Nigeria’s 2021 budget: What you need to know

Following the recent release of the 2021 budget by the President of the Federal Republic of Nigeria, there have been concerns over Nigeria’s debt stock as the nation plans to fund the 2021 budget deficit with N4.28 trillion new borrowings, a situation that has attracted huge backlash from the citizens. The proposed new borrowings represent about a third of the proposed budget. We explain further details on the proposed budget below while comparing it to the 2020 budget.

The proposed 2021 budget has a total expenditure of N13.08trillion while the 2020 budget had N10.81trillion, indicating a total change of 21% while the revenue in the proposed 2021 budget has been put at N7.88trillion while that of the 2020 budget was N5.84trillion with a change of about 35%. Thus, an aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021.

Revenue generation remains government’s main challenge. In this regard, key revenue management measures introduced include deregulation of the price of petroleum products; ongoing verification exercise with IPPIS; and implementation of service-based electricity tariffs. We strongly believe that the exploitation of other sectors of the economy is very important in getting ahead of the revenue generation. We need to explore other sectors such as Agriculture, Technology etc. This will greatly improve in the revenue generation of the country instead of placing maximum focus on only a few sectors.

The 2021 Budget, which is themed the “Budget of Economic Recovery and Resilience”, is determined to deliver on the Government’s Economic Sustainability Plan goals, accelerate the pace of Nigeria’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion.

The quick passage of the Petroleum Industry Bill into law is expected to boost confidence and attract further investments into the oil and gas sector and increase the revenues. The Government is also committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years. Social safety nets will be implemented to cushion the effect of the most vulnerable of our citizens as well as business owners.


Tax compliance: PAYE

In Nigeria today about 75% of potential taxpayers are not in the tax net, and about 65% of registered taxpayers are not fully compliant. This is a worrisome reality that needs to be critically addressed as the average level of tax compliance in Nigeria is put at about 10% based on our research findings.

A taxpayer must ensure that his/her taxes are paid and are also duly accounted for from time to time. This means taxes are paid as and when due and that relevant returns are submitted to the tax authorities in prescribed forms and formats. Going by the news emanating from many State Boards of Internal Revenue, the level of compliance with the requirements for filing of Personal Income Tax returns as prescribed by the Personal Income Tax Act (PITA) remains low across the country.

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First Thoughts: The Underdog Story

The idea of politics fascinates me to no end. While I wouldn’t necessarily call myself partisan, I am honest enough to say I do a lot of watching on the side lines. I am not a registered member of any political party in Nigeria, but I have always tried to be a good citizen and cast my votes a couple of times since the first time I voted in 2007. I had missed the 2003 elections by whiskers as I was yet to hit the voter eligibility age of 18 at the time. Elections, both in Nigeria and outside Nigeria have continued to thrill me even till date. For instance, I can hardly wait for the U.S.A Presidential Elections in November.

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Constant increase in the inflation rate – Nigeria’s CPI August 2020 Report

The latest CPI and Inflation Report released by the National Bureau of Statistics has revealed that inflation increased by 13.22% (Year-on-Year) in August 2020. This is 0.40% points higher than the rate recorded in July 2020 (12.82%).

It’s is not so surprising that the consumer price index (CPI) in Nigeria rose to its highest in over 3 years in the previous month (August 2020). The increase in the price of food is said to be the major reason in this hike.

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TAT’s Decisions on VAT on Real Property Leases – Some Clarifications

As you are aware, on Tuesday, 10th September 2020, the Tax Appeal Tribunal sitting in Lagos State, Nigeria (TAT) delivered Judgement in  Appeal No. TAT/LZ/VAT/029/2019: Ess-Ay Holdings Limited v. Federal Inland Revenue Service (FIRS) (available at:

Issues to be determined:

  1. Whether rental income from real property is subject to Value Added Tax (VAT) under Nigeria’s VAT Act, 1993 (as last amended in 2007)?;
  2. Whether the provisions of the FIRS Information Circular No. 9701 dated 1st January 1997 which exempted only rents from residential properties (and not commercial properties) is valid?
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In this piece, I shall be walking you through the importance of financial and tax management for start-ups in Nigeria. In recent times, Nigeria has risen to be one of the leading business locations in Africa; most significantly for start-up businesses.

Business in Nigeria is a wonderful experience when your business venture succeeds, however before success there could be great challenges and difficulties that a new business or startup must face, one of which is usually financial and tax management.

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According to the latest Federation Account Allocation Committee (FAAC) Disbursement Report, released by the National Bureau Statistics (NBS), the sum of N606.20bn was disbursed in May 2020 bringing a decrease of about 22% compared to the N780.93bn from the previous month (April 2020).

The drastic decline in the revenue generated in May 2020, compared to the previous month – April 2020, is an issue of great concern and reinforces the great importance of exploiting new sectors of the economy both on the Federal and State Government levels. No need for the long story of oil not being as lucrative as it was in the past years. I assume we are all aware of this by now.

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First Thoughts: Post-Lockdown Musings

I have often heard some people say they usually get their inspiration to write from rather uncomfortable situations and experiences. I say, ‘well done to them’. I guess I need to learn how they manage to do this. So, I’ve been in traffic for the last three hours and guys, I can’t seem to get any inspiration from this experience and putting down my ‘First Thoughts’ for today’s Newsletter has been quite a challenge. I have been looking from my laptop to the window repeatedly as we move at snail speed. Once or twice, I have been tempted to step out of the car to stretch my legs but hey, this is Lagos, and this is the Third Mainland Bridge! Anything can happen! Hopefully, I would get home before I am done with this piece.

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Approaching the Common Reporting Standard (CRS) Deadline: Important Information Your Financial Institution Should Know + Do

  1.  Nigeria’s Income Tax (Common Reporting Standard) Regulations 2019 (the Regulations) became effective on July 1, 2019. Nigeria’s Federal Inland Revenue Service (FIRS) is the administering agency.
  2. The Regulations places an obligation on all financial institutions in Nigeria to provide a report to the FIRS on all accounts (Reportable Accounts) maintained by their customers (Reportable Persons) that are not tax-resident in Nigeria or the United States of America (USA).
  3. Your financial institution does not need to provide a report to the FIRS on the accounts (non-Reportable Accounts) maintained by your Nigeria or USA-resident customers (non-Reportable Persons).
  4. Accordingly, and for the purpose of the Regulations, Nigeria and USA are non-Reportable Jurisdictions. All other countries are Reportable Jurisdictions.
  5. A person who has dual tax residency in a Reportable Jurisdiction and a non-Reportable Jurisdiction, is a Reportable Person and accordingly his/her account in your financial institution is a Reportable Account. For example, the accounts of a customer who is tax-resident in both Nigeria and Canada, is a Reportable Account.
  6. Your financial institution has an obligation to know the tax residence of all persons who maintain an account with it. Accordingly, you need to put in place a due diligence process that elicits this information from all your customers.
  7. Your financial institution must maintain a register, schedule or enterprise resource planning tool (ERP) (altogether, Report Register) that identifies all your Reportable Persons and Reportable Accounts.
  8. Your Report Register must contain information such as the following on all Reportable Persons and Reportable Accounts: Name, Address, Reportable Jurisdiction, Date and Place of Birth, Reportable Account Number, Tax Identification Number, Income (including interest, dividends and other income) earned by Reportable Person, and Reportable Account Balance as at end of the relevant period.
  9. Your financial institution must prepare and submit an annual Reportable Accounts Information (Information Returns) not later than Wednesday,  September 30, 2020 to the FIRS. Accordingly, Information Returns on all Reportable Persons and Reportable Accounts maintained in your financial institution in 2019 is due to be submitted to FIRS not later than Wednesday, September 30, 2020.

    Please note: The Reportable Accounts Information (Information Returns) should be submitted not later than May 31st of every year to the FIRS. Due to the COVID-19 Pandemic the deadline was extended. Please read more HERE.
  10. Your financial institution is still required to submit Information Returns even though you have no Reportable Accounts; in which case, a nil Information Returns will be filed with FIRS.
  11. FIRS may share your financial institution’s Information Returns with Nigeria’s counterpart countries further to Nigeria’s obligation under the Multilateral Agreement on the Automatic Exchange of Financial Account Information.
  12. Similar to your accounting records, your Information Returns are required to be kept for minimum of 6 years thereafter.
  13. FIRS may, by a notice in writing, additionally require your financial institution to furnish it, within a minimum of 14days, with any document or information on compliance with the Regulations.
  14. Failure to comply with any of these obligations will expose your financial institution to a maximum flat fine of ₦10million plus ₦1million for every month of breach. For emphasis, your obligations include: keeping your Report Register; filing your Information Returns correctly and accurately; and being ready at any time to supply FIRS with any document or information lawfully requested from your financial institution.
  15. You can employ the services of a service provider like Taxaide to assist with your due diligence and reporting obligation under the Regulations. Taxaide can also assist with the automation of your CRS compliance process including deploying a CRS-focused ERP.

For further enquiries on the subject, please contact Taxaide’s International Tax Desk at: or;  +234 700 TAXAIDE; +234 1 631 0971-2; +234 810 701 7274.