Tax Waivers and Incentives in Nigeria: Policy Tool or Privilege Trap? Introduction As Nigeria confronts a confluence of economic headwinds—soaring inflation, revenue deficits, mounting debt, and currency devaluation—fiscal prudence has taken centre stage in policy discourse. Amidst widespread subsidy reforms and intensified revenue drives, attention is now riveted on a longstanding but controversial fiscal instrument: tax waivers and incentives. Estimated to cost the nation a staggering ₦6 trillion annually, these waivers—originally intended to stimulate investment—are now under scrutiny for enabling elite capture, weakening the tax base, and exacerbating inequality. The key question is no longer whether Nigeria needs tax incentives, but how to reform them to serve the broader public interest. The Promise of Tax Incentives Tax waivers are traditionally deployed to catalyze economic activities in priority sectors. Instruments like the Pioneer Status Incentive (PSI), Free Trade Zone exemptions, and sector-specific tax holidays are designed to: Encourage large-scale capital investment Support emerging industries Facilitate technology transfer Attract foreign direct investment (FDI) Create jobs and promote backward integration Evidence from regulatory bodies supports these objectives. The Nigeria Export Processing Zones Authority (NEPZA) and Oil and Gas Free Zones Authority (OGFZA) report that their schemes have attracted $491.8 million and $15.9 billion in FDI, respectively, while generating over 370,000 direct jobs. However, a lack of transparency, absence of performance benchmarks, and institutional weaknesses continue to undermine the credibility and effectiveness of these fiscal tools. The Cost of Abuse: A Parallel Economy Despite their theoretical benefits, tax incentives in Nigeria have become mired in opacity and abuse. The Senate Committee on Finance reports losses of ₦17 trillion over five years due to unregulated waivers. The Nigeria Extractive Industries Transparency Initiative (NEITI) also notes that oil companies alone claimed $1.56 billion in unwarranted tax holidays between 2014 and 2016. These abuses typically manifest through: Political patronage: Awards based on connections rather than economic merit Discretionary waivers: Lack of legislative oversight and legal codification Retrospective application: Refunding previously paid taxes after incentives are backdated Multiple claims: Use of shell companies to exploit incentive loopholes repeatedly Lack of exit strategy: Waivers extended indefinitely without performance reviews The result is a fiscal regime where policy intent is subverted by vested interests, leading to massive public revenue losses and distorted market competition. Widening Inequality and Eroding Trust The timing of these revelations could not be more problematic. As tax incentives benefit large corporations and politically connected firms, ordinary Nigerians are being asked to shoulder the burden of fiscal reforms. These include: Removal of fuel subsidies New and higher consumption taxes (e.g., VAT, excise on telecoms) Austerity measures with limited safety nets A joint report by Tax Justice Network Africa, Oxfam Nigeria, and CISLAC highlights the resulting inequality: The top 1% of Nigerians hold 25.5% of national wealth The bottom 50% own just 4.7% An estimated 99% of high-net-worth individuals evade taxes Moreover, Nigeria reportedly loses $15–$18 billion annually through illicit financial flows, predominantly via trade misinvoicing and tax evasion. This compounds fiscal pressures and deepens the social contract crisis. Expert Perspectives: Reform Over Repeal Nnamdi Oragwu (Punuka Attorneys & Solicitors) “Tax incentives are vital economic tools—but they must be data-driven, sector-specific, and performance-bound. Reform is the answer, not abolishment.” He recommends: Centralizing oversight under FIRS Instituting cost-benefit analysis and KPIs Auditing existing waivers for compliance Dr. Muda Yusuf (Centre for the Promotion of Private Enterprise) “Waivers should not be arbitrary. They must be based on clear, universal criteria—applicable to any firm that qualifies, not just those with connections.” His emphasis is on: Eliminating discretionary powers Instituting sector-wide eligibility standards Tying waivers to measurable developmental outcomes Dr. Olisa Agbakoba (SAN) “Only essential sectors should enjoy waivers. Others should be placed on a reasonable tariff structure with transparent legal backing.” He calls for: Streamlined legal frameworks Sunset clauses Greater transparency in incentive allocation Global Lessons: What Works Elsewhere A report by Public Services International argues that income tax holidays and profit-based waivers are the least efficient forms of tax incentives. More effective alternatives include: Accelerated depreciation R&D tax credits Loss carryforward mechanisms These are cost-based and reward investment, not manipulation of profits—thereby minimizing abuse. Reform Blueprint: Making Incentives Work To salvage the value of tax waivers and align them with national priorities, the following reforms are imperative: 1. Codification and Legislative Oversight All incentives should be legally established and not left to executive discretion. 2. Centralized Administration A single regulatory agency (preferably FIRS) should manage all incentive schemes. 3. Mandatory Impact Assessment Every waiver should undergo a public cost-benefit analysis before approval. 4. Public Incentive Registry Maintain a real-time database of all approved incentives, recipients, and performance evaluations. 5. Conditionality and Sunset Clauses Waivers should be tied to KPIs (e.g., jobs created, exports made) and time-bound with exit strategies. 6. Retrospective Scrutiny and Recovery Where abuse is detected, waived taxes should be clawed back and penalties enforced. Policy Action in Progress Encouragingly, the government appears to be acting. At a public finance conference, Minister of Finance Wale Edun affirmed the administration’s efforts to: Streamline incentives Eliminate inefficiencies Implement performance-linked frameworks Simultaneously, the Presidential Committee on Tax and Fiscal Policy Reform, chaired by Taiwo Oyedele, is tasked with designing a data-backed incentive regime—one that ensures alignment between revenue preservation and economic growth. Conclusion Tax incentives remain a powerful policy lever, but one currently misused and underperforming in Nigeria. The solution is not wholesale elimination, but comprehensive, transparent, and performance-driven reform. When aligned with measurable development goals and shielded from political interference, incentives can fuel industrial growth, not inequality. It is time to reimagine tax waivers not as giveaways, but as investments with returns—to the people, not just to corporations. Olatunji Abdulrazaq CNA, ACTI, ACIArb(UK) Founder/CEO, Taxmobile.Online