The Federal Inland Revenue Service (FIRS) has stated that Nigeria Earns 70 percent of Its Revenue from Tax Collection.
Nigeria’s major source of revenue over the year has been crude oil, however, the recent Coronavirus pandemic has caused the price of the commodity to plummet, thereby significantly reducing its contribution to the national economy. The Executive Chairman of the FIRS, Muhammad Nami made the disclosure in Abuja at a presentation themed, “Weathering Economic Turbulence,” at an interactive session with stakeholders”.
In its bid to widen the tax net, the FIRS chairman is seeking changes to existing tax laws, he stated that most of the current tax laws predate Nigeria’s independence. Nami cited Nigeria’s declining revenue is disturbing. He pointed out that Nigeria’s total Federation Account revenue for June 2020 was just N696 billion (about $2 billion), “which is equivalent to what a county in the United States spends.”
According to him, the “Nigerian economy is projected to contract by over five percent in 2020 due to COVID-19 and other disruptions. Oil prices have plummeted (from $97.98 in 2012 to below $50 in 2020).”
The FIRS chief decried Nigeria’s VAT gap which according to him is 70 percent.
In his assessment of the nation’s tax-to-Gross Domestic Product (GDP) ratio, Nigeria’s figure is presently at 6 percent, which is relatively low when compared to other African countries such as Egypt at 15 percent, Ghana and Kenya at 17 percent, and South Africa at 28 percent.
The World Bank model encourages countries to maintain a 15 percent tax-to-GDP ratio to ensure economic growth and poverty reduction, he said.
He stated that, “A Debt Management Office (DMO) report indicates that about N1.21 trillion was used to service debt from January to June 2020.
“Over N3 trillion is proposed for debt servicing in 2021. The report further projects that Nigeria’s debt stock will grow significantly by end of 2020.
“God forbid that Nigeria should default in debt repayment obligations. Nigeria’s debt to revenue ratio is worsening – it is estimated at 538 percent at the end of the fourth quarter, that is 190 per cent increase from 2019 figure (348%).”
