In a renewed push for sustainable revenue generation and fiscal stability, Lagos State Governor, Babajide Sanwo-Olu, has called for the expansion of Nigeria’s tax net to capture Micro, Small and Medium Enterprises (MSMEs) and high-net-worth individuals currently evading tax obligations.
Speaking at the 27th Annual Tax Conference of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja on Tuesday, the governor, represented by his Special Adviser on Taxation and Revenue, Ogungbo Abdul-Kabir Opeyemi, stressed that widening the tax base is key to Nigeria’s economic transformation.
Sanwo-Olu pointed to gaps in the proposed tax reform bills awaiting legislative approval, particularly a clause that exempts individuals earning below N800,000 annually from Personal Income Tax (PIT). While acknowledging the social protection objective of this exemption, he warned it could open doors for revenue losses if not carefully managed.
“The clause(s) that puts a cap on income of employees at N800,000 per annum before Personal Income Tax applies requires deliberate strategies. We must ensure taxpayers hiding in the MSME and start-up sectors are captured and intensify efforts to tax high net worth individuals to forestall growing tax evasion nationwide,” he said.
Governor Sanwo-Olu cited Lagos as a model for efficient tax administration, noting that the state generated N1 trillion in Internally Generated Revenue (IGR) in 2024 — a historic milestone made possible by tech-driven tax processes and enhanced citizen engagement.
He highlighted Lagos State Internal Revenue Service’s (LIRS) innovations, including the deployment of Artificial Intelligence-powered chatbots, advanced data analytics, and a centralised Lagos Revenue Portal, which streamlined taxpayer experience and improved compliance without increasing the tax burden.
“Our payer-centric model prioritised convenience and transparency. It allowed taxpayers to fulfill their obligations from their homes or offices, significantly boosting voluntary compliance,” the governor stated.
With over 37 million MSMEs contributing nearly 50% of Nigeria’s GDP but only a small fraction paying taxes, Sanwo-Olu emphasized the urgency of fiscal inclusivity. According to the National Bureau of Statistics, a large number of MSMEs remain informal and outside the tax system.
The governor stressed that wealthier individuals—many of whom have significant income streams from businesses, real estate, and offshore investments—must be held accountable through targeted Direct Assessment initiatives and digital tax audits.
Sanwo-Olu challenged state governments not to wait on the Federal Government but to proactively drive reform. He urged them to review outdated tax laws, adopt technology, invest in tax education, and build capacity among tax administrators.
“It is imperative that as sub-nationals, we not only embrace but lead the implementation drive. Without state-level commitment, the full benefits of national tax reforms will remain elusive,” he said.
This call aligns with the Presidential Fiscal Policy and Tax Reforms Committee led by Taiwo Oyedele, which is working to simplify Nigeria’s complex tax system and expand the tax net to enhance revenue-to-GDP ratio, currently at a low 10%.
Governor Sanwo-Olu also highlighted broader structural reforms in Lagos aimed at improving the business environment and driving economic inclusion. He cited the N10 billion Lagos–Bank of Industry MSME Fund to support small businesses with accessible loans, and the passage of the Lagos State Electricity Law in December 2024 to promote energy independence for businesses and households.
These initiatives, he said, not only promote compliance but also reduce the burden on businesses, thereby encouraging their formalisation and integration into the tax system.
Reiterating the importance of fiscal reforms to national development, Sanwo-Olu said a robust tax system is indispensable to Nigeria’s ambition of becoming a $1 trillion economy, a goal outlined in the country’s medium-term economic development plans.
“These elements are critical to realising the full potential of our tax reform efforts, enhancing fiscal capacity, and contributing meaningfully to national growth,” he said.
He praised President Bola Tinubu for providing strategic leadership in the ongoing tax and economic reforms, while commending the CITN for its role in strengthening tax professionalism in Nigeria.
Reacting to the governor’s comments, tax analysts at the conference urged the government to balance tax expansion with economic empathy. According to Dr. Amaka Nwosu, a taxation lecturer at the University of Abuja, expanding the tax net must go hand-in-hand with public trust and visible social services.
“You can’t tax the poor or small businesses without improving infrastructure, security, and access to credit. Voluntary compliance is easier when taxpayers feel their money is used wisely,” she said.
Another participant, Mr. Abdul Musa, an SME operator in Abuja, welcomed the call for reform but warned against aggressive tax enforcement without education and support.
“Many MSMEs are afraid of taxation because they don’t understand it or lack the financial structure. The government should educate, support, then tax,” he said.
As Nigeria pushes forward with its tax reform agenda, experts say state governments must invest in:
Digital infrastructure to automate tax collection
Data harmonisation across federal and state tax agencies
Incentives for MSMEs to transition from informal to formal
Public awareness campaigns to boost voluntary compliance
Tax tribunals and alternative dispute resolution mechanisms to protect taxpayers’ rights
With Lagos setting the pace, many stakeholders believe Nigeria can achieve a more inclusive, transparent, and efficient tax system capable of funding essential services and driving inclusive growth.