Taxing, Borrowing the Future With out Constructing: What Has Nigeria’s Fiscal Authority Executed for the Actual Sector?

BY BLAISE UDUNZE

In at the moment’s Nigeria, one uncomfortable fact has turn into obtrusive that the fiscal authority collects, but it surely doesn’t construct. It borrows, but it surely doesn’t produce. It taxes, but it surely doesn’t empower. For years, the Nigerian authorities has pursued fiscal insurance policies extra obsessive about income than with outcomes.

The removing of gas subsidy in 2023 was imagined to mark a brand new daybreak. It was bought to Nigerians as a path to fiscal freedom as a step that might redirect over $10 billion yearly from consumption subsidies to capital funding, infrastructure, well being care, schooling and job creation. Two years later, that promise has vanished right into a fog of political spending and bureaucratic complacency.

The query now just isn’t how a lot the federal government has collected, however what it has accomplished with it. What tangible influence have these revenues from taxations and borrowings had on the true sector which is the a part of the financial system that really produces items, creates jobs, and drives growth?

A Fiscal Authority Fixated on Taxation, Not Manufacturing

Nigeria’s fiscal coverage lately has tilted dangerously towards aggressive income assortment. Below immense strain to develop non-oil earnings, the Federal Inland Income Service (FIRS) has expanded its attain to just about each nook of the financial system. From VAT on electrical energy and telecommunications (knowledge utilization) to name credit, financial institution transactions to stamp duties on financial institution transfers, to levies on postal deliveries for on-line purchases, virtually nothing escapes the federal government’s tax internet.

The typical Nigerian entrepreneur now faces a labyrinth of taxes similar to firm earnings tax, schooling tax, signage charges, land use prices, and a myriad of native levies. But the identical entrepreneur operates in an setting outlined by energy shortages, failing infrastructure, foreign exchange volatility, and regulatory uncertainty. These are usually not circumstances for enterprise development; they’re circumstances for extinction.

Taxation, in precept, ought to be a partnership between the state and the productive class as a social contract that trades compliance for growth. However in Nigeria, taxation has turn into punishment, not partnership. The fiscal authority seems to be taxing poverty to maintain forms. It has forgotten that the power of any financial system lies not in how a lot it extracts, however in how a lot it permits.

Taxing With out Constructing

For a authorities that collects billions of naira every day from taxes, surcharges, levies, and newly designed income streams, it’s tough to search out any seen reflection of those revenues within the productive base of the financial system.

Based mostly on FIRS and authorities releases, tax collections amounted to about N34 trillion in 2023-2024, and non-oil receipts reached round N20.6 trillion in January to August 2025, indicating complete authorities collections of at the least N50-N55 trillion since mid-2023, relying on how partial-year and FAAC gadgets are aggregated and with out double counting.

The contradiction is obtrusive that Nigeria’s fiscal managers have turn into extra environment friendly at gathering taxes however much less efficient at constructing the financial system that sustains these taxes.

The fact is sobering. SMEs that stand because the true spine of nationwide productiveness are closing store in droves. The price of diesel, transportation, and lease have tripled, whereas the naira’s freefall continues to eat away at margins. Slightly than supply aid, fiscal companies have tightened the noose with new prices and penalties. The result’s a local weather of exhaustion and financial fatigue.

Borrowing With out Constructing

If taxation is squeezing companies dry, borrowing is suffocating the nation’s future. As if taxes weren’t sufficient, Nigeria’s fiscal authorities have doubled down on borrowing, amassing money owed at an unprecedented fee. These have resulted to spiral of loans justified within the identify of growth however not often seen in tangible outcomes.

As of mid-2025, Nigeria’s complete public debt has ballooned to N152.4 trillion, a staggering 348.6 % improve since President Bola Tinubu assumed workplace in June 2023, when the determine stood at N33.3 trillion. For a rustic already struggling to fulfill fundamental obligations, that is unsustainable.

Reflecting on the broader African context, the image is equally alarming. The continent’s exterior debt now exceeds $1.3 trillion, with debt servicing prices hitting $89 billion this 12 months alone. Nigeria is among the hardest hits, not merely by the dimensions of its debt, however by its lack of productive return.

At the same time as companies groan below the load of a number of taxation, the Federal Authorities has stored its foot firmly on the borrowing pedal. Between July and October 2025, Nigeria’s fiscal authorities secured over $24.79 billion (plus €4 billion, ¥15 billion, N757 billion, $500 million in Sukuk) in new borrowings and amenities, the majority of which had been justified as “growth financing.” But the true sector nonetheless awaits to really feel the promised influence.

Over 25 % of Nigeria’s annual income now goes into debt servicing, leaving little fiscal area for funding in well being, schooling, or trade. Specialists warn that when over 90 % of presidency income is consumed by previous money owed, governance turns into survival, not progress.

Uche Uwaleke, professor of finance and capital markets at Nasarawa State College, stated the excessive value of debt reimbursement continues to undermine the nation’s financial potential.

“Nigeria’s debt service ratio is inimical to financial growth, mainly as a result of what might have been used to construct infrastructure and spend money on human capital is used to service debt,” Uwaleke informed BusinessDay. “The chance value for the nation is excessive. To make sure debt sustainability, the federal government ought to tie future borrowings to self-liquidating tasks that may generate income to repay the loans.”

On the 2025 IMF and World Financial institution Annual Conferences in Washington D.C., world leaders once more pledged to sort out growing international locations’ debt burdens. However as Nigeria’s borrowing continues unchecked by way of Eurobonds, sukuk, and bilateral loans. The query Nigerians ought to be asking is straightforward, who advantages from all this borrowing?

What’s extra troubling is the federal government’s sample of borrowing to service previous money owed and fund recurrent expenditures. As a substitute of financing tasks that create worth, loans are spent plugging funds holes. The chain of debt grows longer, and the productive financial system stays static.

We’re witnessing a fiscal irony as in a nation borrowing to outlive, to not thrive.

The Missed Alternative of Subsidy Financial savings

The removing of gas subsidy was imagined to unencumber capital for productive investments. As a substitute, it has freed up extra money for recurrent consumption. Subsidy funds are actually shared month-to-month among the many three tiers of presidency, with no seen developmental footprint.

Nigerians had been informed that the subsidy windfall would enhance energy provide, roads, and transport infrastructure. However greater than a 12 months later, there may be little to indicate.

In one of many world’s largest oil producing nations, gas costs quintupled, rising greater than 514 % from N175 in Might 2023 to N900. Throughout the nation, small companies are closing down; transport fares stay insufferable; and electrical energy provide stays erratic. The fiscal authority seems to have changed subsidy waste with income waste.

As a substitute of utilizing subsidy financial savings to ignite productiveness, the funds have been channeled into the identical unsustainable cycle of political spending, wage funds, and administrative overheads. This isn’t reform, it’s redistribution with out duty.

The place Is the Fiscal Coverage Coordination?

The disconnect between Nigeria’s fiscal and financial authorities has turn into a elementary barrier to progress. Whereas the Central Bank of Nigeria (CBN) tightens liquidity to regulate inflation, the fiscal authority concurrently floods the financial system with new taxes and levies, inflating enterprise prices and undermining the identical stability the CBN is attempting to realize.

The contradictions are infinite. The CBN preaches monetary inclusion, but fiscal companies impose financial institution switch duties that discourage banking utilization. The CBN claims to advertise SME credit score schemes, but fiscal authorities drain disposable earnings with new taxes.

This absence of coverage synergy sends combined indicators to buyers and residents alike. Companies can’t plan, buyers can’t forecast, and even the federal government’s personal intervention funds lose influence. Nigeria’s financial administration, because it stands, resembles an orchestra with no conductor.

State Governments because the Silent Beneficiaries

Whereas the federal authorities collects the majority of taxes, state governments have turn into silent beneficiaries of the subsidy financial savings. Every month, they obtain billions from FAAC allocations swollen by oil receipts, VAT, and subsidy removals.

Based mostly on knowledge from NEITI and OAGF/NBS month-to-month communiqués, the conservative FAAC disbursement complete from June 2023 to June 2025 stands at roughly N25.65 trillion, overlaying solely months with publicly out there and verifiable experiences.

But, few states have something to indicate for it. Industries are dying, roads are deteriorating, and capital budgets are chronically underfunded. In lots of states, governance has been diminished to wage funds and political campaigns, not growth.

Nigeria’s fiscal success can’t be measured by how a lot Abuja collects however by what states ship. Growth is a sequence, if one hyperlink is weak, your entire system collapses. But, most states proceed to rely on federal allocations as a feeding bottle reasonably than a growth engine.

The federal fiscal authority can’t declare progress whereas sub-national governments squander shared revenues with out accountability. Till FAAC allocations are tied to measurable developmental outcomes, Nigeria will hold sharing poverty, not prosperity.

The Actual Sector being Uncared for and Starved

Nigeria’s actual sector, significantly SMEs continues to endure neglect. Regardless of contributing about 48 % of GDP, accounting for over 90 % of companies and using over 80 % of the workforce, SMEs obtain lower than 5 % of complete financial institution credit score. Fiscal coverage has accomplished little to alter that.

Slightly than offering focused tax reliefs, infrastructure subsidies, or credit score ensures, authorities insurance policies have worsened the price of doing enterprise. The manufacturing sector’s development fee stays sluggish, and capability utilisation in lots of factories has dropped beneath 50 %.

Producers grapple with energy cuts, foreign exchange shortage, and a number of taxation. Many are compelled to depend on costly diesel turbines, additional eroding competitiveness. Import duties stay excessive, ports are congested, and logistics prices hold rising.

Ajayi Kadiri, Director-Basic of the Producers Affiliation of Nigeria (MAN), not too long ago captured this frustration bluntly:

“We are able to’t plan below fiscal chaos. Manufacturing in my village is extraordinarily costly. A number of levies, some with no authorized foundation, are suffocating companies. You may get up in the future and see a 50 % improve in port prices with out prior session. That’s not coverage that’s chaos.”

Kadiri’s assertion is greater than an trade criticism; it’s a mirror of nationwide dysfunction. When producers can’t plan, the financial system can’t develop. When fiscal coverage turns into unpredictable, funding flees. The result’s a panorama of deserted factories, unemployed youth, and shrinking export potential.

In impact, the fiscal authority is extracting worth with out creating it. Authorities has turn into an professional in income assortment however a failure in financial coordination.

The Human Price of Fiscal Mismanagement

Behind the numbers lies a painful actuality. Each share improve in tax or tariff interprets into larger costs, decrease wages, and fewer jobs. The removing of subsidy with no viable security internet pushed hundreds of thousands deeper into poverty. Regardless of the inflation claimed to have eased to 18.02 % from 20.12 remains to be eroding buying energy and diminished client demand, which is the lifeblood of manufacturing.

The market girl who pays for electrical energy she not often will get, the producer shedding employees because of diesel prices, the younger entrepreneur crushed by levies, as these are usually not statistics. They’re the casualties of a fiscal system that prioritises assortment over compassion.

As a substitute of designing focused assist, power rebates, SME tax credit, or rural infrastructure packages the fiscal authority has chosen the better path by taking extra from these already struggling. This short-term method sacrifices long-term productiveness for immediate income gratification.

Want for Constructing, Not Simply Taxing

To rescue the financial system, Nigeria’s fiscal managers should undertake a production-first mindset. A nation can’t tax or borrow its solution to prosperity. It should produce, construct, and export its approach there.

Rebalance fiscal priorities.

–       Channel subsidy financial savings into infrastructure, agro-industrial hubs, and SME credit score amenities not recurrent spending.

–       Reward manufacturing, not compliance. Provide tax breaks for native producers, exporters, and innovators.

–       Implement fiscal transparency. Each borrowed greenback ought to be tied to measurable outcomes, with clear public reporting.

–       Align fiscal and financial coverage. Finish the contradiction between tax enlargement and credit score tightening.

–       Demand state-level accountability. States should present what they’re doing with FAAC allocations by way of verifiable tasks, not political slogans.

The Urgency of a Fiscal Rethink

Nigeria’s fiscal coverage has misplaced its ethical and developmental compass. It has turn into a machine that extracts with out empowering as a construction extra targeted on sustaining authorities than constructing an financial system.

Taxation ought to create an setting the place companies thrive. Borrowing ought to construct the long run, not mortgage it. And subsidy financial savings ought to turn into the inspiration of nationwide renewal, not political redistribution.

Till Nigeria’s fiscal authorities perceive that income assortment just isn’t growth, and that loans are usually not progress, the financial system will stay trapped in a vicious cycle of taxing with out constructing, borrowing with out producing, and spending with out reworking.

Blaise, a journalist and PR skilled writes from Lagos, could be reached by way of: blaise.udunze@gmail.com