Abuja, September 19, 2023 – Zacch Adedeji, the newly appointed Acting Chairman of the Federal Inland Revenue Service (FIRS), has wasted no time in setting a bold and ambitious target for the federal government. In his inaugural speech on Monday, Adedeji called for a tax-to-GDP ratio of 18% to be achieved within the next three years, surpassing the African average of 16.5%.
Adedeji, who took over from his predecessor, Muhammad Nami, emphasized the importance of this goal. He stated, “Our aspiration is audacious – to surpass Africa’s average tax-to-GDP ratio of 16.5% and achieve an impressive 18% within three years. By doing so, we aim to reduce our nation’s reliance on borrowing and ensure financial sustainability.”
Currently, Nigeria’s tax-to-GDP ratio stands at approximately 10.8%, one of the lowest globally. Despite a 56% increase in tax revenues in 2022, Nigeria still faces a daunting national debt of 77 trillion naira, leading to concerns about the country’s fiscal health.
Adedeji believes that innovative strategies, technology, and collaboration with stakeholders will be key in achieving this target. He emphasized, “As we chart our course ahead, FIRS is committed to placing innovation, technology, and fresh ideas at the forefront of our operations. This strategic focus will empower us to enhance efficiency, fortify against revenue leaks, and bolster coordination and accountability within our organization.”
In addition to modernizing tax collection methods, Adedeji stressed the importance of improving voluntary tax compliance and simplifying the tax system. He also highlighted the role of quality data in measuring progress and maintaining accountability.
Addressing the pressing revenue crisis, with 96% of government revenue allocated to servicing debts, Adedeji noted, “This stark reality necessitates swift and resolute action on our part. We cannot afford to delay; we must act decisively to reverse this concerning trend.”
Furthermore, Adedeji pledged to maintain an open-door policy and uphold principles of integrity, confidentiality, professionalism, and fairness in the service to the nation.
Outgoing Chairman Muhammad Nami, in his handover speech, highlighted several achievements during his four-year tenure, including administrative and operational restructuring, automation of tax administration processes, and the creation of a customer-focused organization. Nami also announced that FIRS currently contributes over 70% of all revenues disbursed monthly by the Federation Account Allocation Committee.
Under Nami’s leadership, the FIRS collected over N8.5 trillion in cash between January 1 and September 14, 2023. Additionally, they assessed, reconciled, and recovered over N4 trillion in outstanding tax liabilities and sequestered funds from the Nigerian National Petroleum Corporation (NNPC) on behalf of the Federation. These efforts amounted to over N12 trillion, excluding amounts invested by taxpayers under the Road Infrastructure Tax Credit Scheme and tax implications of waivers by the government from January 2023 to date.
Muhammad Nami, who had aimed to raise Nigeria’s Tax-to-GDP ratio from 6% to 10% in four years, noted that the service had already achieved a Tax-to-GDP ratio of 10.86% within two years as of December 2021.
In conclusion, the FIRS, under the leadership of Zacch Adedeji, is embarking on an ambitious journey to significantly increase tax revenues, reduce reliance on borrowing, and ensure Nigeria’s financial sustainability. Achieving the 18% tax-to-GDP ratio target will require innovative strategies, technology adoption, and collaboration with all stakeholders to create a modern and efficient tax system for the country’s economic growth and development.
As Nigeria faces a challenging economic landscape, characterized by high levels of debt and limited fiscal space, Adedeji’s commitment to bolstering tax revenues is essential. The aspiration to reach an 18% tax-to-GDP ratio within three years is indeed audacious but aligns with the urgent need to secure the nation’s financial future.
Nigeria’s low tax-to-GDP ratio has long been a concern for policymakers. While the country has made progress in increasing tax revenues, the gap between revenue generation and expenditure remains significant. This has led to the government’s heavy reliance on borrowing, which, in turn, has contributed to the growing national debt.
The impact of this debt burden on Nigeria’s economy cannot be underestimated. A substantial portion of government revenue is directed toward servicing this debt, leaving limited resources for critical infrastructure development, social programs, and economic stimulus.
Adedeji’s plan to leverage data, innovation, and technology to enhance tax collection and reduce evasion is a step in the right direction. A data-driven approach can help identify tax gaps, track compliance, and streamline tax processes. By making the tax system more accessible and transparent, the FIRS aims to encourage voluntary tax compliance, fostering a sense of civic responsibility among taxpayers.
The Acting Chairman’s commitment to maintaining fairness and transparency while enforcing tax obligations is crucial for building trust among taxpayers. A robust enforcement model that targets tax evaders without compromising fairness will be essential to achieving the 18% tax-to-GDP ratio target.
Furthermore, Adedeji’s emphasis on collaboration with stakeholders underscores the importance of a coordinated effort to improve the tax ecosystem in Nigeria. Engaging with businesses, individuals, and other relevant institutions will be vital in shaping a tax system that benefits both the government and taxpayers.
Muhammad Nami, in his farewell address, left a legacy of achievement during his tenure as FIRS Chairman. His efforts in restructuring the organization, automating tax administration processes, and focusing on customer service have contributed to the agency’s increased revenue generation.
Nami’s announcement that FIRS currently contributes over 70% of all revenues disbursed monthly by the Federation Account Allocation Committee highlights the critical role of tax revenue in funding government activities. The FIRS, under his leadership, played a pivotal role in supporting the government’s financial stability.
Adedeji, in taking up the mantle of leadership, faces significant challenges but also tremendous opportunities. With the determination to raise the tax-to-GDP ratio to 18% within three years, he carries the hopes of a nation seeking fiscal stability and sustainable development.
The collaboration between FIRS and the Fiscal Policy and Tax Reforms Committee, as mentioned by Adedeji, holds promise for driving economic growth and development in Nigeria. Aligning tax policies with broader fiscal goals can lead to more efficient resource allocation and revenue collection.