Policy experts have emphasized the urgent need for robust public expenditure tracking and independent audits to prevent financial leakage and restore public trust as Nigeria prepares to implement the 2025 Tax Act.
The reforms, signed into law on June 26, 2025, are set to take effect on January 1, 2026.
A new report from the Alliance for Economic Research and Ethics LTDGTE, grounded in World Bank findings and historical analysis, argues that taxation must be paired with credible fiscal oversight to fulfill its democratic promise.
“Taxation is not merely a fiscal instrument for revenue collection; it is a foundational pillar of the social contract between citizens and the state,” the report asserts, highlighting the link between tax compliance and government accountability.
“Restoring trust will demand transparency, institutional reform, and sustained political will.”
The report draws on global and African case studies to show that when citizens perceive their taxes are mismanaged, tax morale plummets and institutional legitimacy erodes.
In Nigeria, where oil rents have historically dominated public finance, the transition to a tax-based democracy demands visible improvements in fiscal governance.
“Transparent revenue collection and credible public expenditure management create incentives for citizens to demand better governance and reduce tolerance for rent-seeking behaviour,” the report notes, citing research by Fjeldstad and Moore (2008).
To reduce leakage and misuse of funds, the report recommends:
These measures, the report argues, are essential to reinforcing the fiscal bond between taxpayers and the state. Without them, the 2025 Tax Act risks becoming a revenue tool without democratic traction.
Across Nigeria, civic campaigns and protests reflect growing impatience with opaque budgeting and irregular service delivery. “When citizens pay, they expect a say and visible returns on their contributions,” the report emphasizes.
Classic studies on tax behavior (Roth, Scholz & Dryden‑Witte, 1989) show that perceptions of fairness and procedural justice strongly influence compliance. As Bobek (1997) observed, “Rebuilding tax morale requires more than enforcement, it requires demonstrable improvements in fairness and accountability.”
The 2025 Tax Act consolidates over 20 legacy tax laws and introduces digital compliance systems, streamlined levies, and a unified fiscal framework. But experts warn that without strong expenditure oversight, the reforms may fall short of their transformative potential.
“Nigeria’s move toward broader tax mobilization can catalyse a deeper social contract, if, and only if, the state demonstrates credible stewardship of public resources,” the report concludes.
As Nigeria enters this new fiscal era, the challenge is clear: taxation must be matched by transparency. Only then can it become a true engine of accountable governance.