Nigeria Raises Tax Bar: N19.4tn Target Reflects Optimism Despite Oil Revenue Dip

Buoyed by a record tax haul in 2023 and confidence in its economic policies, the Federal Government of Nigeria has set a significantly higher tax revenue target for 2024: N19.4 trillion. This ambitious goal represents a nearly 60% increase over the N12.37 trillion collected in 2023 by the Federal Inland Revenue Service (FIRS), exceeding the previous year’s target by 16%.

The government’s optimism stems from a combination of factors. FIRS Chairman Dr Zacch Adedeji attributes the success to an “effective tax collection system” and a “viable economic environment for businesses to prosper.”

Commenting on 2024’s target, FIRS’s chairman, Adedeji said, “What determines whatever we have comes from micro-economic indices because when the economy runs well, we are going to be taxing prosperity, not poverty.

“We will focus on the fruits and not the seeds. We need to ensure we have that viable economic environment that will lead to economic prosperity. And for us at FIRS, it is just to put the system in place to aid effective collection.

“We are not a revenue-generating agency, but a revenue-collection agency. With the plan of President Bola Tinubu to rejuvenate the economy, companies are going to grow and prosper,” he said.

These points merit closer analysis:

Enhanced Tax Collection: The FIRS has implemented various initiatives to improve tax collection, including leveraging technology and expanding the tax base. The success in surpassing the 2023 target suggests that these efforts are bearing fruit. However, concerns about tax evasion and the burden on informal businesses remain, and further improvements in tax administration will be crucial to sustaining the momentum.

Economic Growth: A thriving economy translates to higher potential tax revenue. The government’s focus on improving the business climate and attracting foreign investment aims to create a fertile ground for economic growth and, consequently, increased tax receipts. However, the global economic outlook remains uncertain, and external factors could pose challenges to achieving this ambitious growth target.

Oil Revenue vs. Non-Oil Revenue: The breakdown provided by FIRS highlights the reliance on oil revenue, which accounted for 25.6% of the total collection in 2023. Diversification of the economy and generating sustainable non-oil revenue streams remain crucial to reduce dependence on volatile oil prices and ensure fiscal stability in the long run.

The 2024 target represents a significant increase over the 2023 achievement. While the government’s optimism is understandable, achieving this ambitious goal will require continued efforts on multiple fronts. Strengthening tax administration, fostering economic growth, and diversifying revenue sources are key if the government is to meet its fiscal targets and provide the necessary resources for development and public services.