Nigeria’s non-oil export sector has long underperformed, despite the country’s vast potential. A few years ago, its contribution to the economy was a mere $2.5 billion. The government responded with policies led by the Nigerian Export Promotion Council (NEPC), resulting in incremental gains: non-oil exports reached $3.5 billion in 2022, $4.5 billion in 2023, and are projected to hit $5.5 billion in 2024. However, as Nigeria moves forward with ambitious tax reforms, stakeholders are questioning whether these will significantly enhance trade or simply add another layer of bureaucracy to an already complex system.
The proposed tax reforms, currently under review in the National Assembly, aim to overhaul Nigeria’s taxation framework. Economists, trade specialists, and industry leaders have analysed the potential of these reforms to strengthen Nigeria’s position in global trade while meeting regional and international obligations.
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A critical review of the tax reform bill
The Institute of Export Operations & Management (IEOM) recently gathered experts to assess the proposed tax reforms’ impact on Nigeria’s trade landscape. The discussion focused on how the reforms align with Nigeria’s commitments under the African Continental Free Trade Area (AfCFTA), the ECOWAS Tax Harmonisation Framework, and the OECD’s Base Erosion and Profit Shifting (BEPS) framework.
A key takeaway was the necessity to balance revenue generation with trade competitiveness. Nigeria’s tax system must not only increase government revenue but also create an enabling environment for businesses to thrive, attract investment, and support Africa’s economic integration.
Aligning tax reforms with trade expansion
The panel, which included experts such as Professor Jonathan Aremu (AfCFTA Consultant), Gabriel Ekpo (International Trade Specialist), and Olatunji Abdulrazaq (CEO of Success Africa), identified critical areas where tax reforms could affect trade:
Enhancing Trade Competitiveness: Tax reforms must reduce bottlenecks and simplify administration to help businesses compete in both regional and global markets.
Harmonising ECOWAS Tax Policies: Aligning Nigeria’s tax system with ECOWAS standards is crucial to promoting cross-border trade. Disparities in tax regimes across the region create compliance challenges and discourage investment.
Encouraging SME Participation: Small and medium enterprises (SMEs), which make up over 90 percent of businesses in Nigeria, often struggle with complex tax systems. Simplifying tax filing, offering digital reporting, and providing incentives could help SMEs formalise and grow.
“Nigeria’s tax system must not only increase government revenue but also create an enabling environment for businesses to thrive, attract investment, and support Africa’s economic integration.”
Modernising Tax Administration: Automating tax processes and implementing transparent policies will reduce bureaucracy, making compliance easier for businesses involved in cross-border trade. The adoption of a Single Window System—a tool to streamline customs clearance—was identified as essential, but experts cautioned that its management should be independent of regulatory bodies like Customs or the Nigerian Ports Authority (NPA).
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Bridging the informal sector gap
A significant challenge is the dominance of Nigeria’s informal sector. Many export activities operate outside the formal system, limiting the benefits of tax reforms. To tackle this, the government must create pathways for informal traders to transition into the formal economy by offering tax incentives, financial support, and regulatory protection.
Simplified registration processes, reduced compliance costs, and robust enforcement mechanisms will be vital. Without these measures, informal trade will continue to undermine the impact of tax reforms.
The infrastructure challenge
While tax reforms are critical, they cannot succeed in isolation. Nigeria’s infrastructural deficits—such as unreliable power supply and poor transportation networks—pose a significant barrier to business growth. Without substantial investment in logistics, digital trade infrastructure, and energy, even the most promising tax policies will struggle to yield the desired results.
A defining moment for Nigeria’s economic future
The success of Nigeria’s tax reforms will hinge not just on the policies themselves but also on their execution. Strategic implementation, transparency, and collaboration between policymakers, trade professionals, and regulatory bodies will be essential.
If managed well, these reforms could catalyse increased trade competitiveness, attract investment, and drive sustainable economic growth. However, if poorly executed, they risk becoming yet another bureaucratic hurdle, further complicating the business environment.
The success of these tax reforms hinges on careful implementation and a commitment to continuous evaluation. A transparent and inclusive dialogue between the government, businesses, and civil society is crucial to address concerns and ensure that the tax system is fair, efficient, and conducive to economic growth.
Read also: International trade: Export experts examine how tax reforms can help Nigeria’s export drive
The stakes are high. Nigeria possesses immense economic potential, and these reforms represent a significant opportunity to unlock that potential. However, the path forward requires a delicate balance—one that fosters a thriving business environment while ensuring that the government has the resources to provide essential public services. The future of Nigeria’s economy may well depend on how effectively these tax reforms are navigated.
Mr Michael Ariyibi is a chartered accountant and a seasoned Tax Practitioner specialising in Tax Audit. He is also a senior lecturer with Password Professional Limited, where he lectures Economics, Public Sector Accounting and Finance (PSAF), and Taxation.
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