Experts Warn Nigeria’s Tax Reforms May Falter Without Transparent Spending by State Governments

Story: written by springnewsng March 13,2026
Economic analysts and tax policy experts have cautioned that Nigeria’s ongoing tax reform programme could struggle to achieve its intended impact if state governments fail to use increased revenues to improve public services and citizens’ welfare.
The warning was issued during the 2026 Tax Conference organised by BusinessDay Media Limited in Abuja, where policymakers, economists and tax administrators examined the future of Nigeria’s fiscal reforms.
Participants at the conference agreed that while the reforms are expected to expand the country’s tax base, reduce revenue leakages and increase government income, their long-term success will depend largely on transparency and accountability in public spending.
States must justify higher revenues
Speaking at the event, Sam Amadi, former chairman of the Nigerian Electricity Regulatory Commission, said most tax revenues generated in Nigeria — including Value Added Tax (VAT) — are eventually shared with state and local governments.
According to him, these levels of government carry the major responsibility of providing social services such as healthcare, education and social protection programmes.
He stressed that if the additional funds generated from the reforms are not translated into improved services for citizens, public confidence in the tax system could collapse.
Amadi warned that Nigeria risks sliding into what he described as a “tax enclave” — a situation where government aggressively collects taxes but economic development remains stagnant.
“Taxation involves taking resources from citizens with the expectation that the state will use those resources to improve their welfare,” he said.
“If public officials divert those funds for political purposes instead of development projects, the reforms will not deliver meaningful economic progress.”
He also highlighted public trust as a crucial factor in tax compliance, noting that citizens are more willing to pay taxes when they see visible benefits from government spending.
Reforms designed to strengthen states
Also speaking at the conference, Joseph Tegbe explained that the new tax reform framework was intentionally designed to boost the financial capacity of states and local governments.
According to him, the revised revenue-sharing structure increases the portion of VAT allocated to states from 50 percent to 55 percent, while the share retained by the federal government has been reduced.
He said the adjustment was introduced to enable state governments finance development projects more effectively.
“The main beneficiaries of these reforms are the subnational governments,” Tegbe said. “A larger share of tax revenue is now flowing to states and local governments.”
He also revealed that the VAT distribution formula has been adjusted to reflect where goods and services are actually consumed rather than where companies are registered, a move aimed at ensuring a fairer allocation of revenue across the country.
The reforms also seek to improve financial autonomy at the grassroots by enabling local governments receive statutory allocations more directly from the federal government.
Safeguards for taxpayers
Tegbe further disclosed that the reform programme includes stronger oversight mechanisms to protect taxpayers.
One of the proposed measures is the establishment of a tax ombudsman, an independent office that will handle complaints from individuals and businesses who believe they have been unfairly treated by tax authorities.
The ombudsman, he said, will act as a neutral mediator between taxpayers and government agencies.
Despite these initiatives, Tegbe admitted that Nigeria’s biggest challenge remains the breakdown of trust between citizens and government.
According to him, rebuilding this trust will take time.
He described the reforms introduced under President Bola Ahmed Tinubu as bold steps aimed at rebuilding confidence in Nigeria’s fiscal system while promoting fairer wealth distribution.
Tackling multiple taxes
For his part, Michael Ango said the reforms also address long-standing complaints from businesses about multiple taxation.
He explained that the restructuring of tax laws is intended to streamline overlapping levies and make compliance easier for businesses across the country.
According to Ango, simplifying the tax system will encourage investment and strengthen economic activity.
However, he noted that many Nigerians still struggle to view tax payment as a civic responsibility, pointing to weak enforcement and influence-peddling as ongoing challenges for tax authorities.
Encouraging investment
Economic experts also highlighted the impact of the reforms on Nigeria’s capital market.
Uche Uwaleke said adjustments have been made to the Capital Gains Tax (CGT) structure to close loopholes and discourage capital flight.
While certain high-value transactions will now attract a higher CGT rate, investors will be exempt if proceeds from share sales are reinvested in the Nigerian capital market.
Uwaleke explained that the reforms are focused on widening the tax base and blocking revenue leakages rather than raising tax rates. For example, the Value Added Tax rate remains unchanged at 7.5 percent.
He added that closing loopholes — such as companies operating in free trade zones but selling goods locally while enjoying tax exemptions — will significantly improve government revenue.
Focus shifts to responsible spending
With higher government income expected under the new tax regime, analysts say the next critical step is ensuring responsible use of the funds.
Uwaleke stressed that tax policy cannot be separated from government spending and debt management.
“With increased revenue from these reforms, the focus should now shift to quality spending that improves social services and the overall welfare of Nigerians,” he said.
Analysts say that unless citizens begin to see tangible improvements in infrastructure, healthcare, education and social protection programmes, Nigeria’s ambitious tax reform agenda may struggle to gain the public trust needed for long-term success