ACTG-NTRN Stakeholder Engagement on Approaches to Improve Tax Compliance in the Informal Sector

21st February, 2023


The informal sector constitutes more than half of the Nigerian economy, however, there have been challenges in ensuring tax compliance. Nigeria is currently faced with a looming fiscal crisis as debt servicing is equal to the revenue generated in the country. Therefore, it is imperative that tax compliance in the informal sector of the country is prioritised. Against this background, the International Centre for Tax and Development (ICTD) through the Nigerian Tax Research Network (NTRN), in collaboration with the African Centre for Tax and Governance (ACTG) is organising a one-day stakeholder engagement on approaches to improve tax compliance in the informal sector of Nigeria.

The hybrid event was held on the 21st of February 2023 at The Destination (also known as Skyview Abuja), No 20 N’djamena Crescent, Wuse 2, Abuja and it was conducted in a hybrid model (physical and online). The online participants joined via zoom.

The event was attended by 36 participants which comprised Heads and Directors of Tax Administrations in Nigeria, researchers and other stakeholders such as representatives of the International Budget Partnership (IBP), staff of ICTD, and ACTG. The participating tax administrations in attended includes the Executive Chairpersons and Directors of Plateau Internal Revenue Service, FCT Internal Revenue Service (FCT-IRS), Lagos Internal Revenue Service (LIRS), Ekiti Internal Revenue Service, Edo Internal Revenue Service, Niger Internal Revenue Service, Borno Internal Revenue Service, representatives of Federal Inland Revenue Service.

It was a highly interactive meeting involving presentations, discussions and peer learning sessions. Participants also deliberated on the outcome of the pre-meeting survey they completed before the engagement.


The main objective of this one-day stakeholder engagement is to bring together key stakeholders and present research findings of the Nigerian Tax Research Network related to the theme and discuss the issues related to tax compliance in the informal sector. The specific objectives were:

  • To discuss ICTD and NTRN research findings and recommendations
  • To discuss the challenges tax administrations face in taxing the informal sector
  • To share lessons and experiences on the taxation of the informal sector
  • To identify strategies to appropriately tax the informal sector in Nigeria.


The day started with Mustapha Ndajiwo (ACTG) giving a welcome remark and a brief overview of the event, followed by introductions. The scene of the event was then set by Olly Owen (Research Director, NTRN). It was followed by a presentation of ICTD/NTRN funded research by Dr. Vanessa Van Den Boogaard on “Taxing the Informal Economy: Lessons Learned.” The presentation was followed by discussions with participants and it was followed by a tea break. Upon return, the result of the Pre-Meeting Survey on the Taxation of Informal Sector was presented and discussed. This was followed by a peer learning session, where participants had several one on one sessions with each other to share their experiences and learn from each other. The final presentation was then made by Dr. AbdulRauf Aliyu (ACTG) on “Informal Sector Tax Compliance in Nigeria: Lessons from Niger State”. The event ended with a closing remark by Mustapha Ndajiwo.

The meeting was held in a hybrid model; 15 participants attended physically, while 21 participants attended online.

Presentation of ICTD/NTRN Research

Dr. Vanessa Van Den Boogaard presented on the lessons learned while taxing the informal economy. She highlighted the common assumptions made about taxing the informal economy, why these assumptions are often untrue, understanding the formal and informal fiscal realities of informal workers and businesses, and also how to tax the informal economy more effectively and equitably. The findings provided the participants different perspectives on taxing the informal economy, with case studies from Freetown, Sierra Leone and Accra, Ghana. The finding suggests that taxing the informal economy is not impossible but to do so effectively, the policies should be evidence-based and grounded in institutional realities. Trust has to be built with taxpayers and the right questions must be asked on the how and why of taxing the informal economies.

Survey on the Taxation of Informal Economy

A pre-meeting survey by ACTG was conducted to gather information about taxation of the informal economy across Nigeria. It was administered to 7 respondents via an online form and the participants included tax officials from Niger State Internal Revenue Service, Plateau State Internal Revenue Service, Borno State Internal Revenue Service, Edo State Internal Revenue Service, Ekiti Internal Revenue Service, Lagos Internal Revenue Service and Sokoto State Internal Revenue Service.

The data collected was analysed to identify key findings and trends in the selected states. The survey was sent to participants to complete before the meeting. The results of the survey was presented at the meeting by Mustapha Ndajiwo. The survey asked some pertinent questions about the position of the revenue administrations on taxation of the informal sector in the areas of:

  1. Priority
  2. Jurisdiction
  3. Tax reform efforts on informal sector
  4. Challenges encountered
  5. Measures
  6. Partnership with other agencies
  7. Other tax reform areas identified
  8. Most effective methods for tax collection in informal sector
  9. Availability of digital transformation strategy
  10. Most prevalent businesses in the informal sector in their jurisdiction

The survey revealed that the respondents categorise the following as beneficiaries of the informal sector smallholder businesses, unstructured businesses, high net individuals, professionals/self-employed persons that PAYE does not apply to. All respondents agreed 100% that taxing the informal sector is a priority to them because they constitute the bulk of the population, therefore the largest tax base. It also revealed that the revenue administrations of the respondents have efforts to reform the taxation of the informal sector. Some of the challenges identified from the survey responses were resistance and low compliance of tax payment, lack of informal sector database and lack of specific traceable address of taxpayers.

The survey also revealed some areas the revenue administrations identified for tax reforms such as land administration, education, internet businesses, entertainment etc. The survey in general highlighted the reform efforts on taxation in general by the revenue administrations such as the introduction of tax identification numbers by Ekiti Internal revenue service; taxpayers education, sensitization and use of technology by Borno Internal Revenue Service; automation of processes and collection by Plateau Internal Revenue Service etc. 83.3% of the respondents said they have a digital transformation strategy in place, with Sokoto Internal Revenue Service being the only one without it. This indicates the readiness of the tax administrations to digitalise their tax systems.

Peer Learning Session

The participants had a one session with each other to share experiences and also learn from each other. The session also provided an opportunity for partnership in areas they share mutual interests. It was a very enlightening session.

ACTG Presentation on Informal Sector Tax Compliance in Nigeria: Lessons from Niger State

Dr. AbdulRauf Aliyu presented on compliance in the informal sector in Nigeria, using Niger State as a case study. In his presentation, he provided an overview of the Nigerian informal sector and its potential economic contribution to the economy. Dr. AdbulRauf also highlighted the factors hindering the informal sector tax compliance in Nigeria and also suggested ways to improve the compliance. He further highlighted the methods of taxing the informal sector.

He presented his findings on the informal sector taxation in Niger State, where he highlighted the approach of the Niger State Internal Revenue Service and the strategies they deployed. His findings revealed the technology deployed, value proposition, revenue forecast and critical success factors.

Closing Remarks

The event was closed with a remark by Mustapha. In his closing remarks, Mustapha thanked the participants and key stakeholders present. He stressed on the importance of collaboration and knowledge sharing among revenue administrations in Nigeria and that revenue administrations should pursue efforts to collaborate with revenue researchers and tax organisations such as the ICTD.

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