Taxing the Digital Economy in Nigeria
Abstract
The rapid growth of the digital economy has disrupted traditional taxation systems, creating urgent challenges for revenue mobilisation in developing economies. This study critically examines Nigeria’s digital taxation framework within the context of global reforms and the 2025 Tax Reforms Act, which will take effect from January 2026. Drawing on a mixed-methods approach, the research integrates econometric analysis of Nigeria’s tax-to-GDP performance between 2018 and 2024 with qualitative content analysis of international policy blueprints, including the OECD’s BEPS framework and IMF reports. The results indicate that digital transactions already contribute positively to tax yields, supporting the view that the digital economy offers significant untapped revenue potential. Simulation analysis, based on IMF (2023) elasticities, suggests that measures such as mandatory taxpayer identification numbers (TINs), efiling, and Significant Economic Presence (SEP) rules could raise compliance rates by 12–15% and increase corporate tax contributions by ₦450–₦600 billion annually. This would translate into an estimated 1.2–1.5 percentage point increase in Nigeria’s tax-to-GDP ratio within three years of implementation. However, persistent challenges—including weak institutional capacity, fragmented tax administration, inadequate digital infrastructure, and global resistance from multinational corporations—pose significant risks to effective enforcement. The findings also demonstrate that Nigeria’s reforms are heavily influenced by international models, particularly the OECD’s Pillar One and Pillar Two blueprints, as well as regional precedents in Kenya and South Africa, reflecting policy diffusion across developing economies. The study concludes that while digitalisation presents an opportunity for fiscal expansion, Nigeria’s success will depend on strengthening governance, harmonising legal frameworks, and contextualising global standards to local realities. This research contributes to the literature on taxation in the digital era by providing empirical evidence on Nigeria’s readiness, highlighting prospective outcomes of the 2025 Tax Reforms Act, and situating Nigeria’s approach within broader global debates on tax justice and revenue mobilisation.