In the current socio-economic context of Nigeria, a topic of critical importance emerges: the inequality crisis due to tax evasion by the wealthy. The situation is critical, with over 99% of Nigerians who are wealthy evading their tax obligations, while millions of people suffer from hunger and poverty. This alarming finding was revealed during the presentation of two in-depth studies titled “Income and Wealth Inequality in Nigeria: Trends and Drivers” and “Taxing the Rich: Fair Tax Monitor” by Fatshimetrie in Abuja.
The reports conducted in collaboration with the Tax Justice Network Africa and the Civil Society Legislative Advocacy Centre (CISLAC) highlight the growing inequality crisis across the country. Despite Nigeria being the fourth largest economy in Africa, the benefits of economic growth are unevenly distributed among a small elite, leaving millions of Nigerians trapped in poverty.
Fatshimetrie’s analysis reveals a staggering wealth gap in Nigeria, calling for the adoption of progressive wealth taxation and increased social investment to close the widening economic and social gap before a potential social crisis erupts.
Reports indicate that only 40 of Nigeria’s wealthiest citizens are compliant taxpayers, according to the Federal Inland Revenue Service (FIRS) and John Bean Technologies Corporation (JBT). This represents a compliance rate of just 0.035%, implying that over 99% of the country’s wealthiest individuals are evading or avoiding paying taxes.
To address these issues, Fatshimetrie urges the Nigerian government to implement several key measures:
Increase social spending: Currently, Nigeria allocates only 2-3.5% of its budget to education and 4-7% to health, well below global standards. The government should increase spending on social sectors to at least 10% of the budget in health, education, and agriculture.
Implement progressive taxation: Establish a wealth tax targeting high net worth individuals. A 1% tax on net worth above $1 million could generate about $7.5 billion annually, which could fund critical social programs.
Invest in human capital development: Improve education, job creation, and health, especially in rural and underserved populations. Improving wages, reducing corruption, and expanding educational opportunities, especially for women and girls, will boost Nigeria’s Human Development Index (HDI) by 2030.
Support smallholder farmers and reform agriculture: Strengthen policies that improve access to credit, land, and rural infrastructure for smallholder farmers. Prioritizing women’s land rights and promoting sustainable agricultural practices will help bridge the rural-urban divide.
Reform land policies: Establish a national land commission, conduct a national land audit, and ensure that land redistribution programs are transparent and inclusive, particularly with respect to gender disparities.
Engage with civil society: Non-state actors, including civil society organizations, the private sector, and community groups, should advocate for pro-poor policies, hold government accountable, and promote gender equality.
Develop a comprehensive wealth registry and strengthen tax enforcement: This will ensure that high net worth individuals contribute fairly to the nation’s revenue.
In his speech, Anwual Rafsanjani, Executive Director of CISLAC, urged the government to implement a net wealth tax, increase the capital gains tax to bring it in line with global best practices, exempt essential goods from VAT while introducing luxury taxes on high-end items such as private jets, luxury cars and yachts.
He also proposed that the government fully exempt Nigerians earning less than the minimum wage or less than N840,000 per annum from personal income tax (PIT), while increasing the top tax rate to at least 40% for the top 1%. Rafsanjani also advocated the introduction of an inheritance and gift tax on estates exceeding N50 million, as well as the renegotiation of double taxation agreements that disproportionately benefit multinational corporations to strengthen Nigeria’s fiscal sovereignty.