Nigeria’s tax-to-GDP ratio too low – FirstBank MD

The Managing Director/Chief Executive Officer of First Bank of Nigeria, Olusegun Alebiosu, has raised concerns over Nigeria’s low tax-to-GDP ratio which he described as too low. Speaking at a webinar organised by the bank with the theme, “Tax Reform and the Real Economy: Unpacking the New Reality,”Alebiosu stressed the urgent need to broaden the country’s […]

The Managing Director/Chief Executive Officer of First Bank of Nigeria, Olusegun Alebiosu, has raised concerns over Nigeria’s low tax-to-GDP ratio which he described as too low.

Speaking at a webinar organised by the bank with the theme, “Tax Reform and the Real Economy: Unpacking the New Reality,”Alebiosu stressed the urgent need to broaden the country’s revenue base in order to support sustainable development and improve the government’s capacity to respond to economic shocks.

His remarks set the tone for a broader discussion among economists and policy experts, who agreed that Nigeria’s fiscal framework is undergoing a transition toward a more structured, transparent, and inclusive system.

Chief Economist at FirstBank, Chinwe Egwim, noted that the current reform efforts reflect a deliberate shift from a narrow and fragmented tax structure to a wider and more comprehensive framework.

According to her, “this economy requires a broader and more resilient revenue base,” adding that the focus is now on improving coverage and closing existing gaps in tax administration.

She explained that while inflation has begun to ease slightly, businesses and households are still grappling with high costs, making the current period one of adjustment.

However, she emphasized that a more predictable and consistent tax system would ultimately reduce uncertainty and support long-term investment decisions.

“The environment is becoming more structured,” Egwim said, noting that businesses must now pay greater attention to planning, record-keeping, and understanding their tax obligations. She added that improved fiscal stability would not only enhance government responsiveness but also contribute to more predictable pricing across the economy.

Egwim further highlighted that fiscal policy is increasingly being shaped not just by how much the government spends, but by how it generates revenue. This shift, she explained, is influencing capital allocation decisions and encouraging businesses to adopt more disciplined financial practices.

One of the panelists and Nigeria’s First Professor of Capital Market, Uche Uwaleke underscored the importance of protecting investors while implementing reforms. He pointed out that investments in state government bonds currently enjoy tax exemptions, a policy designed to encourage participation in subnational financing.

However, he suggested that introducing thresholds for instruments such as treasury bills could help balance revenue generation with investor protection. He also commended the government’s decision not to increase Value Added Tax (VAT), warning that raising the rate from 7.5 percent to 10 percent would have worsened inflationary pressures.

“It would have been a huge shock for the economy,” he said, adding that the current reform agenda is not about introducing new taxes but about improving the efficiency and fairness of the existing system.

On implementation, Olufemi Olarinde, Head of Fiscal and Tax Reform Decision at the National Revenue Service (NRS), stressed that success would depend on moving from reactive to proactive governance.

He emphasized the importance of clarity in tax obligations, noting that taxpayers must understand which taxes apply to them and ensure proper compliance.

According to him, taxpayers generally fall into two categories: those paying taxes on income and those subject to consumption or business-related taxes.

In both cases, maintaining proper books of account and accurate records—particularly of employees—is essential, he stated.

Olarinde disclosed that new guidelines are being finalised and will soon be released to provide clearer direction to taxpayers.

He also highlighted the role of the Pay-As-You-Earn (PAYE) system as a key mechanism for tax collection, urging employers to ensure accurate deductions and remittances.

He reiterated that the broader objective of the reforms is to create a fairer and more transparent tax system. “Everything you say, you must be able to prove,” he said, warning against poor documentation and unverifiable claims.

Tax expert Albert Folorunsho drew attention to the significant incentives available to small businesses under the current framework. He noted that many small companies are exempt from income tax, describing the relief as substantial and beneficial for enterprise growth.

According to him, these incentives are already encouraging more businesses to formalize their operations through incorporation, thereby expanding the tax net while supporting economic activity.