Nigeria’s Tax Reforms and the Crisis of Fiscal Legitimacy

By our Senior Staff Writer

Nigeria’s renewed push for tax reform comes at a moment of deep economic strain. With inflation eroding household incomes, businesses struggling to survive, and public trust in government at a low ebb, the question confronting policymakers is not merely how to raise revenue, but how to do so without further undermining social cohesion.

This dilemma was at the heart of a recent interview with Ahmad Bello Dogarawa, Professor of Accounting at the Ahmadu Bello University (ABU), Zaria, Nigeria and an internationally respected Islamic economist, who offered a wide-ranging assessment of Nigeria’s tax reforms. His analysis situates taxation within a broader ethical, legal, and political economy framework—one that challenges prevailing assumptions about compliance, enforcement, and reform sequencing.

Reform Fatigue and the Case for Caution

While acknowledging the necessity of reform, Dogarawa warned against aggressive tax expansion during periods of economic hardship. He argued that legal consolidation, base broadening, and compliance improvement are important objectives, but timing matters. In an economy marked by declining real incomes and fragile enterprises, relentless tax pressure risks worsening poverty and deepening resistance.

From an Islamic jurisprudential standpoint, this caution is well grounded. Classical Islamic law permits state-imposed taxation (darāʾib) only under necessity and insists that such measures must not impose undue hardship (rafʿ al-ḥaraj). Fiscal policy, in this view, must remain sensitive to social conditions. A temporary moratorium or phased implementation during economic distress is not fiscal weakness, but ethical prudence.

Taxation, Justice, and the Limits of Enforcement

Dogarawa’s critique goes beyond timing to question the structure of Nigeria’s tax system itself. Multiple and overlapping taxes across federal, state, and local governments have created complexity that disproportionately burdens small businesses and informal operators. Meanwhile, high-net-worth individuals and large corporations—those with the greatest capacity to pay—are widely perceived as under-taxed or inconsistently enforced.

Islamic public finance places central emphasis on ability to pay and equitable burden-sharing. Taxes that fall heavily on the weak while sparing the powerful violate the principle of justice (ʿadl) and erode moral legitimacy. In such contexts, non-compliance is not merely evasion; it is often a rational response to perceived injustice.

Dogarawa’s analysis suggests that Nigeria’s compliance problem cannot be solved through enforcement alone. Without credibility, enforcement becomes costly, contested, and ultimately self-defeating.

The Role of Islamic Social Finance

One of the most distinctive elements of Dogarawa’s intervention is his call to rethink the relationship between taxation and Islamic social finance mechanisms, particularly zakat and waqf. Rather than viewing these instruments as marginal or purely religious, he argues that they can play a complementary role in Nigeria’s fiscal architecture.

Properly institutionalized, zakat systems have the potential to mobilize significant resources for poverty alleviation, healthcare, education, and social protection—areas where public spending is often inadequate. Waqf, through endowments for public benefit, can reduce pressure on state budgets while fostering community ownership of social welfare.

From a jurisprudential perspective, this approach aligns with Islamic fiscal theory, which prioritizes redistribution and social justice while limiting coercive taxation. It also offers a pragmatic solution in a country where religious institutions retain high levels of public trust compared to state agencies.

External Influence and Policy Autonomy

Dogarawa also raised concerns about the influence of foreign powers and international institutions on Nigeria’s tax agenda. While global best practices matter, externally driven reforms can overlook local realities, ethical norms, and political constraints.

Islamic economic thought is not opposed to learning from others, but it insists that policy must serve domestic welfare (maslahah) rather than external benchmarks alone. Tax reforms designed primarily to satisfy investors or creditors risk deepening domestic alienation if they fail to address inequality, unemployment, and service delivery.

 Policy Recommendations

Drawing from Dogarawa’s analysis, several policy implications emerge clearly:

First, prioritize high-net-worth individuals and large corporations in tax enforcement. This would improve revenue yield while restoring perceptions of fairness.

Second, simplify and reduce tax burdens for small businesses, particularly during economic downturns. Complexity and over-taxation at the lower end undermine entrepreneurship and employment.

Third, institutionalize Islamic social finance mechanisms within Nigeria’s broader fiscal framework, especially for social welfare delivery, without politicization or mismanagement.

Fourth, enhance transparency and governance in tax collection and expenditure. Regular, accessible reporting on how revenues are used is essential for rebuilding trust.

Finally, sequence reforms carefully, allowing economic recovery to precede aggressive expansion of tax obligations.

Rebuilding Fiscal Legitimacy

At its core, Nigeria’s tax challenge is not technical but relational. Citizens increasingly perceive taxation as extraction rather than contribution, while the state views resistance as non-cooperation rather than a signal of distrust.

Dogarawa’s reflections underscore a critical insight shared by both Islamic jurisprudence and modern political economy: taxation is a moral relationship before it is a fiscal one. Authority must earn compliance through justice, restraint, and accountability.

As Nigeria navigates its next phase of reform, success will depend less on how much revenue is raised than on how legitimately it is collected. Without ethical grounding, tax reform will remain fragile. With it, taxation can become a foundation for inclusive development rather than a source of social fracture.

Click here to watch the full interview