By Camillus Eboh
ABUJA (Reuters) – Nigeria will allow companies that owe taxes in U.S. dollars to pay them in naira this month at the prevailing exchange rate, the Federal Inland Revenue Service (FIRS) said, acknowledging a shortage of foreign currency in the country.
The FIRS granted a one-month concession in March, it said, citing challenges encountered in “sourcing for foreign currencies to offset outstanding tax liabilities.”
Nigeria is facing chronic dollar shortages while rising demand for dollars has put pressure on the naira, as providers of foreign exchange, such as offshore investors, exited after the COVID-19 pandemic triggered an oil price crash.
The central bank has offered a naira incentive to exporters for every repatriated dollar, in the hopes that the policy can help to boost foreign exchange earnings from non-oil exports.
The FIRS said the concession would not apply to upstream oil and gas companies and dollar tax liabilities due at the end of last year.
The agency has said it will focus on non-resident firms with significant economic presence that generate turnover in the country for tax collection this year.
Nigeria wants to boost non-oil revenues since oil sales make up 90% of foreign exchange receipts. But it has struggled to raise more money from taxes because many small firms are not registered.
Tax collection from Nigeria’s non-oil sector needs to reach at least 12.75% of gross domestic product for household and business levies to become the main driver of the economy, the World Bank said last year.
Nigerian tax collection sits at around 4.5% of GDP, one of the lowest rates in the world, the World Bank said.
(Writing by Chijioke Ohuocha. Editing by Jane Merriman)
