By Kingsley Eiguedo Okoeguale

For the past eighteen months, Nigeria’s economic policy conversation has been dominated by a single, seductive idea: the state does not earn enough. From the podium of the Nigeria Economic Summit to the floor of the National Assembly, the refrain is identical – raise the tax-to-GDP ratio, expand the base, and levy new consumption taxes. On the surface, the arithmetic appears unassailable. With a tax-to-GDP ratio that hovered between 9.5 and 13.5 per cent in 2025 – still far below the African average of roughly 16 per cent and the OECD’s 34 per cent – Nigeria seems to be leaving billions on the table.

But this consensus, however loudly repeated, is a dangerous misdiagnosis. Nigeria does not have a revenue crisis. It has a governance crisis. The central, unaddressed truth is that the country’s fiscal health will not be saved by extracting more from citizens and businesses. It will only be saved by radical transparency over what is already collected. The real reform, therefore, is not taxation – it is accountability.

The paradox of rising revenues
Let us examine the facts. Far from collapsing, government revenues have grown significantly. Following the twin shocks of subsidy removal and exchange rate unification, fiscal indicators improved markedly. Government revenue rose by approximately 4.5 per cent of GDP in 2024. By 2025, the fiscal deficit had narrowed from 5.4 per cent (2023) to around 3 per cent, and capital inflows surged by 90 per cent.

Yet, even as the numbers improved, the lived reality of Nigerians did not. The 2026 fiscal framework projects a staggering budget of over N54 trillion, with a deficit exceeding N20 trillion – roughly 3.6 per cent of GDP. Crucially, debt servicing alone is projected at nearly N16 trillion.

This is the paradox: more revenue, but even more pressure. This contradiction cannot be explained by low tax effort. It is explained by systemic leakage – the opacity, inefficiency, and weak expenditure control that ensure rising inflows never translate into tangible public goods.

The transparency deficit: Where the money vanishes
The core problem is not the size of the national purse; it is that the purse has holes. Despite the Treasury Single Account (TSA) and improvements in budget disclosure, significant portions of public finance remain opaque. Revenue-generating agencies – from the Nigeria Customs Service to various self-funding parastatals – operate with inconsistent remittance practices. Extra-budgetary funds and special accounts continue to fragment the fiscal system, creating blind spots that oversight bodies cannot penetrate.

The Auditor-General of the Federation’s annual reports have become a ritual of dysfunction – routinely flagging unremitted revenues, unexplained expenditures, and direct procedural violations. In recent years, the Office of the Auditor-General has identified hundreds of billions of naira in unremitted operating surpluses from federal agencies. Yet enforcement remains notoriously weak. No permanent official has faced significant sanction for fiscal indiscipline.

Consequently, the government is preparing to ask Nigerians to pay more into a system that cannot account for what it already has. To increase taxes in this context is not fiscal policy; it is fiscal folly – akin to filling a reservoir with unseen leaks.

Taxation without trust is a political dead end
Taxation is not merely a technical instrument. It is the most intimate contract between a state and its citizens. In Nigeria, that contract is broken. The government has publicly signaled its ambition to raise the tax-to-GDP ratio to as high as 18 per cent within the next few years. But this ambition collides with a hard reality: public trust is at historic lows. Citizens will resist, evade, or simply refuse to pay when they perceive that public funds are diverted, expenditures on healthcare and education are invisible, and institutions that should enforce accountability are themselves compromised.

The Federal Inland Revenue Service (FIRS) has made genuine strides in digitalisation and collection efficiency. But no amount of technological upgrade can legitimise a fiscal system that lacks moral credibility. Nigeria’s challenge, therefore, is not merely to expand the tax net – it is to earn the right to cast it.

The economic cost of opaqueness
This is not a philosophical argument; it is an economic one. Fiscal opacity carries three direct costs. First, it distorts investment. The 90 per cent surge in capital inflows recorded in 2025 is often cited as a success. But a closer look reveals that much of this was short-term portfolio capital, chasing high yields in treasury bills. Long-term productive capital – the factories, power plants, and infrastructure that create jobs – remains cautious. Institutional investors are not merely looking for returns; they are looking for predictable governance. Opacity signals risk.

Second, opacity misallocates resources. When fiscal flows are not fully visible, critical sectors are systematically underfunded. Nigeria’s health and education budgets, as a percentage of GDP, remain among the lowest in the world – not because aggregate revenue is insufficient, but because what is available is diverted or inefficiently spent.

Third, opacity kills reform credibility. The current administration’s macroeconomic adjustments have been politically costly. If those sacrifices are not visibly linked to improved service delivery and accountable governance, the next phase of reform – including tax expansion – will face insurmountable popular resistance.

Beyond revenue: The real reform agenda
If Nigeria is serious about fiscal sustainability, it must abandon the arithmetic of extraction and embrace the architecture of transparency. Four immediate reforms are required.

Radical, real-time fiscal transparency. Nigeria must move beyond annual budget publications to live, public, citizen-facing dashboards. Every remittance from the NNPC, every transfer from FIRS, and every withdrawal from consolidated revenue should be timestamped and accessible. The NEITI framework for extractive industries should become the national standard for all public finance.

Consequences, not just reports. The Office of the Auditor-General must be empowered with prosecutorial authority or guaranteed referral mechanisms that lead to actual sanctions. Until a senior official faces consequences for non-remittance, audit reports will remain mere literature.

Consolidation of fiscal accounts. The proliferation of off-budget agencies and special funds must end. A unified, coherent budgeting framework – where every naira is visible and traceable – is a prerequisite for trust. The TSA was a first step; complete fiscal consolidation is the second.

Enforcement of fiscal discipline. Rules must matter. Fiscal misconduct – whether through non-remittance, misallocation, or procedural violations – must attract predictable and enforceable sanctions. This is not merely a legal requirement; it is a credibility imperative.

Conclusion: Fix the system before expanding it
Nigeria stands at a crossroads. The data shows progress: revenues are rising, deficits are narrowing (even if still large), and foreign capital is cautiously returning. But progress without structural reform is fragile.

The government’s push for higher taxation is not inherently wrong. Eventually, Nigeria must mobilise more domestic resources to fund development. But the sequence matters. Transparency must precede taxation. Citizens must see the effect of their contributions before they are asked to give more. Until Nigeria seals the leaks in its fiscal system, its crisis will remain – not loud and dramatic, but persistent, structural, and dangerously silent.

Okoeguale is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and a public policy analyst focused on economic governance and institutional reform. His work examines the intersection of fiscal policy, public administration, and private sector outcomes.