Educated and middle-class Nigerians accept some assertions about the country wholesale and repeat them like some gospel truths. One of such assertions is that Nigeria has a revenue problem.
We are quick to reel out figures to back this up: Nigeria’s tax-to-GDP, at 6 percent, is one of the lowest in Africa; Nigerians do not really pay tax and the government has no capacity to collect tax.
Since the discovery of oil and the inflow of petrodollars, the government no longer required tax from its citizens to raise revenue, so it made no effort to modernise and strengthen the taxation system to enable it to collect more taxes; a sign of Nigeria’s revenue problems is the new reality that government spends between 90 – 98 percent of revenues on debt servicing while borrowing to fulfil routine government obligations like payment of salaries.
Those reasonings rather show a slavish devotion to and rehashing of Euro-American theories and institutions without critical thought on how those are adapted to the Nigerian and African situations
Many trace the problem to the inability of the government to collect taxes from players in the informal economy, estimated to make up about 67 percent of the Nigerian economy. Even in Lagos where the sheer bravado of the government has succeeded in raising tax revenues to over 60 percent of state revenues, all efforts to collect taxes from the informal economy have been met with failure due to resistance and complex logistics. The state government even complains that the cost of tax collections in the informal economy is higher than the taxes collected.
But like I argued last year on this page, all these figures, while technically correct, are far from the whole truth and do not give a clear picture of the actual problem. Those reasonings rather show a slavish devotion to and rehashing of Euro-American theories and institutions without critical thought on how those are adapted to the Nigerian and African situations.
Empirical evidence abound – confirmed by a number of studies – that Nigeria’s real problem is not that of revenue generation or collection but the pilfering of collected revenues so that they don’t even make it to the books. In every state of the country, there is usually a sophisticated network of state, informal and fraudulent actors, but all working alongside state actors, who efficiently collect exorbitant taxes from those in the informal sector of the economy without ever remitting a penny of those taxes to state coffers. On top of the formal taxes, we have the compulsory market levies/taxes, motor park taxes/levies, extractions at roadblocks by virtually all security agencies, arbitrary taxes by traffic police and other ‘fake taxes’ by government revenue officials or fake officials. So terrible is the spate of formal and illegal taxation on the informal players in the economy, especially small-scale market traders, bus or Okada riders etc that they pay between 30 – 50 percent of their day’s earnings to these taxes.
Take the case of Lagos State for example. A recent report by the International Centre for Investigative Report shows that the Lagos chapter of the National Union of Road Transport Workers (NURTW) alone generates about N123.08 billion annually in levies and illegal taxes on passenger vehicles, motorcycles and tricycles alone. For context, this fee could service the annual budget of Nasarawa, Yobe, and Niger states put together. It is also about half of Lagos State’s officially declared tax revenue collected from over 4 million Lagosians who pay tax. Yet, not a single penny of this revenue goes into government coffers. This does not include the huge illegal taxes collected from hawkers, market women, articulated trucks, small traders displaying their wares on the side of the road, etc.
So mouth-watering is the annual figure that the Lagos state government, although working in tandem with the NURTW that collects these taxes but wasn’t even aware they collect this much, has decided to partake in the bazaar and has decided to also impose its own taxes on operators of the buses.
This is not restricted to Lagos alone. A report released by the International Society for Civil Liberties & the Rule of Law in 2019 revealed that Nigerian security and law enforcement agencies pocket as much as N100 billion in roadside bribery and extortion in the Southeastern part of the country alone.
None of these monies makes it to government coffers. And even for the formal taxation that is collected by governments, most of them don’t also make it to state coffers. Take Lagos for instance, where the state raises over 60 percent of its revenues from taxation but officially hands over a quarter (but by some accounts over half) of all revenues to a so-called tax consultant – AlphaBeta, owned by a godfather in the state. In some states, government revenues consist only of federally allocated revenue. Nothing is said about internally generated revenues. They are simply pocketed by state governors and politicians.
What about the federal level? Well, those entrusted with the task of allocating the tax resources just convert them to personal resources and we all move on and keep blaming Nigerians for not paying tax for the lack of resources to fulfil routine government obligations. The last few weeks, Nigerians have been shocked to numbness by the news that the Accountant General of the Federation just pocketed N80 billion or government revenues without anyone knowing about it. Just last week, it emerged that the anti-corruption agency has again discovered another N90 billion he pocketed. That is how government revenues are administered in Nigeria.
I am not arguing that Nigeria is a rich country. Far from it; we are a poor country. All I am saying is that most of the revenues and taxes realised do not get into government coffers. And even those that eventually make their way to government coffers are simply pilfered by the civil servants and politicians tasked with managing it. It is therefore futile to continue to argue for increased revenue generation when the leakages have not been fixed. It will simply increase the pool of resources for civil servants and politicians to loot.
