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Nigeria has a very low tax to GDP ratio

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By Mercy Kelani

Edun’s analysis states that Nigeria's tax to GDP ratio stands at a mere 10%.

The pace of development in the country is being hindered by the Federal Government due to a lower tax base, which is not on par with other nations that possess a sufficient tax-to-GDP ratio. During a bilateral inter-ministerial gathering on February 6, 2024, Olawale Edun, the Minister of Finance as well as the Coordinating Minister of the Economy, expressed his stance. Svenja Schulze, the German Minister of Economic Development and Cooperation, was also present at the meeting.

Additionally, Dr. Doris Uzoka-Anite, the Minister of Industry Trade and Investment, participated in the event. Among the African continent and various European nations, Nigeria stands out with its relatively meager tax-to-GDP ratio, resting at a mere 10 percent. This figure portrays Nigeria as an outlier, as other African countries and European counterparts maintain higher taxation levels. Edun’s analysis reveals that Nigeria’s tax to GDP ratio stands at a mere 10 percent, and when accounting for states, it slightly rises to 13 percent.

Gov’t relies on these tax funds to carry out its necessary functions.

This figure positions Nigeria among the countries with the most diminutive tax to GDP ratios globally. Tax collection plays a pivotal role in developed countries, with Edun pointing out that it exceeds 50 percent. This substantial amount opens up doors for enticing investments and enables the growth of essential components such as social infrastructure, welfare programs, social services, and numerous other areas. There is simply no escaping the undeniable truth that sufficient taxes must be paid.

Also, this payment will be useful for the government to fulfill its obligations and responsibilities, as he emphasized. The government relies on these tax funds to carry out its necessary functions. The government and people of Nigeria are deeply concerned about the need to boost economic growth, enhance productivity, generate employment opportunities, and alleviate poverty, recognizing that these goals can only be achieved through a flourishing and prosperous private sector. Additionally, the government acknowledges the pressing issue of escalating prices.

Importance of tackling issues related to employment.

More so, this problem poses a challenge for both the authorities and the citizens of Nigeria. President Ahmed Tinubu has made significant strides in addressing the issue of supply and demand, particularly concerning agricultural goods. He has taken proactive measures by supplying farmers with grains and fertilizer, thereby making a crucial intervention in this sector. Additionally, his intervention extends to the production of essential crops like rice, maize, wheat, and cassava, all of which promise to swiftly alleviate inflationary pressure.

Svenja Schulze, the German Minister responsible for Economic Development and Cooperation, emphasized the importance of fostering a bilateral connection between both nations. In light of Nigeria’s abundance of talented youth, she emphasized the necessity of promoting and nurturing this creative potential. Furthermore, she highlighted the crucial importance of tackling issues related to employment, ensuring access to food, and enhancing educational opportunities. In terms of fostering stronger bilateral ties, she emphasized Germany’s eagerness to actively strengthen the bond between the two nations.

Related Article: FG Urged to Tax the Wealthy to Boost Revenue

Under the umbrella of MSMEs, there lies a promising opportunity for collaboration between the Ministry of Industry Trade and Investment, under Doris Uzoka-Anite, and the German government. Together, they can focus their efforts on enhancing the expertise of craftsmen and providing them with adequate education. These specific domains ignite the interest of Germany, and through a growing partnership, both nations can foster substantial growth and development. An agreement known as the Memorandum of Understanding (MOU) is set to be signed in order to enhance the efficiency of planning and decision-making initiatives.

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Ask Nigeria
21 days ago

Nigeria has a very low tax to GDP ratio.Edun’s analysis states that Nigeria’s tax to GDP ratio stands at a mere 10%.Express your point of view.

21 days ago

The ratio of taxes to GDP in Nigeria is extremely low. Nigeria has a tax to GDP ratio of just 10%, according to Edun’s study. The ratio of taxes to GDP is very modest; nevertheless, it could be higher if there were more supportive policies for businesses to prosper. There’s a greater chance of raising taxes the more jobs and businesses are produced.

21 days ago

Nigeria is notable for having a comparatively low tax-to-GDP ratio of just 10%, which the Federal Government of the country believes is impeding development because of a smaller tax base.As a result of our low tax to GDP ratio, which has an impact on industrialized nations, tax collection is essential.

Adeoye Adegoke
21 days ago

Nigeria’s tax to GDP ratio of 10% is indeed quite low. This means that the government is not collecting enough revenue through taxes compared to the size of the economy. A higher tax to GDP ratio is essential for sustainable development and the provision of public goods and services.
A low tax to GDP ratio can have several implications. Firstly, it limits the government’s ability to invest in critical sectors such as healthcare, education, infrastructure, and social welfare programs. These sectors play a vital role in improving the quality of life for citizens and fostering economic growth.
Additionally, a low tax to GDP ratio can hinder the government’s ability to address income inequality and promote social justice. Through progressive taxation, where higher-income individuals contribute a larger proportion of their income, the government can redistribute wealth and provide support to vulnerable populations. This can help bridge the gap between the rich and the poor, leading to a more equitable society.
Moreover, a low tax to GDP ratio can result in a heavy reliance on external borrowing to finance government expenditure. This can lead to an increase in public debt, which may have long-term consequences for the economy, such as higher interest payments and limited fiscal flexibility.
To address this issue, it is crucial for the Nigerian government to implement effective tax reforms. This could include expanding the tax base, improving tax administration and compliance, and reducing tax evasion and avoidance. By doing so, the government can increase tax revenue without placing an excessive burden on the citizens.
Furthermore, there is a need to enhance transparency and accountability in the use of tax revenue. This will help build trust among taxpayers and ensure that the collected funds are utilized efficiently and effectively for the benefit of the society.

21 days ago

The government’s concern about Nigeria’s low tax-to-GDP ratio underscores the importance of boosting revenue for economic development and essential services. Collaboration with international partners like Germany shows commitment to addressing key challenges like employment and food security. Strengthening ties with MSMEs offers promising opportunities for mutual growth and skill enhancement.