector increased by 54 percent in 2023 compared to 2022. Breaking down the N12.37 trillion tax revenue, he said the oil sector generated N3.17 trillion (25.6 percent) and the non-oil sector contributed N9.2 trillion (74.4 percent).
Speaking on the target for 2024, Adedeji said the agency aimed for a tax revenue of N19.4 trillion. According to him, the strategy for reaching the target is to develop proactive engagement by establishing regular communication.
“We will provide customised and efficient services that address the unique needs of large taxpayers and key sector contributors,’ he said.
THEWILL’s findings showed that the FIRS is determined to improve service delivery, expand tax net and enhance compliance measures by improving enforcement activities in line with relevant laws, and increase collaboration with strategic stakeholders. This provides for what some stakeholders call paying tax joyfully.
Reacting to the feasibility of the N19.4 trillion revenue target, Adedeji said FIRS must provide an effective tax collection system that departs from the old order. And this is imbibed by the sub-nationals whose tax segments of their internally generated revenues, IGR, has been on the increase in recent years.
The FIRS boss announced that the Service is not essentially a revenue-generating agency, stressing, “If we go with the plan to rejuvenate the economy, the goal is to tax prosperity and not poverty. Our duty is to have that viable structure to aid effective collection and development. So the focus is to improve tax collection effectiveness without increasing tax.”
The transformation of Nigeria’s tax ecosystem shown in the FIRS’s policy on taxing the informal sector, which Adedeji said aims to move the informal sector to become formal, is a welcome strategy.
“Our focus is actually to bring the informal sector to the formal sector. How do we bring all these vocational skills, how do we get them registered, and we put them in such a way that the government can actually deal with them and make them formal?” Adedeji said.
“So the focus should not be to go and tax the informal sector. The focus would be that we move from the informal sector to the formal sector by registering them, improving their skill and we can then tax them.”
THEWILL learnt that the FIRS unveiled a new organisational structure recently approved by the federal government which aims to improve the efficiency and effectiveness of the operations of the agency.
“In our pursuit for a more efficient and contemporary tax administration methodology, we are embracing an integrated tax approach, leveraging technology at every step.
“This approach positions FIRS at the forefront of innovation, ensuring that we meet the evolving needs of our taxpayers in a rapidly changing world.
“By tailoring our services to specific taxpayer segments, we aim to simplify the taxpayer experience. No more complexities, no more overlaps—just a seamless and user-friendly interaction for every taxpayer,”
He further said the agency is taking time to move from traditional tax categorisation to formulating taxpayer segments based on thresholds.
“This tailored approach ensures that taxpayers are guided and serviced according to their specific needs, eliminating confusion and redundancy in tax administration,” Adedeji said.
“Behind this transformative initiative are carefully considered considerations detailed in our operations plan.
“These considerations set the stage for a more responsive, efficient, and user-friendly tax administration system.
“Let me assure you that due process will be followed in this reformation. Extensive re-orientation and change initiatives will be implemented to ensure that no one is left behind.”
Adedeji, therefore, said the FIRS is restructuring and the goal is to have an unyielding commitment to excellence in tax administration. By this tempo, the FIRS will hit the projected N20 trillion non-oil revenue in 2024.
Also, to facilitate the achievement of the target is the ‘human face’ of the system called Tax Appeal Tribunal (TAT) to adjudicate cases of injustice in the administration of tax policies. News reports revealed that almost 80 new TAT appeals with a disputed value of N73.3 billion and USD19.5 million have been treated at the TAT.
Dangote Sugar Plc recently won a tax liability case of N220,973,124 against the federal government at the TAT.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
