Burden Of Multiple Taxation: FG, States, LGs Impose 39 Charges On MSMEs

Micro, Small, and Medium Enterprises (MSMEs) in Nigeria are struggling to survive under the weight of numerous taxes, levies, and fees imposed by federal, state, and local governments. NATIONAL ECONOMY findings reveal that these businesses face 39 different levies across the three tiers of government. At the federal level, the Federal Inland Revenue Service (FIRS) collects key taxes such as Company Income Tax, Value-Added Tax (VAT), Stamp Duties, Capital Gains Tax, Personal Income Tax, and Withholding Tax.
State governments add to the financial burden with their own set of taxes. These include Pools Betting Tax, Lotteries Tax, Gaming and Casino Taxes, Road Tax, and Business Premises Registration Fees. Entrepreneurs are also required to pay Development Levy (applicable to individuals), Market Taxes, and Right of Occupancy Fees for state-controlled land. Additionally, states collect Personal Income Tax through the Pay-As-You-Earn (PAYE) system or via direct self-assessment. Some states further impose charges like Naming of Street Registration Fees within state capitals.
At the local government level, businesses encounter another layer of levies. Common charges include Shops and Kiosks Rates, Tenement Rates, On- and Off-Licensing Fees for liquor sales, and Market Taxes for local markets. Entrepreneurs must also pay Slaughter Slab Fees, Public Convenience Fees, Sewage and Waste Disposal Fees, as well as Vehicle Radio License Fees. Businesses operating in rural areas face Right of Occupancy Fees, while levies for bicycles, canoes, wheelbarrows, and carts are also prevalent. Furthermore, local governments impose registration fees for marriages, births, and deaths, compounding the operational challenges for businesses.
These overlapping taxes have placed a significant burden on MSMEs. For Ahmed, a small-scale retailer in Kano, the dream of owning a business has turned into a constant struggle to stay afloat. “It’s not just one tax,” he explains with a weary expression. “There are so many—the federal tax, the state tax, local government charges, and then some unexpected fees that come out of nowhere.” He recounted how local government officials regularly visit his shop, demanding various payments for signage, environmental fees, and other charges that seem arbitrary. “I pay them just so they don’t come and close my shop,” he said, highlighting the fear many MSME owners have of retribution for non-compliance, even when the taxes feel unjust.
Chinwe, who runs a tailoring shop in Lagos, voiced a similar frustration. “It’s like they don’t want us to survive,” she said, shaking her head. “Every month, someone comes with a new bill, and sometimes I don’t even know what I’m paying for.” The uncertainty surrounding what taxes are legitimate and what constitutes extortion is a major issue for business owners like Chinwe. The lack of clarity and transparency in tax collection breeds corruption and makes it difficult for MSMEs to plan their finances effectively. As Chinwe pointed out, “How can we grow when we are always worried about paying one fee or another?”
As for Adegboyega Adetutu, a bakery owner in Ojo Local Government Area in Lagos State, the issue of multiple taxation is very frustrating considering the fact that the tax and levy collectors contribute virtually nothing to the growth of his business. “The government does not provide water; the roads to my bakery are impassable; and we are at the mercy of criminals on a daily basis. So how can we survive? It’s like dashing out money to bullies that offer no services to better our business,” he lamented to NATIONAL ECONOMY.
The burden of multiple taxation has taken not just a financial toll, but an emotional one as well. Ibrahim, a poultry farmer in Ogun State, confessed that managing the maze of levies has affected his mental health. “I’ve thought of quitting so many times. It’s exhausting,” he admitted.
Harassment by tax officials is another pressing issue. Some local governments resort to aggressive tactics, such as setting up roadblocks or sealing off businesses until levies are paid. Roseline an agricultural processor, said she had to shut down her business to escape arbitrary fees. “I now operate from home and sell online to avoid the harassment,” she explained.
Manufacturers are also affected by this multi-layered tax system. Frank Onyebu, President of the Apapa Chapter of the Manufacturers Association of Nigeria (MAN), criticised the constant inspections by different authorities, which further complicate operations.
“You could have federal, state, and local inspectors visiting your factory back-to-back, each demanding payments,” Onyebu said, urging Lagos State and other governments to harmonise taxes and inspections to avoid driving more businesses into closure.
“I wish to bring to the notice of the government that several manufacturing firms have shut down due to the current harsh operating environment and so many more are just holding on by the strings. We are calling on the government to compel ministries and agencies to abide by the harmonised inspection agreement reached with manufacturers. This will not only curtail corruption but will also encourage manufacturers struggling to survive amid a very uncertain future,” Onyebu said.
The harmonised inspection framework, designed to ease the regulatory burden on businesses, requires all relevant ministries, departments, and agencies (MDAs) to coordinate inspections and carry them out jointly. Instead of multiple uncoordinated visits, agencies are expected to work as a team to reduce redundancies and create a more business-friendly environment.
Experts warn that unless the tax system is reformed, Nigeria risks crippling its entrepreneurial sector.
President of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, emphasised the need for urgent reforms. “Some taxes are duplicated across levels of government, making it impossible for businesses to plan or grow efficiently,” Yusuf said.
Despite government promises to simplify the tax structure, progress has been slow. Without decisive reforms, small businesses like Ahmed’s, Chinwe’s, and Ibrahim’s will continue to struggle under the crushing weight of these levies, limiting their ability to thrive.
According to the Chartered Institute of Taxation of Nigeria (CITN), over 75 pe rcent of MSMEs in Nigeria collapse within four years, with multiple taxation identified as a key factor.
PriceWaterHouseCooper (PWC), has also noted that for small businesses like hair salons, corner shops, local manufacturers, and food vendors, these taxes eat into already slim profits. The financial strain leaves many business owners with little to reinvest in their operations or expand, forcing them to operate at a subsistence level. For some, the burden becomes too much, and they shut down entirely, contributing to the high failure rate of MSMEs in Nigeria.
The International Labor Organization (ILO),said small and medium-sized businesses account for the majority of enterprises and employment in Nigeria. But about 80 per cent of these businesses fail within the first five years.
“Many small business owners, unable to navigate the complex tax environment or afford the numerous levies, choose to remain informal. This informality means they are excluded from accessing financial services, such as loans or grants, that could help their businesses grow. It also means that Nigeria’s tax base remains narrow, with the formal sector carrying the bulk of the burden, while informal businesses contribute little to government revenue,” said a development economist at Adeleke University, Professor Tayo Bello.
The Nigerian government has made some efforts to address the challenges of multiple taxation, including promises to streamline tax collection and simplify the process for MSMEs. However, for many small business owners, these efforts have not yet translated into real relief. The reality on the ground remains harsh, and the human stories of struggle and survival continue to pile up.
“It is about the small business owners who wake up every day hoping to build a better future for themselves and their families but are met with an endless barrage of fees and demands. It is about the workers whose jobs are threatened when their employers cannot keep up with the costs of doing business. And it is about the communities that rely on the vitality of MSMEs to drive local economies and create opportunities,”Dr David Umoru, a financial economist told NATIONAL ECONOMY.
Addressing the issue of multiple taxation in Nigeria is essential not just for the survival of MSMEs, but for the well-being of millions of Nigerians who depend on them. Simplifying the tax system, ensuring transparency, and eliminating unnecessary levies would allow small businesses to flourish, creating jobs, driving innovation, and ultimately contributing to the broader economic development of the country. Until then, the voices of business owners like Ahmed, Chinwe, and Ibrahim will continue to echo the same refrain: “We just want a fair chance to succeed.”