The Importance of Fiscal Policy and Tax Reforms in Nigeria

Feranmi Olaseinde

Feranmi Olaseinde

Aug 01, 20233 min read


The Importance of Fiscal Policy and Tax Reforms in Nigeria


In a move to address fiscal policy and tax reforms in Nigeria, President Bola Tinubu has approved the establishment of a presidential committee. The committee will be chaired by Taiwo Oyedele, fiscal policy partner and Africa tax leader at PwC Nigeria. However, concerns have been raised regarding the potential negative impact of increased tax burden on the economy. This article will explore the significance of fiscal policy and tax reforms in Nigeria and provide actionable advice for effective implementation.

1. The Need for Fiscal Policy and Tax Reforms:

Fiscal policy plays a pivotal role in shaping a country's economic outlook. It involves the government's decisions regarding taxation, spending, and borrowing. Tax reforms, on the other hand, focus on improving the efficiency and fairness of the tax system. These reforms are essential for several reasons.

Firstly, fiscal policy and tax reforms can enhance economic growth. By implementing fair and efficient tax systems, governments can encourage investment, stimulate entrepreneurship, and create job opportunities. These measures contribute to economic stability and prosperity.

Secondly, fiscal policy and tax reforms can address income inequality. Through progressive tax systems, governments can ensure that wealthier individuals contribute a larger proportion of their income, leading to a more equitable distribution of wealth. This, in turn, can help alleviate poverty and improve social cohesion.

Lastly, fiscal policy and tax reforms can strengthen public finances. By optimizing revenue collection and reducing tax evasion, governments can increase their fiscal capacity to fund public services and infrastructure development. This is crucial for sustainable economic development and poverty reduction.

2. The Concerns and Counterarguments:

While the establishment of the presidential committee on fiscal policy and tax reforms is a step in the right direction, concerns have been raised regarding the potential negative consequences of increased tax burden.

One argument against increasing value-added tax (VAT) is the potential impact on employment. Critics worry that higher taxes could lead to layoffs and an increase in unemployment rates. Additionally, VAT services may not align with the traditional VAT system, as they function as intermediaries between manufacturers and distributors.

However, it is important to note that tax reforms should be implemented holistically, taking into account the specific needs and challenges of different sectors. By conducting comprehensive research and stakeholder consultations, the committee can develop tailored strategies that minimize potential negative consequences.

3. Actionable Advice for Effective Implementation:

To ensure the success of fiscal policy and tax reforms in Nigeria, here are three actionable advice:

  • a. Conduct comprehensive impact assessments: Before implementing tax reforms, it is essential to conduct thorough impact assessments to understand the potential consequences on different sectors and stakeholders. This will enable the committee to develop targeted strategies that mitigate negative effects.
  • b. Promote tax education and awareness: Enhancing tax literacy among citizens and businesses is crucial for effective implementation. The committee should prioritize public education campaigns to inform citizens about the benefits of tax reforms and encourage compliance.
  • c. Foster collaboration and transparency: Engaging with relevant stakeholders, including businesses, civil society organizations, and tax professionals, is vital for inclusive and transparent decision-making processes. Collaboration will help address concerns and ensure the reforms are widely accepted.


Fiscal policy and tax reforms are essential for Nigeria's economic growth, income redistribution, and public finance management. While concerns about increased tax burdens are valid, implementing comprehensive impact assessments, promoting tax education, and fostering collaboration can help address these issues. By adopting a holistic approach, Nigeria can achieve sustainable and equitable economic development.

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