Nigeria’s New Single-Digit Tax Policy To Stimulate Economic Growth

In less than a year in office, President Bola Ahmed Tinubu through four Executive Orders, suspended some of the stifling taxes in Nigeria and directed the implementation of a single-digit tax system in the country.

The single-digit tax system, expected to take off after the Presidential Committee on Fiscal Policy and Tax Reforms report presentation to the government will shrink the current multiple tax regime, put at over 60 taxes, to 9 taxes. The new tax policy is to create an enabling business environment while restoring the confidence of local and foreign investors to set up businesses in Nigeria.

Experts say the single-digit tax system, when implemented, will fully create job opportunities for graduates and also pull Nigeria out of the current economic challenges.

The Chairman of the Federal Inland Revenue Service (FIRS), Mr. Zach Adedeji, described the single-digit tax as a strategic plan that is being followed to lead the country out of the current economic challenges. Mr. Adedeji assured stakeholders of the President’s commitment to grow the national tax base rather than introducing new taxes or increasing existing ones.

The Chairman of Dangote Group, Mr. Aliko Dangote identified the benefits of the single-digit tax regime to encourage investments in the downstream sector of the oil and gas industry and create job opportunities for the Nigerian youths.

Other benefits of the new tax regime include protecting manufacturers that the policy was unfair to in the past by making the manufacturers rejoice and pay the harmonized taxes.

Over the years, manufacturers in Nigeria have been groaning under the yoke of all manner of problems coupled with the recent removal of fuel subsidies and the exchange rate unification.

During the last days of former President Muhammadu Buhari’s administration, he introduced different taxes, many of which experts say hindered the growth of many businesses in the country.

In a bid to stimulate economic growth and encourage investment, the introduction of the Single Digit Tax initiative by the Tinubu administration marks a significant departure from conventional fiscal policies. This will provide relief to businesses by substantially reducing the tax burden, thereby fostering a favourable environment for entrepreneurship and business expansion.

One of the primary advantages of President Tinubu’s Single Digit Tax is its potential to stimulate investment by significantly lowering the tax rate, as a result, businesses free more capital to reinvest in their operations. This surplus capital can be directed toward expanding production capacity, upgrading technology, or venturing into new markets that will lead to job creation and enhanced economic prosperity.

The policy of single-digit tax demonstrates the Nigerian current administration’s commitment to mitigate socio-economic disparities to alleviate financial strain on small businesses, thereby enabling them to thrive and contribute meaningfully to the national economy.

With reduced tax obligations, businesses operating in Nigeria will gain an edge over their counterparts in other regions where tax rates remain high and multiple. This newfound advantage can attract domestic and foreign investors and position the West Africa region as investors’ destination of choice for businesses seeking to optimize their bottom line.

Tax incentives play a pivotal role in fostering innovation and entrepreneurship. By lightening the tax burden, President Tinubu’s administration will automatically empower startups and SMEs to channel their resources toward innovation, research, and development.

This nurturing environment encourages risk-taking and experimentation, ultimately leading to the emergence of disruptive technologies and business models that will make the startup ecosystem more results-driven for long-term economic growth in Nigeria

For Nigeria to attain the objectives of this tax policy review there is the need to rationalize the tax system to make it more equitable, it is necessary to encourage greater compliance among businesses towards boosting government revenue streams.

The success of the emerging tax regime in Nigeria hinges on effective implementation, prudent fiscal management, and periodic review to ensure alignment with evolving economic realities.

If fully executed, this initiative could serve as a blueprint for other countries in Africa and beyond facing similar tax policy challenges for a more realistic era of prosperity and opportunity for businesses. It will set the stage for robust economic growth and accelerated development in Nigeria and Africa.