Nigeria, an economic giant of Africa, has made history by collecting a staggering 5.5 trillion naira ($7 billion) of tax revenue in the first half of 2023, according to the Federal Inland Revenue Service (FIRS). This is the highest tax revenue ever recorded by the service in any first six months of a fiscal year, smashing the target of 5.3 trillion naira set for the period.
The amazing performance was driven by improved voluntary tax compliance by taxpayers, as well as the introduction of a new automated tax administration system that has made tax-related processes easier and faster. The FIRS also reached out to stakeholders in both the formal and informal sectors to increase awareness and enforcement of tax obligations.
The tax revenue collected from January to June 2023 comprised of 2.03 trillion naira from the oil sector and 3.76 trillion naira from the non-oil sector. The non-oil sector exceeded its target of 2.98 trillion naira by a whopping 26%, while the oil sector fell short of its target of 2.3 trillion naira by only 12%. This shows the government’s efforts to diversify its revenue sources and reduce its reliance on oil, which exposes it to global market shocks.
The FIRS Chairman, Muhammad Nami, expressed his delight with the achievement, saying that it was a great start towards meeting the annual target of 10.6 trillion naira for 2023. He also projected that tax collection in 2024 will hit 25 trillion naira, more than double the amount collected in 2022.
Nami said that the FIRS was able to overcome various challenges that affected the economy in the first and second quarters of 2023, such as the impact of the currency redesign and the 2023 general elections. He also thanked various stakeholders, including the National Assembly, state governments, ministries, departments and agencies, taxpayers and civil society organizations for their support and cooperation.
Nigeria has embarked on a bold reform agenda to improve its tax system, which suffers from low collection rates and high evasion levels. The government aims to achieve a tax-to-GDP ratio of at least 18% in three years, up from the current level of around 10.8%, which is one of the lowest in the world. The government also plans to widen its tax base by removing barriers impeding compliance and capturing more taxpayers from the informal sector, which accounts for a large share of economic activity.
However, raising more money from taxes has proved difficult in a country where many small businesses are not registered and where some influential individuals and groups use violence and intimidation to extort money from traders and motorists under the guise of tax collection. The government has vowed to crack down on these illegal activities and ensure that all citizens pay their fair share of taxes according to the law.