Between Taxes And Trust: The Real Test Of Nigeria’s Fiscal Reform

In recent months, the conversation about Nigeria’s fiscal future has grown louder, and for good reason. With oil revenues fluctuating and debt obligations swallowing nearly all government income, the federal government is racing to widen its non-oil tax base. But the real challenge isn’t just raising more taxes; it’s rebuilding trust in what those taxes are used for.
Nigeria’s fiscal policy today sits at a crossroads between necessity and legitimacy. The Federal Inland Revenue Service (FIRS), under its current leadership, has been on a mission to modernise tax collection, harmonise levies, and expand compliance, especially in the digital economy. There’s no doubt that reforms such as e-filing, automation, and data-driven enforcement have improved efficiency. Yet, beneath these technical wins lies a harder truth, Nigerians are increasingly taxed without visible returns.
From value-added tax (VAT) to multiple state and local government levies, many businesses, particularly small and medium-sized enterprises say they are being suffocated by overlapping taxes. In markets across Lagos, Abuja, and Port Harcourt, traders complain that officials from different agencies collect payments for the same permits under different names. “We pay so many taxes we don’t even understand anymore. But our roads are still bad, and power is still unstable,” one small business owner in Ikeja lamented recently.
This sentiment captures the heart of Nigeria’s fiscal dilemma: citizens and businesses are losing faith that taxation leads to public value. Without that connection, no reform, however sophisticated, will be sustainable.
President Bola Tinubu’s administration has promised a more disciplined fiscal regime, one that shifts from dependence on oil receipts to a broad-based tax economy. The government’s Fiscal Policy and Tax Reform Committee, chaired by Taiwo Oyedele, has recommended consolidating the country’s maze of over 60 taxes into a handful of efficient and transparent instruments.
The vision is clear: simplify, digitise, and incentivise compliance. But execution will test Nigeria’s governance culture. Businesses will only comply if they see fairness, transparency, and tangible improvements in infrastructure and public services. Otherwise, tax reforms risk becoming yet another policy Nigerians endure rather than embrace.
Across Africa, the story is mixed but instructive. Kenya and Ghana have made major strides by linking tax collection to digital identity systems and by using revenue to finance visible local projects. In Kenya, tax data is integrated into digital national IDs, ensuring accountability and minimising evasion. Citizens can see where taxes are spent, and that visibility builds compliance.
Nigeria can learn from this. The informal economy, which makes up more than 50 per cent of GDP, will not formalise through threats or enforcement raids; it will only formalise when inclusion feels worth it. When small traders see that tax receipts come with real benefits, better markets, lighting, security, they will comply willingly.
Fiscal reform is not just about numbers; it is about nation-building. Taxation is the most visible expression of the social contract, the understanding that citizens contribute to a collective pool in exchange for public good. When that contract breaks, so does public cooperation.
To rebuild trust, the government must make tax transparency visible at every level. Publish annual “tax impact” reports showing how revenue is used. Create state-level dashboards linking collections to projects. Reward compliant taxpayers with recognition and incentives. And above all, eliminate the waste and leakages that make tax payment feel like pouring water into a basket.
If Nigeria must tax more, it must also deliver more. Fiscal responsibility cannot be one-sided. As citizens are asked to tighten belts and businesses to pay more, the government must show discipline in spending, cutting excesses, reducing administrative costs, and investing in productivity-enhancing infrastructure.