The international development establishment has a favourite prescription for Nigeria, raise tax-to-GDP ratio. The IMF says it, the World Bank echoes it. Every visiting economist and policy consultant repeats the mantra, Nigeria’s 9-10% tax collection is too low, a sign of state weakness that must be corrected. They point to successful economies with ratios of 20%, 30%, even 45%, and insist we must follow Olugbenga Jaiyesimi jerry3jaiye@gmail.com 08123709109suit.They are catastrophically wrong. Nigeria’s low tax-to-GDP ratio isn’t a bug in our system, it’s a feature and perhaps our saving grace.
Let’s start with an inconvenient fact. Nigeria experienced its most impressive period of economic diversification and growth in the 2000s and early 2010s when our tax-to-GDP ratio remained stubbornly below 10%. This wasn’t oil-boom growth, as the conventional narrative claims. The Niger Delta crisis had crippled oil production throughout much of this period. Production numbers didn’t recover until the 2010s.
What drove that growth? The private sector, unleashed and unburdened with extra taxes.Telecommunications revolutionized the country, mobile penetration went from near zero to transforming how Nigerians do business. Nollywood became a global cultural force, built entirely on private initiative and individual hustle. Dangote built a cement empire. Waste-to-wealth industries emerged. Innovation flourished in the informal sector.
Here’s the crucial detail the experts conveniently forget, this non-oil growth weathered the 2008-2010 global financial crisis and the accompanying oil price collapse. Why? Because it was real, diversified, private sector-led growth not government-engineered fantasy.
The standard argument goes thus “If only government had more revenue, it could invest in infrastructure, education, healthcare, and security.” This sounds reasonable until you observe what Nigerian governments actually do with money.
Billions of dollars—not millions, billions—have been poured into the power sector. What’s our current electricity generation capacity relative to our population? We’re in perpetual darkness. Successive governments have “revived” our refineries with astronomical expenditures. Result? Until lately we imported nearly all our refined petroleum products. The returns on these investments don’t amount to 5% of the expenditure.Â
This isn’t incompetence. It’s systematic prebendalism, a deeply entrenched culture where public office exists primarily for private enrichment and distributing patronage. Every naira that flows into government coffers becomes fuel for this machinery of waste. It funds ghost workers, inflated contracts, abandoned projects, and the elaborate feeding chain that keeps our political class comfortable while ordinary Nigerians suffer.
The 2015-2023 period provides a perfect natural experiment for what happens when government expands its footprint. President Buhari’s team inherited a balance of payments problem. Nigeria’s foreign reserves had been depleted, and the currency was under pressure. This required painful but straightforward adjustment, aggressive non-oil exports, allowing the naira to find its level, and letting markets rebalance. Instead, they misdiagnosed it as a business cycle recession and applied Keynesian solutions of reflating the economy through government borrowing, monetary financing through the Central Bank, expanded public expenditure. They threw borrowed money at problems while the structural defects remained untouched. The result? Debt burden exploded, inflation soared, the currency collapsed anyway, and the private sector got crowded out. Had they kept government lean and let private actors adjust and innovate, we would have recovered faster and stronger. Instead, we got years of stagnation and a lost decade.
Here’s the uncomfortable truth that no policy paper will tell you: Nigeria lacks the social contract that makes high taxation work elsewhere. Scandinavian countries can maintain 40%+ tax ratios because their citizens trust government, and have centuries-old culture and institutions that enforce it. Their governments largely deliver what they promise.
The conventional advice for Nigeria says we need to build state capacity through taxation. But you cannot build capacity in a system designed for extraction. You only fund more sophisticated extraction. Imagine if Nigeria announced a radically different strategy: “We are going counterintuitive. We’ are keeping taxes low, minimizing government intervention, and letting the private sector and civil society lead development.”
Foreign investors would rush in, not for tax breaks alone but for the signal that Nigeria understands its comparative advantage isn’t in government-led development but in unleashing the legendary entrepreneurial energy of its people. Companies would build private power plants (some already are), toll roads, ports and logistic networks. They’d create the jobs that genuinely reduce poverty, not the inflated government payrolls that drain resources.
Yes, this creates challenges. Private provision won’t reach every village or serve the poorest equally. Markets create islands of prosperity before they spread. But compare it to the alternative; high taxation funding a government that delivers nothing while the same elite extracts wealth through monopolies, oil theft, regulatory capture, land grabs etc. At least with resources in private hands, some Nigerians prosper and create opportunities for others. With resources in government hands, only the politically connected feast.
Nigeria still controls massive oil revenues. In a low-tax model, this is admittedly problematic, the government has resource rents but minimal service obligations. This is a genuine weakness in the argument and deserves being addressed . Perhaps the answer is radical transparency, publish every naira of oil revenue and its use, let civil society watchdogs track it, and limit its use to only what government absolutely must provide (basic security, contract enforcement, truly national infrastructure and catering to the weakest in society)
Addressing the weakest in society, we have seen how in the past the monies for them were diverted into private accounts, billions of naira. Churches and mosques with vast networks and community trust could expand their already significant role in education, healthcare, and social welfare. To incentivize them further, threaten them with heavy taxes unless they provide social services and watch how quickly they’d mobilize further.
I know this argument makes development economists in the World Bank, IMF, policy consultants and government officials uncomfortable. Some of them genuinely believe higher taxation is the path to development. Others, let’s be honest, benefit nicely from the current system where international institutions pressure Nigeria to expand revenue, which funds the contracts, consultancies, promotions and connections they profit from.
To these groups, I say they look at the evidence. Nigeria’s best growth ever came with low taxation. Our worst stagnation came with expanded government. Your models may say we need 20% tax-to-GDP. Our reality says we need government to take less and interfere less.The conventional wisdom isn’t just wrong for Nigeria, it’s dangerous. It would strengthen the exact institutions that have failed us, funding the exact behaviors that keep us poor.
Nigeria’s low tax-to-GDP ratio isn’t a weakness to be corrected. In a country with our governance reality, low tax to GDP is the thin line between survival and suffocation of the private initiative that actually creates prosperity. Maybe it’s time the experts stopped prescribing from textbooks and started learning from our lived experience. The sleaze is comfortable, the consultancy fees are good, but Nigeria deserves better than recycled solutions that have failed us for decades. Our strength lies not in feeding a dysfunctional state, but in starving it while feeding the entrepreneurial spirit that has always been our true wealth.
If this submission is accepted, the economy grows at much higher rates, possibly double digit rates. Government revenues also grow exponentially from increased economic activities without the need to raise tax to GDP. Economist should go on to develop models of Nigeria’s economy at both 8% tax to GDP and at 18% tax to GDP, they might be surprised at their findings.
Olugbenga Jaiyesimi can be reached via jerry3jaiye@gmail.com 08123709109
