Nigeria to tax digital transactions with technology

Nigeria's President, Muhammadu Buhari, has recently ordered the implementation of technology to tax digital transactions conducted within the country. This strategic move is part of the government's efforts to bolster its revenue generation. Mayawaii Ige, a Research Analyst at Financial Derivatives Company, was interviewed by CNBC Africa to provide insights into this development. During the interview, Mayawaii highlighted the importance of diversifying revenue sources and stressed the significance of taxing the digital economy as a growing sector. She emphasized that the government's focus on increasing tax revenues is essential due to limitations in revenue generation from traditional sources. As Nigeria grapples with a significant budget deficit, the adoption of innovative measures to enhance revenue streams becomes imperative. The deployment of technology to tax digital transactions signifies a proactive approach by the government to tap into new revenue streams. Mayawaii discussed Nigeria's tax to GDP ratio standing at 6.1%, which is considerably lower compared to other African countries like Ghana and South Africa. She attributed this disparity to the high level of informality in Nigeria's economy and low compliance rates. The analyst also pointed out that the country's tax orientation and economic environment play a crucial role in tax revenue generation. She underscored the importance of transparency, accountability, and infrastructure development in fostering a conducive environment for businesses to thrive and contribute significantly to tax revenues. Furthermore, the conversation delved into the role of Nigerian states in boosting their internally generated revenues amid declining oil revenues. Mayawaii emphasized the need for states to be more proactive in revenue generation and reduce their dependency on federal allocations. She proposed innovative revenue generation strategies for states, including leveraging public-private partnerships and creating special economic zones to attract businesses and drive economic growth. The interview also touched upon Nigeria's persistent revenue shortfalls in recent years, necessitating a roadmap to address the widening revenue-expenditure gap. Mayawaii highlighted the urgency for the government to trim governance costs and focus on building infrastructural projects with high income-generating potential. She cautioned against overreliance on debt to sustain the economy and stressed the importance of creating a conducive business environment to spur revenue growth. In conclusion, Nigeria's move to tax digital transactions underscores the government's commitment to exploring untapped revenue sources. By leveraging technology to enhance tax compliance in the digital economy, Nigeria aims to bridge its revenue shortfall and achieve sustainable economic growth. However, sustained efforts in improving transparency, accountability, and infrastructure development are crucial for maximizing tax revenues and reducing fiscal deficits.