The House of Representatives has initiated an investigation into the alleged misuse of tax incentives, waivers, and exemptions, which have reportedly resulted in a staggering N8 trillion in lost revenue for the Federal Government. This move follows the adoption of a motion by Oluwole Oke, the representative for Oriade/Obokun Federal Constituency in Osun State, during Thursday’s plenary.
Although the motion was initially adopted on July 14, 2023, Oke’s renewed push indicates that little to no significant action has been taken on the matter since then.
In his remarks, Oke emphasized that taxation, whether on incomes, profits, capital gains, exports, or imports, falls under the Federal Government’s jurisdiction, with fiscal policies designed to stabilize economic conditions. He pointed out that tax waivers, exemptions, and incentives are tools used by the government to stimulate economic growth in certain sectors by attracting investment.
Oke acknowledged that while some fiscal policies and tax interventions have yielded positive results, the implementation of tax incentives has led to a “major black hole” in the country’s finances. He attributed much of the issue to companies exploiting the system, often taking advantage of these schemes.
The lawmaker cited data revealing that Nigeria loses an estimated N8 trillion annually due to these tax waivers—N6 trillion attributed to companies abusing the system and N2 trillion due to mismanagement of the waivers. He outlined specific fiscal areas vulnerable to exploitation, including capital allowances, investment allowances, pioneer status incentives, free trade zone exemptions, and VAT exemptions.
These loopholes, Oke stressed, have significantly impacted Nigeria’s tax-to-GDP ratio, which stands at just 10.6%, one of the lowest in Africa. Without urgent reforms, he warned, Nigeria could face a fiscal crisis. “If this situation persists, Nigeria could find itself in a position similar to Venezuela, where a country rich in resources ends up in economic turmoil, recession, and depression,” he cautioned.
Following extensive discussions, the House directed its Committees on Industry, Finance, and Commerce to conduct a thorough investigation into the issue. The committees have been given four weeks to submit a report, after which further legislative action will be taken to address the abuse of tax incentives and prevent further financial losses.
This probe marks a critical step toward rectifying the mismanagement of fiscal policies and ensuring better governance of tax incentives in Nigeria.
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