Oyedele Flags State Tax Leakages Amid NRS N40trn Revenue Drive

By Kingsley Ani

The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, recently in Abuja accused some state governments and Government Owned Enterprises (GOEs) of failing to deduct and remit Value Added Tax (VAT) and Withholding Tax as required under Nigeria’s tax laws. He described the trend as a structural threat to fiscal fairness and voluntary compliance. Speaking through his Chief of Staff, Mr. Tolu Adegbile, at the National Workshop on Strengthening Tax Compliance Under the New Tax Regime organised by the Nigeria Revenue Service (NRS), Oyedele said that the federal government had uncovered persistent leakages weakening tax administration and distorting fiscal federalism.

Executive Chairman of the NRS, Dr. Zacch Adedeji, represented by Executive Director, Finance and Corporate Services Directorate, Mr. Muhammad Abubakar Lawal, disclosed that the agency faces a N40 trillion tax revenue target in 2026, warning that uneven compliance among states and public institutions threatens institutional credibility and revenue sustainability. Executive Director, Large Taxpayer and Government Directorate, Madam Amina Ado, added that field audits revealed delayed remittances and weak compliance structures among some sub-national entities and public institutions.

DECISION HIGHLIGHT
The NRS plans to intensify technology-driven tax administration, strengthen remittance monitoring, expand voluntary compliance frameworks, and introduce a national ranking system recognising the most tax-compliant states from 2026. Authorities also signalled stronger enforcement powers under the new tax regime while publicly prioritising collaborative compliance over punitive enforcement.

DECISION MEMO
The federal government’s intervention signals a deeper recalibration of Nigeria’s fiscal architecture rather than a routine compliance warning. The emphasis on VAT and Withholding Tax leakages indicates concern within the fiscal authorities that revenue instability is no longer driven only by weak economic activity or oil volatility, but increasingly by institutional non-compliance within government structures themselves.

Oyedele’s framing of tax as “the social contract in action” reflects an attempt to reposition taxation from an extraction mechanism into a legitimacy instrument for public finance. However, the stronger subtext is fiscal centralisation through data visibility, technology deployment, and remittance traceability. The new tax regime appears designed to reduce discretionary leakages across Ministries, Departments and Agencies- (MDAs), GOEs), and sub-national governments that historically retained delayed remittances without immediate detection.

The NRS’s N40 trillion target substantially raises the pressure on internal government revenue mobilisation. In that context, states and public institutions are no longer merely beneficiaries of federation allocations; they are being repositioned as measurable compliance actors within the national revenue ecosystem.

Adedeji’s proposed “tax-compliant states” ranking introduces reputational competition into fiscal governance. While presented as a collaborative mechanism, it effectively creates a soft-performance index capable of exposing structurally weak states without immediate confrontation.

The broader implication is that Nigeria’s tax reforms are shifting from legislative redesign into operational enforcement. The next phase is likely to focus less on announcing reforms and more on tracking remittance behaviour across public institutions in real time.

DATA BOX

• N40 trillion tax revenue target for 2026 by the Nigeria Revenue Service
• Leakages identified in Value Added Tax and Withholding Tax deductions/remittances
• Affected entities include states, Ministries, Departments and Agencies, and Government Owned Enterprises
• Nigeria Revenue Service introducing tax-compliant state recognition framework in 2026
• Reform focus areas: technology-driven remittance systems, voluntary compliance, audit monitoring, enforcement enhancement
• Workshop venue: Abuja
• Organiser: Government Business Group, Government and Large Taxpayers’ Directorate of the Nigeria Revenue Service

WHO WINS / WHO LOSES

Who Wins:

• Highly compliant states likely to gain reputational advantage and stronger federal alignment
• Technology and tax administration service providers supporting compliance automation
• Federal fiscal authorities seeking predictable non-oil revenue streams
• States with already-digitised treasury and remittance systems

Who Loses:

• States and Government Owned Enterprises reliant on delayed remittance practices
• Institutions operating opaque treasury structures
• Sub-national entities exposed by comparative compliance rankings
• Agencies vulnerable to retrospective audits and tax debt recovery actions

POLICY SIGNALS

• Federal authorities are prioritising tax administration efficiency over new tax-rate increases
• Fiscal federalism is being reinterpreted around reciprocal compliance obligations
• The new tax framework favours centralised monitoring with decentralised responsibility
• Technology-driven tax transparency is becoming a core economic governance tool
• Public institutions are increasingly being treated as taxable accountability entities, not merely state actors

INVESTOR SIGNAL
The development reinforces Nigeria’s medium-term shift toward non-oil revenue consolidation and institutional revenue formalisation. For investors, the emphasis on tax predictability, remittance transparency, and technology-led administration suggests a gradual strengthening of fiscal data reliability. However, it also signals a more assertive compliance environment for entities operating within government-linked ecosystems.

The policy direction may improve sovereign revenue resilience if enforcement remains consistent and politically sustainable. A stronger tax collection framework could also support debt servicing credibility and public expenditure planning over time.

RISK RADAR

• Political resistance from non-compliant states and Government Owned Enterprises
• Weak intergovernmental coordination limiting enforcement effectiveness
• Potential legal disputes over remittance liabilities and retrospective audits
• Risk of selective enforcement undermining credibility of reforms
• Institutional capacity gaps in digital tax administration across sub-national governments
• Compliance fatigue if enforcement intensifies without visible public service improvements