NIGERIANS ARE OVER-TAXED

Nigeria's dangerous tax regime is a disaster. Nigeria by its complex system of taxation that lacks transparency, organization, and accountability has damaged government reputation, worsened the livelihood of low-income earners and chased SMEs and Multinational organisations out of the country rapidly. I have heard some people erroneously argue that Nigerians do not tax enough. Laughable postulation. Over-taxation burdens the populace, particularly lower-income individuals, who are disproportionately underemployed, and do not receive any basic amenities such as housing, subsidised energy, food stamps, free health care or higher education loans.

The government enforces a coercive tax infrastructure, collecting taxes arbitrarily—whether citizens earn income or not—including Personal Income Tax (PIT), Value Added Tax (VAT), Company Income Tax, Petroleum Profit Tax, Withholding Tax, Capital Gains Tax, Education Tax, and Stamp Duties. Even the tax reform bill was never considerate of the massive unemployment in the country.

The Electronic Money Transfer Levy (EMTL) imposes a government-mandated fee of ₦50 on electronic transfers of ₦10,000 or more, introduced through the Finance Act 2022. Nigerians are taxed relentlessly, both directly and indirectly. Banks tax them. Telecom multinationals tax them. NCC and other government parastatals tax either via Remita or through indirect collection. Food vendors, transportation businesses, and water companies also tax them, creating a cascade of financial impositions.

In Nigeria, a minimum wage of ₦120,000 cannot even cover monthly water expenses, as 90% of the population purchases bagged water for drinking and gallons of borehole water for bathing. An average household of four consumes about 100 bags of water monthly during the dry season. However, there is no guarantee that the water is clean or hygienic due to regulatory failures. The government has refused to provide basic pipe-borne water, with some locations selling bottled water for as high as ₦1,500 due to VAT.

Nigeria’s tax regime thrives on indirect taxation. From cement in construction to medications in the pharmaceutical industry, from bread, Coke, and Pepsi to rice, beans, and garri, hyperinflation has morphed into a form of indirect taxation, further impoverishing the populace.

At Customs, outrageous import duties are charged on goods that Nigeria does not even produce, from pencils and toothpicks to cars and condoms. This exorbitant duty system—deeply entrenched in corruption—indirectly taxes a population of jobless, hungry, and disillusioned people, institutionalising an era of anger.

For instance, salt faces a duty of 70%, while cement carries a duty of 55%. Used vehicles are taxed at a 20% duty rate, while new vehicles incur a 20% duty alongside a National Automotive Council (NAC) levy of 20%. Importing an SUV valued at ₦25 million attracts ₦5 million in duty fees and another ₦5 million as an NAC levy. This, coupled with unofficial payments to customs agents, leads to exorbitant costs for automobile dealers and end-users alike.

The government taxes before it builds. In October 2013, during President Goodluck Jonathan's administration, the Nigerian Automotive Industry Development Plan (NAIDP) was announced to expand local vehicle manufacturing. However, it imposed a 35% levy on automobile imports in addition to an existing 35% tariff, resulting in a total duty of 70%. The plan allowed manufacturers in Nigeria to import one vehicle for every car manufactured domestically. These measures, however, worsened affordability, with imported goods such as rice and milk priced significantly cheaper in Cotonou than in Nigeria.

Nigeria’s tax-to-GDP ratio is among the highest globally for emerging economies. Yet, government institutions, tax collectors, and banks squander tax revenues and blame Nigerians for underpaying taxes. For example, the government collects a Cybersecurity Levy of 0.005% on all electronic transactions, impacting citizens indiscriminately.

In stark contrast, nations like the UAE, Quatar, Brazil and UK subsidise essential goods and services, creating a higher quality of life. In London, roads are washed, homes are connected to gas, and families receive free cable television and evening newspapers. Essential items like eggs, chicken, and fuel are subsidised, which reduces crime, ill health, and stress, while fostering patriotism. Basic amenities such as uninterrupted electricity, running water, and free healthcare through the NHS are standard. These are glaring disparities when compared to Nigeria, despite its status as a former British colony, member of the Commonwealth and an oil producing nation.

Overtaxation in Nigeria leads to severe economic and social consequences, including:

1. Reduced Economic Growth and Business Closures: Excessive taxation discourages investment and entrepreneurship by reducing disposable income for individuals and businesses. This stifles innovation and slows economic expansion. For instance, multinational corporations like Pfizer, Shoprite, and GlaxoSmithKline have exited Nigeria due to high taxes, economic instability, and operational difficulties.
2. Increased Tax Evasion: Overtaxation drives individuals and corporations to avoid taxes through loopholes or illegal means, reducing government revenue and creating systemic inequalities.
3. Burden on Low-Income Groups: Excessive tax pressure on already impoverished citizens exacerbates wealth inequality, fuels crime, and leads to reduced public trust in the government.

Nigeria’s stagnation despite over $5 trillion in oil revenue since 1956 reflects its failure to translate resources into national prosperity. Corruption, mismanagement, and a neocolonialist mindset enrich the few at the expense of the majority. The question remains whether transformative governance is possible to alleviate this economic quagmire.