TAXATION WITHOUT PROTECTION

K. BOLANLE ATI-JOHN writes why Nigeria risks turning fiscal reform into instability

Nigeria’s tax debate is being conducted at the wrong altitude. Public discussion has become fixated on bands, rates, and compliance targets, as though the central challenge were merely technical: how much can be collected, from whom, and how quickly. Yet taxation is never just a fiscal instrument. It is a political and moral act embedded in a social contract. When that contract is fractured, taxation ceases to be a tool of development and becomes a catalyst for social and political instability.

That is the danger Nigeria now confronts.

The real question is not whether taxation is necessary. Every functioning state requires revenue to survive. The harder and more consequential puzzle is this: Can a state that has largely withdrawn from social provisioning intensify personal income taxation without deepening poverty, fuelling insecurity, and eroding its own legitimacy? In Nigeria’s present conditions, the evidence suggests it cannot at least not without a fundamental rethink of sequencing, targeting, and accountability.

Taxation is often defended in the language of civic duty. Citizens are told that everyone must pay something, that contribution builds community, that sacrifice today enables prosperity tomorrow. These claims are not inherently false but they are context dependent. They presume the existence of a functioning reciprocal relationship between state and citizen.

In political economy, taxation derives legitimacy from exchange. Citizens surrender part of their income because the state absorbs risks they cannot manage alone: healthcare shocks, insecurity, unemployment, infrastructure provision, and social protection. This is not sentiment it is structure. Where that reciprocity is visible and credible, taxation is accepted even embraced. Where it is absent, taxation becomes coercive extraction dressed up as civic virtue. Nigeria today sits uncomfortably close to that line.

Nigeria’s poverty statistics are well known but often insufficiently unpacked. According to the National Bureau of Statistics, over 60 percent of Nigerians live in multidimensional poverty meaning deprivation across health, education, housing, nutrition, and living standards. This is not merely low income it is structural deprivation. What matters, however, is how this poverty is distributed across Nigeria’s economic strata.

Roughly eighty to eighty five percent of Nigeria’s workforce operates in the informal sector. Income here is volatile, seasonal, and insecure. For this group, earnings are consumed almost entirely by food, shelter, transport, and family obligations. Even small fiscal impositions direct or indirect translate into reduced nutrition, school withdrawal, or loss of economic mobility.

Less discussed but politically pivotal is the condition of Nigeria’s formal sector workers. A significant proportion earn between N80,000 and N250,000 monthly. On paper, they are taxable. In reality, once rent, transport, food, electricity generation, school fees, healthcare, and family remittances are deducted, many fall below a functional survival threshold. Their income is nominally formal but substantively precarious. For this group, personal income tax does not skim surplus. It tightens constraint.

At the top sits a narrow elite whose wealth is often asset based, rent derived, or shielded by weak enforcement. Property holdings, capital gains, luxury consumption, and offshore assets remain lightly taxed relative to capacity to pay. The result is a tax system that is broad at the base, thin at the apex, and misaligned with economic reality.

The most analytically neglected fact in Nigeria’s tax debate is that households already pay a substantial unacknowledged tax to compensate for state absence. Healthcare is illustrative. Over seventy percent of Nigeria’s total health expenditure is out of pocket placing the country among the highest globally on this measure. A single medical emergency can wipe out years of savings. Education follows a similar pattern, families pay privately because public schools are under resourced or dysfunctional. Electricity is self generated. Water is self supplied. Security is informally arranged through vigilantes, guards, and community levies.

Taken together, these expenditures function as a parallel tax. For lower middle income households, this burden routinely consumes thirty to fifty percent of income. This is not anecdotal. It is visible in household expenditure surveys and daily lived experience. Formal taxation layered onto this reality is not marginal. It is cumulative.

Inflation converts technical progressivity into practical regressivity. Nigeria has endured sustained double digit food inflation eroding real wages and rendering nominal income an unreliable indicator of welfare. The minimum wage, even when fully implemented, no longer covers basic food, transport, and housing costs in most urban centres. In such an environment, the argument that everyone should pay something no matter how small collapses. A marginal tax on a household operating at subsistence is not symbolic. It is destabilizing. It may be the difference between continuity and collapse. Progressive taxation presumes that the tax base has already cleared survival. Nigeria’s has not.

Any serious analysis must confront the state’s predicament. Nigeria faces acute fiscal stress. Debt servicing absorbs a large share of federal revenue. Oil receipts are volatile and declining in real terms. Infrastructure needs are vast. Social demands are escalating. Advocates of expanded taxation argue correctly that the state needs immediate revenue to avoid collapse. This argument cannot simply be waved aside. But it must be interrogated.

Nigeria’s low tax to GDP ratio is an incomplete diagnostic. In countries with higher ratios, the state delivers healthcare, education, unemployment insurance, pensions, and transport at scale. Nigeria does not. Raising taxes without restoring public goods does not replicate those models, it distorts them. The crisis is as much about expenditure inefficiency and leakage as revenue scarcity.

Corruption, opaque budgeting, and poor value for money have eroded trust. A revenue only solution to a credibility problem is structurally incoherent. The popular argument that taxation enables accountability, no taxation without representation assumes citizens possess effective mechanisms to enforce representation. In contexts of weak institutions, taxation without visible return more often produces disengagement and informality than empowerment.

Nigeria’s insecurity is often framed in ethnic, religious, or criminal terms. These lenses matter but they are incomplete. Across the country banditry in the northwest, kidnapping and illegal mining in the north central regions, oil theft in the south, economic desperation is a common driver. Armed groups function as alternative labour markets where the formal economy has collapsed. When fiscal pressure reduces marginal income among already distressed populations, it expands the pool of individuals for whom illicit activity becomes rational. This is not conjecture. It is documented repeatedly across Nigeria’s conflict zones. Fiscal policy that deepens poverty therefore feeds insecurity even if unintentionally. Taxation is not neutral, it reshapes incentives.

Personal income tax in Nigeria accrues largely to state governments not the federal centre. Yet most states provide neither universal healthcare nor meaningful social safety nets. The legitimacy deficit therefore is not only national it is subnational. This raises uncomfortable questions. Should criticism be directed more squarely at state governments?

Does Nigeria require a recalibration of fiscal federalism to realign revenue with responsibility? At minimum, any serious reform must confront the reality that taxation and protection are institutionally decoupled. Citizens are taxed by entities that do not meaningfully protect them. Without restructuring incentives and accountability at the state level, higher extraction will continue to yield low legitimacy.

The familiar sequencing services first taxes later risks appearing politically unrealistic. But the alternative is worse. The solution lies in targeted credibility building steps not fiscal maximalism. Several pathways are feasible even within current constraints. An inflation indexed moratorium on personal income tax increases for individuals below a defined income threshold would protect survival margins while reforms take root. Radical transparency at the state level through accessible publication of how existing tax revenues are spent would help rebuild trust. Rebalancing extraction toward surplus through enforceable wealth and asset taxation credible property tax reform and strengthened asset declaration regimes would align contribution with capacity. Protection first pilot zones in select local governments where enhanced security and primary healthcare are demonstrably delivered alongside tax registration could rebuild legitimacy through visible results rather than rhetoric.

These are not utopian proposals. They are pragmatic steps to restore reciprocity.

For any administration including that of Bola Tinubu, the danger is not reform itself but mis sequencing. When citizens are asked to give more while receiving little, reform is reframed as punishment rather than progress. States do not collapse from under taxation alone. They collapse when extraction outpaces legitimacy.

Nigeria’s core problem is not civic indiscipline. It is a breakdown of reciprocity. Citizens already pay through parallel taxation, insecurity, inflation, and self provisioning. Formal taxation layered onto this reality without protection is not state building. It is destabilization.

The path forward is narrower, harder, and more disciplined. Restore visible protection where possible. Tax surplus where it clearly exists. Make expenditure legible. Only then can taxation resume its rightful role as a foundation of collective progress rather than a trigger for social fracture.

Taxation can build states.

But taxation without protection builds something else entirely.

 Rear Admiral Ati-John (rtd) writes from Lagos