The federal government announced yesterday that, as provided in the 2021 Finance Act, offshore companies providing digital services to local customers in Nigeria will be subject to a 6% tax on turnover.

Mrs. Zainab Ahmed, the Minister of Finance, Budget, and National Planning, revealed this during a public presentation and breakdown of the 2022 budget in Abuja.

Ahmed also revealed that as of November 2021, the government had surpassed all independent revenue collections from 2017 to date, which she claimed reflected the success of the government’s revenue-growth initiatives.

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“We have now surpassed the 1 trillion mark in independent revenue collection for the first time (N1.104tn collected as of November against a budget target of 973.41bn).” “Analysts have always thought our projections were unrealistic, but we’ve always insisted on the opportunities to grow FGN’s independent revenues,” she explained.

She went on to say that the tax on digital services applies to apps, high-frequency trading, electronic data storage, and online advertising, and that “this is introducing a fair and reasonable turnover tax.”

The new policy is outlined in Section 30 of the Finance Act, which amends Sections 10, 31, and 14 of the Finance Act regarding VAT obligations for non-resident digital businesses.

“Section 30 of the Finance Act, which amends sections 10, 31, and 14 of the VAT Act, is in relation to VAT obligations for non-resident digital companies, and the mechanism that will be used is to restrict VAT obligations primarily to digital non-resident companies that supply individuals in Nigeria who cannot self-account for VAT,” Ahmed explained.

“As a result, if you go to Amazon, we expect Amazon to tack on a VAT charge to whatever transaction you’re making.” As an example, I’ll use Amazon. We’ll be working with Amazon to become a registered tax agent with the FIRS.

“As a result, Amazon will now collect this payment and remit it to FIRS, as per global best practices; we have been missing out on this revenue stream.”

The new law, according to her, applies to foreign companies that provide digital services such as apps, high-frequency trading, electronic data storage, online, and advertising, among other things.

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Non-resident companies are now required to pay tax at a rate of 6% on their turnover, according to Section 4 of the Finance Act, she said.

The minister, who stated that the government wanted to modernize taxes for its digital economy and improve compliance, stated that digital non-resident companies would not need to be registered locally, but would instead have an agreement with the Federal Inland Revenue Service (FIRS) to collect and remit taxes in order to reduce compliance burdens.

She also revealed that the federal government has imposed a N10 per litre excise duty on all non-alcoholic, carbonated, and sweetened beverages sold in Nigeria.

The beverage tax, according to the minister, was included in the Finance Act, which was signed into law by President Muhammadu Buhari on December 31, 2021, along with the 2022 Appropriation Bill.

The new sugar tax, according to the minister, was implemented to increase excise duties and revenues for health-related and other critical expenditures in line with the budget priorities for 2022.

According to her, the goal was to discourage excessive sugar consumption in beverages, which contributed to diabetes, obesity, and other diseases, as well as raise excise duties and revenues for the health sector, as part of the Finance Act.

She also stated that the Act included a provision that would strengthen the FIRS mandate as the primary tax collection agency while collaborating with other law enforcement Ministries, Departments, and Agencies (MDAs).

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Ahmed also expressed the federal government’s readiness to conduct the national population and housing census, which was last conducted in Nigeria over 15 years ago.

In November of last year, Ahmed announced that the national population census had been approved for N178.09 billion in the 2022 budget.

The minister stated that the necessary budgetary allocations had been made and that all machinery had been put in place to carry out the exercise, but that the National Population Commission (NPC) was in charge of drawing up a timetable.

Due to the implementation of the 2020 Finance Act, Ahmed also revealed that Nigeria’s independent revenue surpassed N1 trillion in 2021.

According to the Petroleum Industry Act, all petroleum products must be deregulated, according to the minister.

As a result, she stated that a subsidy was provided up until June, after which full deregulation will take effect.

The minister stated that the subsidy would be provided until June to allow for the completion of ongoing consultations with various stakeholders, including organized labor.

Zainab said that a committee set up by the government to devise measures to cushion the impact of the subsidy removal on Nigerians, particularly the vulnerable, would make recommendations on how to proceed.

President Muhammadu Buhari signed the N17.13 trillion 2022 Appropriation Bill into law on December 31, 2021, after presenting the proposal to the National Assembly on October 7, 2021.

On the same day, the president signed the 2021 budget bill into law.

The spending plan was increased by N735.8 billion from the proposed N16.391 trillion to N17.126 trillion by the two chambers. They also increased the oil benchmark from the executive’s proposed $57 per barrel to $62.

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Oil production was set at 1.88 million barrels per day, the exchange rate at N410.15 to the dollar, GDP at 4.2 percent, and inflation at 13% by the National Assembly.

Mr. Muhammad Nami, Executive Chairman of the Federal Inland Revenue Service (FIRS), revealed in his presentation that the service collected N6.4 trillion in taxes last year.

Mr. Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), said in his virtual presentation that the country now produces 1.74 million barrels of crude oil per day.

However, he claimed that the country’s security situation had reduced the figures to 1.5 million barrels about three months ago before the recent improvement.

“We came down to 1.5 million barrels per day three months ago because of security issues, and we are responding to it,” he said.

“As of today, production has increased to 1.74 million barrels per day, and ongoing security interventions are underway.”

“We expect to reach 1.8 million barrels per day within the month and exceed the limit within the year,” says the official.


The Minister revealed in a presentation that the federal government’s aggregate revenue as of November 2021 was N5.51 trillion, or 74% of its fiscal year target.

The federal government received N970.3 billion in oil revenues (representing a 53 percent performance of the prorated sum in the 2021 budget), while the federal government received N1.62 trillion in non-oil tax revenues (118.8 percent over and above the target).

Furthermore, collections of Companies Income Tax (CIT) and Value Added Tax (VAT) totaled N718.58 billion and N360.56 billion, respectively, representing 115 percent and 165 percent of the prorata targets for the period. Customs collections in 2021 totaled N542.11 billion (104 percent of the target), while other revenues totaled N2.8 trillion, with the federal government’s independent revenues totaling N1.1 trillion and GOEs’ retained revenues totaling N1.20 trillion.

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On the expenditure side, she revealed that N12.56 trillion (or 94.1%) of the N13.57 trillion prorata budget had been spent. The GOEs’ expenditure estimates were included in this performance, but Project-tied Loans were not.

N4.20 trillion was spent on debt service, while N3.02 trillion was spent on personnel costs, including pensions.

The federal government had spent N3.40 trillion on capital projects as of November 2021. Of this, N2.98 trillion was set aside for capital expenditure by Ministries, Departments, and Agencies (MDAs), N369.9 billion was set aside for multilateral/bilateral Project-tied loans, and N49.52 billion was set aside for capital expenditure by the Government of the Federation (GOF).


The 2022 budget, according to Zainab, aims to maintain the government’s reflationary policies from the 2020 and 2021 budgets, which, she claims, helped the economy get back on track to recovery and growth.

“The policies/strategies contained in the 2022–2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) were taken into account when preparing the 2022 Budget.”

“The Budget was prepared using the Zero-Based Budgeting (ZBB) method and in accordance with the government’s development priorities as outlined in the National Development Plan (NDP) 2021-2025.” The core objectives of the NDP 2021–2025 guided allocations to MDAs.

“The plan will be funded by the federal government, state governments, and the private sector, with a total investment of N348.1 trillion. “The federal government’s budget for 2022 is the first major public-sector contribution to the plan’s implementation,” she explained.

Although Nigeria’s total production capacity was 2.5 million barrels per day, current (year to date) crude production was about 1.4 million barrels per day (slightly less than the OPEC+ production quota), with an additional 300,000 barrels per day of condensates, totaling about 1.6 million barrels per day.

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According to the Energy Information Administration (EIA), global oil production will rise to keep up with rising global oil consumption.

In 2022, OPEC crude production is expected to average 28.34 million barrels per day, up from 26.94 million barrels per day in 2021.

“In consultation with NNPC and other stakeholders, we projected our base oil price at $57/bbl in 2022. This was based on the averages of leading institutions’ forecasts, market fundamentals, global economic recovery, government plans, and market sentiments.

“However, the National Assembly raised the proposed oil price benchmark for 2022 from $57 per barrel to $62 per barrel. According to the World Bank, crude oil prices will average $74 per barrel in 2019.

As oil demand grows and reaches pre-pandemic levels in 2022. Brent prices are expected to average $70.05 per barrel in 2022, according to the EIA,” she added.

While commenting on the critical sectoral allocations of the 2022 budget, the minister said the education sector received N1.234 trillion, with the Ministry of Education and its agencies receiving N815.69 billion for recurrent and capital expenditure.

She also stated that the Universal Basic Education Commission (UBEC) will receive N112.29 billion, while the Tertiary Education Trust Fund (TETFUND) will receive N306 billion for infrastructure projects in tertiary institutions.

The health sector received N876.38 billion, or 5.1% of the overall budget. For recurrent and capital expenditures, including hazard allowance, the Ministry of Health and its agencies will receive N770.87 billion.

The defense and security sector ate up 13.4% of the budget, or N2.29 trillion, while infrastructure development took up 8.3% of the budget, or N1.42 trillion, with N462 billion earmarked for social development and poverty reduction programs.


The federal government forecasted a 9.36 percent increase in consumption in 2022, from N136.57 trillion in 2021 to N149.35 trillion in the current fiscal year. Real GDP growth was forecast to be 4.2 percent in 2022, 2.3 percent in 2023 (election year impact), and 3.3 percent in 2024, with nominal GDP rising from N168.60 trillion in 2021 to N184.38 trillion in 2022 and then up to N221.78 trillion in 2024.

Furthermore, given structural issues affecting the cost of doing business, such as high food distribution costs, inflation was expected to be double-digit in the medium term.

“However, the current steady decline is expected to be sustained, with inflation rates falling to 13% in 2022 and 10% in 2024,” the minister added.


In her presentation, Ahmed stated that the projected aggregate revenue available to fund the 2022 budget of N10.74 trillion (including GOEs) was 32% higher than the N8.12 trillion projected in 2021.

The government’s revenue was projected to be N9.01 trillion without the GOEs retained revenue.

She revealed that the federal government’s 2022 budget proposal included allocations to TETFUND and the budgets of 63 GOEs in order to promote fiscal transparency, accountability, and comprehensiveness.

Oil-related sources will account for 35% of projected revenues, while non-oil sources will account for the remaining 65%.

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The total federal government expenditure in 2022 (including GOEs and project-tied loans) was projected to be N17.13 trillion, up 18% from the 2021 Budget.

Recurrent (non-debt) spending, on the other hand, was estimated to be N6.91 trillion, accounting for 40% of total expenditure and 20% higher than the 2021 budget.

She also revealed that capital expenditures totaled N5.96 trillion, accounting for 35% of total spending.

This included the capital component of statutory transfers, as well as GOE capital and project-related loan expenditures.

Debt service accounted for 21% of total expenditure and 34% of total revenues, totaling N3.61 trillion.

N270.71 billion was set aside to retire maturing bonds to local contractors and suppliers, accounting for 1.6 percent of total spending.

The provision, according to the minister, is in line with the federal government’s commitment to pay off accumulated arrears of contractual obligations that date back over a decade.

“The overall budget deficit for 2022 is N6.39 trillion. This is equivalent to 3.46 percent of GDP.

Domestic sources: N2.57 trillion; foreign sources: N2.57 trillion; multilateral/bilateral loan drawdowns: N1.16 trillion; and privatization proceeds: N90.7 billion,” she said.


The federal government’s debt level, according to Ahmed, is still within sustainable limits. Borrowings were primarily for capital expenditure and Human Development, according to her, as defined by Section 41(1)a of the Fiscal Responsibility Act 2007.

“Having lived through two economic downturns, we’ve had to spend our way out of them, which has contributed significantly to the rise in the national debt.” It’s unlikely that we would have recovered as quickly from each of the two recessions if the government hadn’t continued to spend money it didn’t have.

“To make matters worse, the country has been technically at war due to the widespread security threats.” This has necessitated massive spending on security equipment and operations, which has contributed to the fiscal deficit; the defense and security sector accounts for 22% of the budget for 2021.

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“Among Africa’s leading economies, Nigeria’s Budget Deficit/GDP (-4.3 percent as of November 2021) and Debt/GDP (30 percent as of September 2021) ratios are the lowest;

“However, among the same African top economies, Nigeria’s debt service/revenue ratio (76 percent as of November 2021) is the highest. This demonstrates that we are facing a revenue challenge rather than a traditional debt sustainability issue.

“These comparator countries’ tax rates and compliance ratios are significantly higher; for example, Nigeria’s VAT rate of 7.5 percent is the lowest in Africa, and less than half of the average rate,” she added.

According to Ahmed, efforts are still being made to address the country’s revenue problems, and cutting spending is not a viable option.

“However, we must continue to rationalize our spending because we cannot afford to waste.” Personnel costs, debt service, and capital expenditures account for 85% of the budget for 2022.

“In the medium term, there is very little room for reduction in any of these.” As a result, the most viable solution to our fiscal problem remains to increase revenues and plug all leaks.

“Our medium-term goal is to increase our revenue-to-GDP ratio from around 8% to around 10%.”

– From 9% in 2015 to 15% in 2025. The debt-to-service-to-revenue ratio will no longer be a critical concern at that level of revenue,” the minister added.

She mentioned improving the tax administration framework, which includes tax filing and payment compliance improvements, as well as evaluating the process and policy effectiveness of fiscal incentives, which include: a look at which industries are eligible for Pioneer Tax Holiday Incentives under the Industrial Development Act

Setting annual ceilings on tax expenditures to better manage their impact on already constrained government revenues and ensuring that MDAs appropriately account for and remit their internally generated revenue, among other things, are all part of the Development Income Tax Relief Act (‘IDITRA’).

“The government will continue to create an enabling environment for the private sector to increase investment and contribute significantly to job creation, economic growth, and the lifting out of poverty of millions of our citizens.” Early passage of the 2022 Budget, which will go into effect on January 1, will go a long way toward achieving the government’s macro-fiscal and sectoral goals.

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“However, revenue remains our main financial challenge right now.” The government remains committed to ensuring that the Strategic Revenue Growth Initiatives are implemented effectively in order to improve revenue collection, expenditure management, and fiscal sustainability.

“Considering the positive global oil market outlook and the continued improvement in our non-oil revenues, we are optimistic about our ability to finance the budget.” To accelerate the pace of our infrastructure development, we will look into possible public-private partnerships, concessions, and climate finance arrangements,” she added.

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