Economic growth is the straight-forward solution to Nigeria's tax woes

05 June 2019 2 min. read
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Nigeria must rely on economic growth to boost tax revenues and not vice-versa, according to Chairman of KPMG Africa Kunle Elebute. Currently, a lack of trust in the government to make the best of tax money is what appears to be driving high default rates and a low tax revenue threshold. 

Analysts have been trying for months now to devise ways in which the taxation system in Nigeria can be improved so as to boost overall revenue levels in the country. Some argue that the high default rates are being caused by the complexity of paying taxes, and the large amount of time consumed in the process.

Elebute has been at the helm of Big Four accounting and advisory firm KPMG Nigeria as Chairman for nearly two years now, and has been a vocal commentator on the economic scenario in the country. According to him, Nigeria must go back to the basics when it comes to boosting revenues.

Kunle Elebute - Senior Partner, KPMG in Nigeria & Chairman, KPMG Africa

Elebute claims that the surest and most sustainable way of escalating tax revenues is to accelerate the movement of people from the economically poor segment to the middle class. Essentially, increasing the taxable income is the best way to increase taxes, a scenario that is heavily reliant on economic growth.

Once employment rates and economic growth increase, the next step is to regain the trust of the people that their tax money is being put to appropriate use. “Taxpayers need to see what they are using their money to do. That is because if you are using the money to clear expenditure or finance elephant projects, then why shouldn’t we pay tax?” explains Elebute. 

“In that sense, it is granted as a civic duty and everybody must pay tax. But the reality is that countries where the political leaders or those at the helms of affairs do not use tax money to grow the economy, would find that in such situation, trust will be broken. And for Nigeria, that is the first step,” he adds.

Barring the resolution of such fundamental issues, Elebute predicts continued economic losses in Nigeria’s future, carrying forward and compounding from each year to the next. Given the country’s role as a driver of regional economic growth, Elebute recommends a shift in the focus back to the fundamentals.