November 14, (THEWILL) — Nigeria’s renewed push to raise government revenue through an expanded and more aggressive tax regime is facing mounting criticism from economists, private-sector leaders, and development experts who warn that the current approach could undermine the country’s target of achieving double-digit economic growth and building a $1 trillion GDP within the decade.
A Revenue Drive Built on a Fragile Economy
The federal government has repeatedly defended its tax reforms as essential for reducing dependence on borrowing and stabilizing public finances. However, analysts argue that the drive is unfolding at a time when the economy is grappling with soaring inflation, weakened consumer purchasing power, sluggish industrial output, foreign exchange volatility, and elevated energy costs.
Several experts say that pushing new or higher taxes into an already weakened system risks shrinking the productive economy instead of strengthening it.
Business Community Raises Alarm
Key business groups including manufacturing associations, traders, and SMEs have warned that the rising tax burden could choke an economy already battling high operational costs. SMEs, which account for over 80% of Nigeria’s employment, say they are being asked to contribute more despite receiving very little in terms of infrastructure, electricity, or policy environment.
Manufacturers argue that the reforms ignore the sector’s severe constraints:
- escalating input costs
- unreliable power supply
- difficulty accessing FX
- declining factory capacity utilization
Many warn that additional taxes could accelerate factory shutdowns and job losses.
Concerns Over Timing and Strategy
Economists broadly agree that the country needs to improve its tax-to-GDP ratio—but say the method and timing matter. Nigeria’s tax-to-GDP ratio, at around 10%, is among the lowest in Africa. But experts insist this cannot be fixed simply by taxing the same formal businesses and salary earners more heavily.
They advocate for a “productivity-first” strategy: boost output, formalize the informal sector, drive inclusive growth, then widen the tax base gradually.
One of the most persistent criticisms is that the government’s reforms still fall short on capturing revenue from the large informal economy, which accounts for more than half of national output.
Instead of broadening the base, analysts say policymakers appear to be piling pressure on those who are already compliant, thereby risking lower voluntary compliance and encouraging tax avoidance.
Governance Costs and Public Trust
Many industry leaders have also questioned why the government is demanding more from businesses and citizens without substantially reducing the cost of governance, which remains one of the highest in the developing world.
Public trust is a recurring theme. Stakeholders argue that widespread perceptions of waste, inefficiency, and corruption reduce citizens’ willingness to pay more taxes, and that reforms must go hand-in-hand with visible improvements in transparency, service delivery, and fiscal discipline.
Implications for the Trillion-Dollar Dream
Nigeria’s ambition to build a $1 trillion economy by the early 2030s hinges on sustained investment, improved productivity, and stable macroeconomic policies. Critics fear that an aggressive tax-first strategy could deter investors, slow domestic expansion, and reduce competitiveness. Outcomes that directly threaten long-term growth targets.
Economists emphasize that double-digit growth is incompatible with policies that suppress consumption, investment, and manufacturing output. They maintain that sustainable revenue expansion cannot come at the cost of economic expansion.
Balancing Revenue with Growth
Experts recommend a recalibrated approach focused on:
- simplifying tax laws
- digitizing revenue collection
- expanding the tax net to include the informal sector
- reducing governance waste
- improving infrastructure and power supply
- implementing pro-growth policies for SMEs and manufacturing
The consensus is clear: Nigeria must raise revenue but not at the expense of the very economy that must produce the trillion-dollar dream.
Ogochukwu Onwaeze
