Nigeria’s fiscal federalism has a problem that everyone in government knows about but few say out loud: some states and government-owned institutions collect from the national revenue pool every month without putting anything meaningful into it. Last week in Abuja, that problem finally got a room of its own.
The national workshop on tax compliance under the new tax regime brought together federal and sub-national government officials to talk about something uncomfortable. The Nigeria Revenue Service executive chairman Zacch Adedeji said it directly: the country can no longer sustain a fiscal structure where some states benefit from federally distributed revenues without making commensurate tax contributions. His agency’s own monitoring operations have found significant gaps in how government institutions deduct and remit VAT and withholding tax. The leakages are not coming only from private businesses.
Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, framed the broader stakes. Nigeria is trying to move its revenue base away from oil, which is volatile and finite, towards a stable tax system that can fund infrastructure, healthcare, education, and security sustainably. That shift only works if every tier of government participates honestly. A federal tax reform that stops at the federal level is not a reform. It is a rebranding exercise.
The NRS is carrying a target of N40 trillion in tax revenue for this year. That number is significant not because it is easy to achieve but because of what achieving it would require: tighter coordination between federal and state revenue authorities, faster remittance of withheld taxes by government institutions, and a compliance culture that applies to public entities with the same force it applies to private ones.
The introduction of a performance-based recognition initiative for states with strong tax compliance is a small but telling detail. It suggests the NRS understands that enforcement alone will not close the gap. States that do the right thing deserve to be seen doing it. States that do not should find that harder to hide.
Nigeria has talked about fiscal federalism for a long time. The conversation in Abuja last week was less about the idea and more about the mechanics of making it real. That is a different and more useful conversation to be having.
