There is growing urgency for Nigeria’s 36 states and 774 local government areas to abolish so-called “nuisance taxes” — a web of illegal levies and extortion practices that continue to burden citizens and businesses across the country.
These informal charges, often imposed by transport union officials, touts, and even security agents at checkpoints, have evolved into a parallel system of taxation that operates outside government control. From motor parks to highways, commercial drivers and small business operators are routinely forced to pay multiple, unreceipted fees that add no value to public revenue.
The consequences are far-reaching. Beyond the financial strain, these illegal collections have been linked to violence and insecurity. A recent incident in Benin City, where a suspected tout was reportedly killed over disputes tied to illegal ticketing proceeds, highlights the dangerous underbelly of the system.
Billions Lost to Informal Levies
Available estimates suggest that the scale of these collections runs into billions of naira annually. In Lagos alone, research indicates that commercial transport operators may be forced to part with between tens of millions and hundreds of millions of naira daily to informal collectors — funds that remain unaccounted for and outside official tax systems.
These nuisance taxes include a mix of arbitrary levies such as stickers, fines, road charges, and checkpoint payments. For small and medium-sized enterprises, they represent a significant cost burden, complicating compliance without contributing meaningfully to government revenue.
Reform Efforts Gain Momentum
The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has acknowledged the scale of the problem, noting that businesses in Nigeria contend with over 60 official taxes — a number that can exceed 200 when unofficial levies are included.
According to him, ongoing tax reforms under the administration of Bola Tinubu aim to address these distortions by harmonising tax systems and eliminating illegal collections.
A key part of the reform is the prohibition of physical tax collection methods, including roadblocks and cash payments, which often enable leakages and corruption. Authorities are also pushing for digital tax systems to improve transparency and accountability.
Economic Impact and Missed Opportunities
Experts warn that nuisance taxes significantly weaken Nigeria’s economic potential. By diverting funds into private hands, they deprive governments of much-needed revenue for infrastructure, healthcare, education, and security.
Nigeria’s tax-to-GDP ratio remains around 13 percent — below the African average — while the cost of tax collection is estimated to be four times higher than the global average. Analysts say eliminating informal levies could help improve efficiency, boost investor confidence, and stimulate economic growth.
Call for Decisive Action
State governments are now being urged to take firm action by dismantling illegal collection networks, enforcing compliance among transport unions, and digitising revenue systems.
Without decisive intervention, nuisance taxes will continue to stifle productivity, inflate the cost of living, and undermine trust in public institutions.
Ending these practices, stakeholders argue, is not just a fiscal necessity but a critical step toward restoring order, improving governance, and unlocking Nigeria’s economic potential.
