Innovating Nigeria's tax systems

Nigeria's Federal Inland Revenue Service has set an ambitious target to increase the country's tax to GDP ratio to 18 percent by 2026. Chamberlain Peterside, the Chief Executive Officer of Xcellon Capital Advisors, discussed the feasibility and strategies to achieve this goal in an interview with CNBC Africa. Peterside highlighted that Nigeria's current tax to GDP ratio stands at around 10 percent, below the African average of 16 percent. The target of 18 percent over the next three years seems achievable, considering the country's recent efforts in widening the tax net and becoming a data-driven organization. One of the key strategies to boost tax revenue is expanding the tax net, especially by tapping into the informal sector. With the introduction of tools like the Bank Verification Number (BVN) and National Identification Number (NIN), there is progress in identifying and capturing more taxpayers. However, challenges persist, such as inadequate data on SMEs and low tax compliance, which need to be addressed for effective revenue collection. Furthermore, Peterside emphasized the importance of auditing, monitoring, and going after tax defaulters to enhance revenue collection. Collaboration with other agencies and leveraging incentives like tax amnesties can contribute to a significant increase in tax revenue. Implementing a mix of enforcement and incentive-based strategies is crucial for achieving the 18 percent tax to GDP target. Regarding Nigeria's debt levels and debt service to revenue ratio, there are concerns about sustainability. Peterside suggested that attracting more investment flows through effective communication and positioning of the country's economic potential can help stimulate the economy and improve revenue generation. In conclusion, achieving the 18 percent tax to GDP ratio will require a multi-faceted approach that includes widening the tax net, enhancing compliance, targeting tax defaulters, and creating a conducive environment for investment. The commitment of the Federal Inland Revenue Service and collaboration with other stakeholders will be vital in driving Nigeria's economic growth through increased tax revenue.