Why Nigeria’s gig economy may grow beyond tax reach

Nigeria is struggling to capture tax revenue from its fast-growing gig economy, as millions of freelancers and digital workers earn income outside the visibility of a system that is built to tax only structured, formal employment.

Jonny is a Lagos-based software developer who builds websites for clients across Nigeria and abroad. Payments come in irregularly, sometimes through platforms, sometimes directly into his bank account.
But one thing is consistent: he does not pay tax on most of that income.

“When I work directly with clients, I don’t charge or remit any tax. It’s only when I’m paid through platforms like Upwork or through a company that there may be some form of deduction,” said the Lagos-based software developer.

His experience highlights a growing disconnect in Nigeria’s economy, one where income is rising rapidly, but remains largely invisible to tax authorities.

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That invisibility is at the heart of Nigeria’s struggle to tax the gig economy.
Unlike traditional employment, where income is structured, reported, and taxed at source, gig work is fragmented, flexible, and often undocumented.
Earnings come from multiple clients, across different platforms, and sometimes from outside the country, making it difficult for authorities to track, assess, and enforce tax obligations.
Experts say this structural mismatch between how the economy is evolving and how the tax system is designed is the real problem.

“Challenges still exist as many gig workers operate informally as platforms may not fully share user income data with the Nigeria Revenue Service (NRS) and cross-border transactions are still difficult to track and enforce,” said Yvonne Afolabi, Principal tax consultant at Techpoint, an Abuja-based firm.

Read also: Tax authorities tighten scrutiny on related-party transactions

Driven by high unemployment and growing internet access, the country now ranks among the top freelance markets globally, generating an estimated $0.2 billion annually according to World Population Review and accounting for a significant share of Africa’s online work.
But while the digital economy is growing, tax compliance is not keeping pace.
Studies and industry analysts point to low awareness, weak enforcement, and the complexity of gig work as key barriers to compliance. Many workers either do not fully understand their tax obligations or operate in ways that make compliance difficult to enforce.

Even where the law is clear, enforcement remains a challenge.
Under Nigeria’s updated tax laws, digital workers are required to register, file, and pay taxes under existing frameworks.
“Wherever you may be playing, you must understand the fact that you may be liable to tax in Nigeria,” said Olamide Obajimi, tax partner at Olaniwun Ajayi.
But the ability to enforce that obligation across millions of independent earners remains limited.
“I do not think the tax authorities currently have the infrastructure to track and enforce compliance across millions of digital earners,” said Agbada S. Agbada, a tax associate.

For some workers, taxation only happens when structure is introduced.
Victor Nanmwa, a freelance data analyst, said his employer deducts and remits taxes on his behalf.
“My company calculates and settles my taxes and ensures that I operate according to the rules,” he said.
But outside that structure, gaps remain. Payments from independent clients, especially those made directly, often go untaxed.
This contrast underscores the core issue: the tax system works where income is visible and organised, but struggles where it is fragmented and informal.

To address the gap, authorities are turning to technology.
Ayodele Subair, chairman of the Lagos State Internal Revenue Service (LIRS), said the agency is phasing out manual processes and moving to a fully integrated digital system.
“Eventually, it will be fully integrated, and people will not be able to operate manually anymore. It’s going to be totally computerised,” he said.
He added that collaboration with financial technology firms could improve visibility over digital transactions.
“We see fintechs not as adversaries but as partners in building a transparent, efficient, and sustainable revenue system,” he said.
However, experts caution that technology alone may not resolve deeper structural issues, including weak taxpayer identification, fragmented income streams, and the informal nature of gig work.

For the government, the potential upside is significant. Even modest improvements in compliance among digital earners could generate billions of naira in additional revenue.
But there are risks.
Aggressive enforcement, without simplifying compliance, could discourage the same entrepreneurial activity that has driven the growth of the gig economy, particularly among young Nigerians navigating a weak formal job market.

Ultimately, Nigeria’s struggle to tax the gig economy reflects a deeper mismatch.
A modern, fast-growing digital workforce is colliding with a tax system built for a more structured, visible economy.
Until those two systems begin to align, a significant share of Nigeria’s economic activity may continue to grow beyond the effective reach of the tax net.