In a letter dated May 25, 2023, the Statistician-General of the Federation, Prince Adeyemi Adeniran, conveyed a significant update to the Federal Inland Service (FIRS) regarding Nigeria’s tax-to-GDP ratio.
The revised ratio of 10.86% was determined through a comprehensive evaluation of data spanning from 2010 to 2021, conducted jointly by the National Bureau of Statistics (NBS), FIRS, and the Federal Ministry of Finance.
Johannes Wojuola, the Special Adviser on Media and Communication to the Chairman of the FIRS, Mr. Muhammad Nami, confirmed this development in an official statement.
Nigeria’s tax-to-GDP ratio measures the nation’s tax revenue in relation to the size of its economy, represented by the Gross Domestic Product (GDP).
Over the past 12 years, this ratio had remained relatively steady between 5% and 6%. However, the recent revision considered additional revenue sources that were previously excluded, specifically those collected by other government agencies. Previous calculations neglected to account for tax revenue accrued by agencies beyond the FIRS, Customs, and State Internal Revenue Service.
Mr. Nami, the Chairman of FIRS, emphasized the significance of this revision, stating, “The re-evaluation incorporated key indicators that were previously overlooked, resulting in a revised Tax-to-GDP ratio of 10.86% for 2021, surpassing the previously reported 6%.”
However, he acknowledged that Nigeria’s Tax-to-GDP ratio should ideally be higher than the revised figure. He attributed the lower ratio to factors such as tax waivers, leakages caused by the country’s fragmented tax system, and the impact of the GDP rebasing in 2014.
Highlighting the importance of increased revenue to support government programs and enhance the country’s tax-to-GDP ratio, Mr. Nami urged the government to consider reviewing its policies on tax waivers.
By addressing these issues, Nigeria can bolster its tax system, enhance tax morale, and minimize leakages, thus positively impacting the overall tax-to-GDP ratio and fostering sustainable economic growth