Nigeria’s economy, once touted as Africa’s powerhouse, is facing an existential crisis that threatens the future of its more than 220 million citizens. The symptoms of this dysfunction are glaring: a currency in free fall, businesses collapsing under bureaucratic strain, and a tax system that disproportionately burdens the poor while letting the wealthy off the hook. Despite these realities, the country’s leadership appears either unwilling or incapable of addressing the structural flaws that have brought Nigeria to the brink of economic paralysis.
The data alone paints a worrying picture. Four out of every five start-ups in Nigeria fail within their first three years—a sobering statistic in a country where entrepreneurship is seen as a key lever for economic development. Government-imposed hurdles only increase this, with small business owners facing exorbitant taxes that far exceed the resources needed to establish their enterprises. A shop owner in Lagos, for instance, could spend N185,000 on a banner, only to be confronted days later by officials demanding over N450,000 in taxes and fees. Such policies do not promote growth—they stifle it.
“Part of the problem is a regressive tax system that disproportionately targets the poor: any Nigerian earning over N30,000 per month is liable to pay tax, whereas in Kenya and South Africa, the threshold is significantly higher.”
Exporters, too, are caught in an endless cycle of inefficiency, requiring over 20 approvals to send goods abroad—most of which serve no discernible purpose other than to entrench red tape and corruption. This is a country where doing business is not simply difficult; it is untenable.
These issues are compounded by a currency in crisis. The naira has suffered a dramatic devaluation, now trading at N13 to the Kenyan shilling, a stark contrast to a decade ago when one could get N2 per shilling. Despite billions in foreign exchange inflows, the currency continues to depreciate, driven largely by illicit demand for dollars. Governors and other officials, according to media reports, routinely convert their monthly allocations into foreign currency, fuelling a shadow economy that undermines efforts by the central bank to stabilise the naira.
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Without meaningful reforms, this currency crisis will continue to destabilise the broader economy. Yet Nigeria’s leadership has shown little appetite for the structural changes needed to reverse these trends. While officials speak of attracting foreign investment, their actions suggest otherwise. Bureaucratic inefficiencies and policy incoherence remain the norm, driving multinationals to exit the country rather than expand their operations.
Tax reform, too, remains a significant challenge. Nigeria’s tax collection system is woefully inefficient, with personal income tax revenue amounting to less than 5 percent of what South Africa collects, despite Nigeria having a larger population. Part of the problem is a regressive tax system that disproportionately targets the poor: any Nigerian earning over N30,000 per month is liable to pay tax, whereas in Kenya and South Africa, the threshold is significantly higher. As a result, many who could pay tax avoid doing so, while those who can least afford it are burdened with it.
Corruption further erodes the integrity of the system. In a more transparent economy, the Nigerian National Petroleum Corporation (NNPC) would be contributing between $18 billion and $20 billion annually in taxes. Instead, NNPC claims it is owed significant sums by the federal government—a baffling assertion given the sector’s dominance in the national economy. More disturbingly, recent reports revealed that federal government assets worth N1 trillion were found registered under private names at the Corporate Affairs Commission (CAC), highlighting the pervasive nature of graft in Nigeria’s public sector.
The dysfunction extends to local governance. With 774 local councils in the country, one might expect a modicum of transparency in how public funds are allocated and spent. Yet none of these councils publish their annual budgets online, leaving citizens in the dark about how their taxes are used. In contrast, South Africa operates an online platform, Municipal Money, which allows the public to track spending by local governments. Nigeria could—and should—adopt similar measures to improve accountability.
What is particularly striking about Nigeria’s economic malaise is not just the scale of the challenges, but the absence of urgency in addressing them. The country’s leadership appears content with half measures, focused on short-term fixes rather than long-term solutions. This lack of political will is not only exacerbating the current crisis but is also setting the stage for a prolonged period of stagnation.
The situation is not irreparable. Addressing the structural deficiencies in Nigeria’s tax system, improving the ease of doing business, and tackling corruption at all levels of government are achievable goals. But these require a coordinated, transparent approach—something that has been sorely lacking in recent years. The Nigerian government must go beyond rhetoric and implement policies that foster real, sustainable growth. Failure to do so will only deepen the crisis and push more Nigerians into poverty.
If Nigeria is to realise its potential as Africa’s economic engine, it must confront the entrenched dysfunction that has stifled its growth for too long. The time for decisive action is now.
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