‘Nigeria’s tax reforms generate revenue but squeeze businesses under Tinubu’

BY MOTOLANI OSENI

Since taking office on May 29, 2023, President Bola Ahmed Tinubu has pushed an aggressive tax-driven economic model, aiming to boost government revenue and reduce reliance on oil earnings. While the strategy has increased fiscal inflows, it has also placed immense pressure on businesses, investors, and the general populace.

Nigeria’s manufacturing sector, a key driver of economic growth, has struggled under the weight of rising taxes and levies. Cement giants Dangote Cement and BUA Cement have reported surging costs due to increased tax obligations, forcing price hikes and reevaluation of expansion plans.

To this end, the added burden has raised concerns over foreign investment, as profit margins continue to shrink. The financial sector has also felt the impact. With the Federal Inland Revenue Service (FIRS) mandating stricter tax compliance, commercial banks such as First Bank, Access Bank, and Zenith Bank have integrated digital tax collection systems, ensuring real-time remittances.

While this has enhanced revenue collection, businesses operating on thin margins have complained about the aggressive enforcement measures.

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For instance, Small and Medium Enterprises (SMEs), particularly in Lagos markets such as Balogun and Alaba, have faced increased tax demands, with many traders arguing that excessive levies stifle business growth.

In fact, some SMEs have retreated into the informal economy to escape taxation, undermining the government’s goal of expanding the tax base. Despite tax breaks for startups and tech firms, many traditional small businesses continue to struggle. Even the oil and gas industry has not been spared.

The Dangote Refinery, expected to reduce Nigeria’s reliance on imported petroleum products, has encountered tax-related delays, with management lobbying for waivers on crude imports. The tension between tax incentives and government revenue generation has slowed the refinery’s full-scale operations.

While Tinubu’s tax reforms have strengthened government revenue and digitised tax collection, the policies have also tightened the business environment, reduced profit margins and discouraging investment.

Striking a balance between revenue generation and economic sustainability remains a critical challenge for the administration’s long-term success.