Nigeria is turning to regional tax coordination as a lever for strengthening domestic revenue mobilisation, betting that harmonised policies across federal and sub-national jurisdictions can unlock significant untapped fiscal capacity.
The push comes against the backdrop of Africa's largest economy grappling with one of the lowest tax-to-GDP ratios on the continent, persistently below double digits and far short of the African Union's recommended 15 percent threshold. With crude oil revenues—long the mainstay of government finances—facing structural headwinds from global energy transition pressures and persistent production challenges, fiscal authorities are under mounting pressure to broaden the domestic tax base.
Central to the reform effort is the need to streamline the overlapping mandates of the Federal Inland Revenue Service and the 36 state internal revenue services, which have historically created a fragmented tax landscape characterised by multiple taxation, inconsistent rates, and compliance burdens that deter formal business activity.
The Joint Tax Board, the statutory body charged with promoting uniformity in tax administration across the federation, is expected to play a pivotal role in advancing the harmonisation agenda. Proposals under discussion include standardised filing procedures, unified taxpayer identification systems, and agreements on jurisdictional boundaries for personal income tax, consumption taxes, and other sub-nationally administered levies.
For businesses operating across multiple states, the fragmentation has long been a source of friction. Companies frequently face audits, assessments, and enforcement actions from multiple revenue authorities on the same income streams—a dynamic that raises the cost of compliance and discourages inter-state commerce. Tax practitioners argue that clarifying the fiscal federal architecture could yield immediate gains in both revenue collection and ease of doing business.
Beyond domestic coordination, the regional dimension also extends to cross-border tax cooperation within the Economic Community of West African States framework, where Nigeria has signalled interest in aligning its transfer pricing and anti-avoidance rules with regional counterparts to protect its corporate tax base from profit shifting.
The reform push aligns with broader fiscal consolidation efforts under the medium-term expenditure framework, which envisions a gradual shift from deficit financing towards self-sustaining revenue generation. Analysts note that successful implementation will require political buy-in from state governments, many of which guard their fiscal autonomy jealously and rely heavily on internally generated revenue to meet recurrent obligations.
Whether the regional tax reform bet pays off will depend largely on the durability of inter-governmental consensus and the capacity of revenue agencies to modernise collection systems. For an economy seeking to reduce its vulnerability to commodity cycles, the stakes could hardly be higher.