LAWMAKERS in Nigeria, specifically the House of Representatives, have decided to investigate claims that Nigeria has lost trillions of naira because of tax incentives, waivers, and exemptions given to companies.
The government agency responsible for handing out these tax breaks and incentives is the Federal Ministry of Finance, through the Nigeria Investment Promotion Commission (NIPC).
The motion was adopted at the plenary on Thursday, March 27.
It followed the adoption of a motion of urgent public importance moved by a member representing Oriade/Obokun Federal Constituency, Osun State, Oluwole Oke.
While moving the motion, Oke explained that the Federal Government has the sole right to tax income, profits, capital gains, exports, and imports. They use tax rules to try and keep the economy stable..
He pointed out that one way the government tries to boost the economy in certain areas is by giving tax waivers, breaks, exemptions, and incentives.
However, the the lawmaker also said that while these tax breaks are meant to be helpful, they have created a massive hole in the country’s finances.
He claimed that this is mainly because companies that benefit from these schemes are abusing the system.
Oke, however, pointed out that successive administrations had issued fiscal policy measures and tax modification orders in line with national economic strategies, with some interventions yielding positive results.
Despite the good intentions, the lawmaker, however, lamented that tax incentives and waivers had created a “major black hole in the country’s finances.”
He asserted that this is mainly due to abuses by companies benefiting from the scheme.
Oke stressed that data suggest Nigeria loses an estimated N8 trillion every year due to tax waivers. Out of this, N6 trillion is lost because companies are taking advantage, and N2 trillion is down to badly managed waivers.
He highlighted specific tax areas that are often misused, such as capital allowances, investment allowances, pioneer status incentives, free trade zone exemptions, and VAT exemptions.
“These loopholes have significantly impacted Nigeria’s tax-to-GDP ratio, which currently stands at 10.6%—one of the lowest in Africa,” Oke maintained.
He believes that urgent steps need to be taken to curb the abuse of tax waivers so the country does not get plugged into severe fiscal crises.
“If this situation persists, Nigeria may not only be on the verge of a fiscal collapse but could suffer a fate similar to Venezuela, where a country with vast resources finds itself in deep economic turmoil, recession, and depression.”
To further look into the matter, the Green Chamber then mandated its Committees on Industry, Finance, and Commerce to investigate the issue and submit a report within four weeks for legislative action.
Nigeria’s losses to tax incentives and others have been a worry to many stakeholders and concerned groups.
In particular, the Civil Society Legislative Advocacy Centre (CISLAC) has repeatedly expressed worries that Nigeria faces a severe fiscal crisis marked by a consistent decline in government revenue over the past years.
The ICIR reported in April 2024 that CISLAC’s executive director, Auwal Ibrahim Musa, lamented that Nigeria’s fiscal woes were being compounded significantly by revenue losses attributed to tax expenditures, encompassing incentives, exemptions, credits, and waivers.
According to him, this substantial revenue leakage underscores the urgency of addressing tax expenditure and debt management issues with utmost priority.
He argued that there is a need for a comprehensive review of existing tax incentives to ensure their effectiveness, efficiency, and alignment with national development priorities.