Nigeria’s tax reforms tests path from enforcement to voluntary compliance

Nigeria’s push to raise non-oil revenue has intensified scrutiny on its tax system, but a deeper question is emerging: can Africa’s largest economy move from enforcement-driven collections to a culture of voluntary compliance?

Traditionally, tax systems relied on audits, penalties, and fear. Now, many countries are prioritizing voluntary compliance where taxpayers willingly file and pay correctly without coercion. Governments now see it as more efficient and sustainable than chasing non-compliance

Experts say the biggest barrier to voluntary compliance in Nigeria is not policy design, but trust.

Afeez Adebimpe, a tax expert, explaining the importance of aligning Nigeria’s tax reforms with global standards, emphasized that while Nigeria’s reforms are directionally sound, their success hinges on credibility.

“Tax compliance improves when trust improves,” he said, adding that citizens and businesses must see clear value from taxes paid, government must demonstrate transparency and accountability in utilisation.

According to him, voluntary compliance becomes achievable when taxpayers can connect their contributions to tangible outcomes such as infrastructure, education, and healthcare.

This trust gap is widely cited in surveys by global institutions, in which Nigerian businesses consistently cite concerns about transparency and government accountability as key reasons for low compliance.

The country’s tax-to-GDP ratio has risen to about 13.5 percent as of late 2025, up from below 10 percent in previous years, with a target of 18 percent by 2027.

Despite the improvement, analysts warn that Nigeria’s reliance on enforcement-led collections may have limits, particularly if rising revenues are not matched by stronger taxpayer trust and system efficiency.

This concern is becoming more pronounced as ongoing reforms from digital tax platforms to electronic invoicing, reshaping how taxes are administered. The critical question, however, is whether these changes can shift taxpayer behaviour from enforcement-driven compliance to trust-driven compliance.

For many businesses, particularly in the informal and SME segments, tax compliance is often driven less by willingness and more by fear of sanctions.

Multiple taxation across federal, state, and local authorities, coupled with complex filing processes, has historically made compliance burdensome. As a result, many businesses engage only when compelled through audits, sealing of premises, or regulatory pressure.

This dynamic reflects a broader structural issue: a weak link between tax payments and visible public value. Without that connection, compliance tends to be reactive rather than voluntary.

Beyond trust, the role of tax within organisations is also evolving, with implications for how businesses approach compliance. Abiola Ibiyemi, Head of Tax Management at First City Monument Bank, argues that tax is no longer just a statutory obligation but a strategic function. “In an era of fiscal pressures, regulatory scrutiny, and margin compression, tax has become a strategic lever that directly impacts profitability, liquidity, and business resilience,” he said.

According to Ibiyemi, modern tax functions are shifting from periodic filings to proactive planning, embedding tax considerations into business decisions, leveraging data analytics, and engaging regulators early to reduce disputes. This shift suggests that for larger, structured organisations, compliance is increasingly tied to efficiency and value creation rather than enforcement alone.

At the policy level, Nigeria is betting heavily on digitisation to improve compliance.

The introduction of platforms such as Rev360 is expected to transform how businesses interact with the tax system, moving from manual processes to a fully digital, self-service model.

Ayodapo Bamidele, a tax technology consultant, said the platform will fundamentally change compliance dynamics for SMEs. “Businesses will now be required to register, file taxes, make payments, track audits, request refunds, and manage their tax profiles entirely online,” he said.

While this improves efficiency and transparency, offering real-time visibility into liabilities and filings, it also raises the bar for compliance. Errors, late filings, and inconsistencies are more likely to be detected instantly, triggering penalties more quickly.

For many SMEs, this creates a dual reality: easier processes, but higher exposure to enforcement. “There is greater control, but also greater responsibility,” Bamidele added.

According to a report by OECD titled ‘Tax Transparency in Africa 2024: Africa Initiative Progress Report’ there is a growing shift in how African countries are strengthening domestic revenue mobilisation, showing that improved tax transparency and the use of Exchange of Information (EOI) are beginning to yield measurable results.

According to the report, EOI has played a significant role in boosting revenues, with nearly €4 billion identified by 12 African countries since 2009 through offshore investigations, voluntary disclosure programmes, and the effective use of automatically exchanged financial data.

The report underscores that while transparency frameworks are now in place, the real gains depend on how effectively tax authorities use the data, reinforcing a broader global trend where voluntary compliance is increasingly driven by information visibility rather than enforcement alone.

The transition from forced to voluntary compliance is ultimately behavioural, not just technical. While digital platforms, data integration, and stricter monitoring can reduce evasion, they do not automatically build willingness to comply.

Instead, analysts argue that important conditions must align, such as a simpler, more predictable tax process, a transparent and accountable use of tax revenue and a credible link between taxation and public value. Without these, enforcement will continue to dominate.

Nigeria’s tax reforms signal a clear intent to modernise its fiscal system and reduce reliance on oil revenues. Yet, the success of this transition will depend less on how much enforcement is applied and more on how much trust is built.

As reforms deepen, the country faces a delicate balancing act, using technology and enforcement to close compliance gaps, while simultaneously creating a system that taxpayers see as fair, efficient, and worthwhile.

If that balance is achieved, voluntary compliance may gradually replace coercion. If not, Nigeria risks entrenching a system where taxes are paid out of obligation, not conviction, limiting the sustainability of its revenue ambitions.