Nigeria has a long-standing reliance on crude oil sales to generate revenue. However, the ongoing volatility in oil prices and the growing shift to alternative energy sources have made reliance on crude oil sales for fiscal planning unsustainable in the long term. The shortage of daily crude oil production in Nigeria is an additional challenge, thereby making revenue diversification and the shift to non-oil taxation critical.

In 2019 the Nigerian government re-introduced the use of annual finance acts (FAs) to address loopholes identified in tax laws and raise awareness about generating non-oil tax revenue. Since then, three FAs have been implemented. The changes resulting from by these acts have supported the drive to increase tax revenue.

The recent focus on taxation has led the federal government to make broad changes to several pieces of tax legislation that had either stifled private sector growth or inhibited the optimal collection of taxes.

Finance Acts

The FAs operate as legislation to set the fiscal tone of their country for any given year. Like Nigeria, several countries enact annual FAs to amend tax legislation in a way that allows the government to shape the behaviour of economic players.

Since the government reintroduced the annual enactment of FAs, there have been three consecutive amendments: the 2019 FA enacted on January 13, 2020; the 2020 FA enacted on December 31, 2020; and the 2021 FA enacted on December 31, 2021. These FAs collectively brought about the amendment of key provisions in different statutes, including the Companies Income Tax Act, the Personal Income Tax Act, the Value-Added Tax (VAT) Act, the Federal Inland Revenue Service Establishment Act and the Capital Gains Tax Act. The FAs collectively accomplished the following:

• Adjusted tax rates: The federal government adjusted tax rates to reflect current economic realities. For instance, the VAT rate was increased from 5% – one of the lowest in Africa – to 7.5%, while the Tertiary Education Tax rate was increased from 2% to 2.5%.

The FAs were also used to introduce graduated corporate income tax rates of 30%, 20% and 0% for large, medium, and small companies, respectively.

• Clarified tax provisions: The FAs have also been used as a vehicle to provide clarity on portions of tax legislation which had previously caused confusion. For instance, provisions that had imposed double taxation on company profits were modified.

• Discouraged non-compliance: The FAs introduced stiffer penalties for non-compliance with tax laws.

For instance, penalties for failure to submit VAT returns were increased by about 400%. The amendments to the tax statutes have increased citizens’ awareness of taxation and the social contract between the population and the government, and also boosted activity in the Nigerian tax space. Many analysts have argued that recent changes in taxation by the federal government have placed Nigeria in a strategic position to deal more effectively with the impacts of the Covid-19 pandemic.


Annual enactment of FAs can be said to be good practice as it has helped the government to:

• Align the existing tax laws with global realities and update some old/obsolete provisions;

• Provide clarity on grey areas in the tax laws; and

• Increase compliance from non-resident companies. However, some taxpayers have struggled to keep pace with these yearly changes. There remains room for improvement in providing taxpayers with clarity and opportunity for further action in the tax system.


To date, the enactment of annual FAs has been a success. In the coming years, the regulatory authorities must ensure that any further amendments are made with the overall objective of both increasing revenue and improving productivity at the same time.