With the ongoing transition to the Nigeria Revenue Service (NRS), the principle of tax-for-service has moved to the forefront of public debate. The idea rests on a straightforward premise: citizens are far more inclined to meet their tax obligations when they can directly observe how those contributions translate into improved clinics, roads, schools, and other essential infrastructure.
This arrangement is anchored in the Fiscal Exchange Theory, which frames taxation not as a mechanical extraction of wealth but as an implicit bargain. Under this compact, citizens surrender a portion of their resources with the expectation of receiving public goods in return. When people see their money funding services they value, compliance rises naturally. This dynamic creates a cycle of fiscal reciprocity—visible service delivery strengthens government legitimacy, which in turn deepens the public's internal motivation to pay.
Similar demands have reshaped tax policy elsewhere. In Brazil, the 2013 protests known as the "Giant Awoke" forced a direct response from the government. Law 12,858/2013, commonly called the Royalties Law, was enacted to channel 75 percent of new oil royalties into education and 25 percent into healthcare, creating an explicit link between resource extraction and social dividends. In Vietnam—a country with demographic and income patterns notably similar to Nigeria's—near-universal health coverage was achieved and millions were lifted out of poverty within a single decade. The strategy was straightforward: tax revenues were funnelled into a robust social safety net that citizens could see and feel.
Nigeria's fiscal position presents a stark contrast. The 2025 fiscal year was administratively impressive, with the NRS collecting a record ₦28.23 trillion—exceeding its target by 12 percent. Yet the exchange side of the bargain remains fractured because the state is handcuffed by prior obligations. Between January and July 2025, debt servicing at ₦9.81 trillion and personnel wages at ₦4.51 trillion together absorbed 105 percent of the government's actual income. In effect, every Naira earned was already committed to past liabilities, leaving nothing for the services citizens are demanding.
To plug the gap, the 2026 budget was revised upwards to ₦68.32 trillion, carrying a deficit of ₦31.46 trillion that will require ₦29.20 trillion in new borrowing. As part of the Budget Call Circular, the government mandated a 70 percent rollover of 2025 projects into 2026, a move designed to ensure eventual completion of ongoing initiatives. The budget sets aside ₦3.52 trillion for education and ₦2.48 trillion for health, signalling a stated focus on human capital development. However, organisations such as ActionAid Nigeria have criticised these allocations as inadequate, pointing out that they remain far below international benchmarks and do little to satisfy the public's call for a visible return on their tax contributions.
The demand for tax-for-service is not a passing sentiment. It represents the fundamental fiscal bargain between any state and its citizens. Under the Benefit Theory of governance, taxation derives its legitimacy only when citizens receive a proportional return in the form of public services. For Nigerians, the insistence on tangible dividends—functioning schools, accessible hospitals, and reliable infrastructure—is a justifiable expectation of what has been called the dividend of democracy. While record revenues are currently overwhelmed by debt obligations, the validity of this demand remains the primary driver pushing toward a genuine restoration of the social contract.
