ABUJA (Reuters) – Nigeria’s regional governments owe huge amounts in tax arrears, the country’s revenue service head said on Thursday, threatening to block the states from the bond market or receiving bank loans.
The Federal Inland Revenue Service (FIRS) Chairman Muhammad Nami said some regional governments had not remitted taxes deducted from payments to contractors as required, but did not disclose how much was unremitted or name the states.
The tax agency said it will name and shame defaulting states and publish the amounts owed after 30-days of non-compliance.
Nami said the FIRS will advise the federal government and the finance minister to decline requests for new bonds, commercial bank loans as well as foreign borrowings for states with unremitted tax deductions.
Nearly two-thirds of Nigeria’s 36 states, which run semi-autonomously from the central government, have had difficulties paying tax bills in the past. In 2016, several of them raised money on the domestic bond market and from banks to fund projects, but as the oil revenues, which Nigeria relies on for government income plunged, many were unable to meet their expenses.
Nigeria has been struggling to raise revenues after recovering from a recession caused by previously low oil prices. The revenue situation has been worsened by the COVID-19 pandemic.
The West African country did not sign up to the Paris-based Organisation for Economic Cooperation and Development minimum tax rule last October because some multinational firms would stop paying taxes.
State bond issuance has been muted this year with inflation running in double-digits above interest rates and as politicians gear up for national elections next year. Last week, the central bank raised rates in a surprise move, citing rising inflation.[nL5N2XG3P9]
(Reporting by Camillus Eboh; Writing by Chijioke Ohuocha; Editing by James Macharia Chege)
