If only we always draw requisite lessons from other climes, Venezuela’s notorious bankruptcy despite its abundant oil reserve suffices as a last trigger for our full economic diversification and reduced dependence on oil. Alas, the oil price apocalypse orchestrated by COVID-19 is launching an attack on our economic stability and raising questions of economic diversification again. Consequently, it has left the Nigerian government no choice than adjusting the 2020 budget to assume an oil price of $25 per barrel as against the initial assumed price of $57 per barrel.

As if the pandemic has not wreaked enough havoc, economic activities that could help generate substantial revenue from taxes have been grounded to a halt due to the different spectrums of lockdown across the country in a bid to combat the spread of the Pandemic. Unfortunately, our sweet oil is now tasting sour and can no longer satisfy our taste buds for revenue generation, yet our economy is at crossroads. Can we find a way out of this puzzle?


Cicero has long posited that taxation is ‘the sinews of the state’ i.e central to the existence of a nation and quite remarkably, tax revenue in Nigeria has been on the increase in recent times. The Federal Inland Revenue Service (“FIRS”) generated N1.1 trillion in the first quarter of 2020, recording a 7.3% increase. However, the lockdown occasioned by COVID-19 puts the emergence of successive growth from tax revenue under serious threat. The economic standstill will undoubtedly reduce the profits of many businesses and in turn affect the possible amount of tax revenue that can be generated.

COVID-19 is in no doubt cruelly crippling government’s major sources of revenue leaving no room from soft landing from this harsh reality. Unavoidably, taxation is also adversely affected and tax bodies have nevertheless adopted various means to ease the taxpayers’ burden in this economically burdensome period. Given the restriction on physical engagements due to the pandemic, the FIRS on 23rd March extended the due dates for filing certain taxes and granted some waivers as follows;

·        Filing of Value Added Tax (VAT) and Withholding Tax (WHT) returns was extended to the last business day of the month following the month of deduction as against the original 21st day of the month;

·        Due date for filling Companies Income Tax (CIT) returns was extended by a month;

·        Filing of Personal Income Tax (PIT) returns for personnel of Foreign Affairs, Military and Police, and non-resident persons was extended by three months;

·        Waiver of penalty for late returns for taxpayers whose tax liabilities were paid early but returns submitted later

·        Remittance of VAT was extended till the last day of the month, following the month of deduction;

·        Electronic platforms will also be put to more use especially for filing tax returns.

In a bid to further cushion the economic effects by securing the jobs of private sector employees, The Emergency Economic Stimulus Bill, 2020 introduces a 50% tax rebate on the actual personal income tax (PAYE) amount due or paid by companies who retain all their employees from March 1 till the end of the year. Also, import duties on medical equipment, medicines and personal protective gears required for treatment and management of COVID19 will be suspended for three months, effective on 1 March 2020 among other measures.

Commendably, the Finance Minister has expressed readiness to grant tax relief in line with the Finance Act 2019 to companies that donated to support the government’s effort in combatting the pandemic. This is a great incentive to boost revenue generation needed for the fight against COVID19.

Even though operators in the informal sector do not qualify for the enjoyment of some of these benefits as they do not pay corporate taxes paid by operators in the formal sector, the exemptions offered to MSMEs by the Finance Act 2019 is a pre-existing solution to the financial burden they would have to bear at this time. An additional benefit is that basic food items are already exempted from VAT by the Finance Act.


While the provision of various revenue reliefs is essential to ease the economic burden of COVID19 on Nigerians, filling the vacuum of revenue gap is nevertheless necessary. However, the FIRS’ attempt to rise up to the occasion was unfortunately greeted with heavy criticisms and erroneously decorated with ignoble colours of capitalism – prioritizing wealth accumulation over human health.

On 22 April 2020, the FIRS issued a Press release with the subject: ‘Update on Palliative Measures to Cushion Effect of COVID19 on Taxpayers’. The apex tax authority in its Press release appealed to corporate bodies in sectors such as Telecommunication Companies (Telcos), Financial Institutions, e-commerce companies, Supermarkets, manufacturers of certain products, among others to make special efforts to commence payment of taxes due to them earlier than the due date.

The rationale behind this is the increase in commercial activities in these sectors during the pandemic and the need to ease cash flow gaps at this time. While many people condemned the move without hesitation, we need to remind ourselves of the fact that some sectors are actually feeding fat at this time while the government is seriously cash strapped, especially to aid the collective efforts in battling the effects of COVID19. It is therefore not out of place to call on those that are not adversely affected to contribute commensurately to the fight, especially as they are not been asked to pay more than the amount of taxes due to them.

Moreover, all FIRS did was to appeal to these sectors. Remember, this appeal was after giving a series of tax reliefs with more in the pipeline. Is it then out of place to ask operators in the fortunate sectors to aid the cause? Truly, no nation can tax itself to prosperity, but revenue is needed to be a catalyst of this prosperity unless it is an expectation of day pigs would fly. Meanwhile, revenue must be sought beyond IMF loans!


Other countries are also looking to expand their revenue base beyond foreign loans at this time. Countries like Saudi Arabia despite having an estimated borrowing of almost $60 billion this year just announced a VAT increase from 5% to 15%, effective from July 1, 2020. Yes, we don’t necessarily have to do a copy and paste of others’ moves. What is good for the goose might not be exactly good for the gander owing to their different local circumstances, but a lesson or two on the need to be proactive and respond to this novel situation with novel responses can be picked from observing others.

Be that as it may, what more can be done to expand the tax net and generate more revenue with ease? John F. Kennedy had rightly noted that:

The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity’.

One untapped gold mine that comes to mind is the taxation of the digital economy. The digital economy is growing by the day with Facebook having about 27 million active users in Nigeria and Google having not less than 103 million subscribers. The Nigerian Investment Promotion Commission (NIPC) projects that the Nigerian digital economy is expected to generate $88 billion by the end of 2021. Without mincing words, the digital space is another world on its own and accounts for massive streams of cash flow.

I know the same question is running through your mind – is the digital economy immune from the adversities of this novel global pandemic? Well, if we won’t wear another clothe for facts, the pandemic’s tailspin is not discriminatory. It affects all sectors and walks of life, albeit in varying proportions.

While the global economy is under serious threats and attacks from this unseen enemy of mankind, the digital economy is very much well-positioned to thrive, despite the challenges it might encounter in these difficult times. The rate of screen time and internet users owing to lockdown and stay at home order is growing exponentially. Facebook in its 2020 Q1 reports announced a record-breaking increase of 2.6 billion active users, amounting to increase of 10% year over year and revenue of $17.74 billion and net income of $4.9 billion as against $15.1 billion and net income of $2.43 billion in 2019 Q1.

In the same vein, Alphabet reported earnings of $33.7 billion in its 2020 Q1 reports. And as expected, Netflix recently announced a new 16 million paid subscribers globally. The streaming giant recorded a $5.8 billion revenue according to its Q1 reports. How about the zoom boom despite COVID19? Zoom Video Communications recently hit a record market value of $42 billion; giving its Founder and Chief Executive, Eric Yuan, a place in the list of world richest people with a net worth increase from $4 billion to $7.9 billion.

It is no rocket science. The freedom of movement curtailed by different spectrums of lockdown order is the trigger for a massive boost in digital engagements. Virtual activities are fast replacing physical engagements. However, the digital economy is not without its revenue challenges. Leading tech giants have equally expressed fear as to how the uncertainty and shutdown of business activities can negatively impact their income stream, especially from Ads revenue.

Google’s Chief Financial Officer, Ruth Porat noted that they experienced a significant slowdown in Ads revenue in March. In the same vein, Mark Zuckerberg made it known that Facebook is just ‘trying to keep the lights on’. These are indications of the possibility of tech giants dancing to the tune of COVID19’s jarring music. However, this does not cancel out the fact that there would still be significantly enormous cash flow in the digital economy as the need for digital services will continue to increase while our unwanted visitor is still around. Even after the world bid this pandemic farewell, the digital space will continue to benefit from the increased exposure and patronage it could gather while the pandemic lasted.

Innovation has no choice in the face of necessity; it will surely be driven. It is therefore trite that economic downturns will either accelerate growth for innovative companies or new companies will emerge to tackle difficult market realities. Thus, adapting to the new realities of COVID19 will unavoidably require innovative means of coping with the restrictions on physical movements. The best appropriate answer to that is the digital economy and we are already experiencing it. From virtual meetings, streaming services, online orders etc., digital services are getting more relevance and recording increased usage. Business outfits at this time will be left with no choice than to adjust their business operations to become more digitalized in a bid to stay relevant.

Taxing the digital economy is, therefore, a viable option to increase government revenue at this time. Given the intricacies of cross-border transactions and the need for a global consensus in combating the challenges with taxing the digital economy, the Organization for Economic Cooperation and Development (OECD) has an ongoing Base Erosion and Profit Shifting (BEPS) Action Plan (Action 1) to cater for these challenges. This will contribute greatly to combating notorious ploys of transborder tax avoidance.

The global negotiations of the BEPS Action Plan involve over 135 countries (Nigeria inclusive). The good news here is that OECD has indicated that the pandemic will not put a stop to ongoing negotiations and thereby working towards a rough outline of final agreement to be ready by July. The current global economic climate and need for more revenue is expected to boost interest in digital tax negotiations as well, according to the International Centre for Tax and Development (ICTD).

However, in the absence of a global consensus, countries have begun to take unilateral efforts. France currently has a 3% digital service tax on large multinationals providing digital services to France based users and a 2% tax imposed on companies providing streaming services to persons in France subject to given thresholds. The Indian government imposes a 6% tax (equalization levy) on gross revenues from online advertising services. Even with the outbreak of COVID19, India recently expanded the scope of its equalization levy to cover foreign e-platforms. Also, the United Kingdom HMRC tax office in March announced the readiness of the country to charge 2% digital service tax on revenue from 1 April 2020, with an expectation to generate £280 million in the next financial year and an increase to £515 million by 2024/25.

As a typical Nigerian, what you are most likely asking yourself right now would be: ‘What is the Nigerian Government doing to secure the bag as well?’ The Nigerian government is not lagging behind and preparatory steps to taxing the digital economy are already being taken. Many thanks to the innovative moves that orchestrated the passing of the Finance Act, 2019. The Act lays a foundation for the taxation of the digital economy and the erstwhile obstacle of ‘permanent establishment’ being a precondition to tax liabilities has been removed. Thus, opening the door for subjecting non-resident companies to tax. The Finance Minister however still needs to clarify what will constitute Significant Economic Presence (SEP) in line with section 4 of the Finance Act in order to aid the taxation of digital services in Nigeria.


Truly, a global consensus is the best way to give effect to seamless taxation of digital services but we cannot subject our national tax strength to the uncertainties of international negotiations. While OECD is still working towards a global consensus, it is important for us to chart our own way of unilaterally taxing the digital economy. We should leverage upon the Significant Economic Presence principle already mentioned in the Finance Act while carefully considering the OECD guidelines as done by a number of other countries with such unilateral measures. Adoption of an appropriate global solution can then be made when eventually there is one.

The abundant wealth in the digital space remains an incontrovertible fact and it is pertinent for more steps to be taken to make Nigeria benefit from these prospects. This pandemic further places the digital space in an advantageous position as shown above. Commencing the implementation at this time will put considerable money in the hands of government and set the track for continuous generation of massive streams of revenue from the digital space post COVID19.

While we do this, it is equally crucial for the relevant tax authorities to continue to improve efforts in widening the tax net and the government should relentlessly ensure diversification of the economy beyond the commendable move to revamp the Ajaokuta steel plant, putting taxpayers’ money to profitable use in aiding sustainable economic growth and more cost cutting measures beyond the implementation of the Oronsaye report.



–         PwC, ‘FIRS Grants Tax Concessions in Response to COVID-19’ <> accessed May 10, 2020.

–         International Centre for Tax and Development, ‘The Impact of Covid-19 on Global Digital Tax Negotiations’ <> accessed May 10, 2020.

–         Ohiorenuwa Imosemi and Lucky Okwu, ‘Nigeria: Taxing Nigeria’s Digital Economy’ <> accessed May 11, 2020.

–         Andersen Tax, ‘Taxation of Nigeria’s Digital Economy: Challenges and Prospects’ <> accessed May 11, 2020.

–         Wole Obayomi, Victor Adegite, and Ademola Idowu, ‘INSIGHT: Taxation of the Digital Economy in Nigeria and the 2019 Finance Bill’ <> accessed May 11, 2020.

–         Chukwuma Charles Soludo, ‘COVID-19: Can Africa Afford Lockdowns?’ < > accessed May 11, 2020.

NOTE: This Article was originally published on 


Musa Kalejaiye  is a 5th year law student at Faculty of Law, University of Ilorin. He is a winner and has participated in a host of tax competitions, conferences and seminars. Beyond the letters of tax, he also takes interest in intellectual property law and arbitration. You can reach him on mail via: or LinkedIn via:

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