Nigeria Forgoes N8 Trillion Annually Through Tax Concessions, House Committee Reports
A House of Representatives committee has revealed Nigeria loses approximately N8 trillion yearly through tax concessions, waivers, and exemptions, representing substantial revenue leakage that undermines fiscal capacity.
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Nigeria's federal government is forgoing approximately N8 trillion annually through various tax concessions, waivers, and exemptions, according to a House of Representatives committee investigating the country's tax incentive framework. The figure represents roughly 1.6% of Nigeria's GDP based on 2024 estimates and highlights substantial revenue leakage at a time when the government faces mounting fiscal pressures.
James Abiodun Faleke, Chairman of the House ad hoc committee on the Review of Tax and Export Incentives, Waivers and Exemptions, disclosed the findings on Tuesday during committee proceedings. The All Progressives Congress (APC) representative from Lagos State is leading the legislative inquiry into the effectiveness and transparency of Nigeria's tax incentive regime, which has expanded significantly over the past decade without comprehensive oversight.
The N8 trillion revenue gap comes as Nigeria's Federal Inland Revenue Service (FIRS) targets N19.4 trillion in tax collection for 2025, according to its Medium Term Revenue Strategy. The amount lost to concessions and waivers represents approximately 41% of the FIRS collection target, underscoring the scale of foregone revenue that could otherwise fund critical infrastructure, education, and healthcare sectors.
Nigeria's tax-to-GDP ratio remains among the lowest globally at approximately 10.8%, well below the African average of 16.5% and significantly trailing developed economies where ratios exceed 30%. The World Bank has consistently identified tax exemptions and waivers as key factors constraining Nigeria's revenue mobilization capacity, particularly as the country seeks to reduce its dependence on volatile oil revenues.
The House committee's investigation focuses on determining which sectors and entities benefit most from these fiscal incentives, whether the concessions achieve their stated policy objectives, and how much revenue the government sacrifices annually. According to The Nation Newspaper, Faleke's committee is examining tax incentives across multiple sectors including manufacturing, agriculture, solid minerals, and technology, where successive administrations have granted exemptions to stimulate investment and economic growth.
Tax expenditure—the technical term for revenue foregone through exemptions, deductions, and preferential rates—has grown substantially in Nigeria without corresponding transparency or impact assessment. The Federal Ministry of Finance does not publish regular tax expenditure reports, making it difficult for policymakers and citizens to evaluate whether these incentives deliver value commensurate with their fiscal cost.
The timing of the investigation aligns with President Bola Tinubu's broader fiscal reform agenda, which includes multiple tax bills currently before the National Assembly aimed at harmonizing Nigeria's complex tax structure. The proposed reforms seek to expand the tax base, improve compliance, and rationalize incentives that may have outlived their economic justification or primarily benefit rent-seeking interests rather than productive investment.
International financial institutions have long urged Nigeria to conduct comprehensive reviews of its tax incentive regime. The International Monetary Fund noted in its 2024 Article IV consultation that Nigeria's extensive use of tax holidays, import duty waivers, and sector-specific exemptions creates distortions, reduces transparency, and provides opportunities for abuse without clear evidence of achieving development objectives.
The N8 trillion figure encompasses various categories of tax relief including pioneer status incentives for new industries, export processing zone benefits, import duty waivers on machinery and equipment, value-added tax exemptions on specific goods and services, and discretionary waivers granted by the Ministry of Finance. Critics argue many of these concessions benefit well-connected corporations and individuals rather than genuinely supporting economic transformation.
As Nigeria grapples with a debt service-to-revenue ratio that consumed 96% of federal government revenue in 2023 before recent reforms, the committee's findings are likely to intensify calls for eliminating ineffective tax expenditures. The government's ability to fund the 2025 budget of N49.7 trillion—which projects a deficit of N13.08 trillion—depends heavily on improving revenue collection and reducing leakages.
The House committee is expected to submit comprehensive recommendations on reforming Nigeria's tax incentive framework, potentially including sunset clauses for existing exemptions, stricter eligibility criteria, mandatory impact assessments, and enhanced transparency through regular tax expenditure reporting. These reforms could significantly boost government revenues without raising statutory tax rates, providing fiscal space for development spending while maintaining competitiveness for genuine investors.