To What Extent Does the Federal Tax Regime in Nigeria Represent Good Practice in Mineral and Petroleum Taxation?

Abstract

Mineral and petroleum resources account for about 90-95 percent of Nigeria’s export revenues and 80 percent of government revenues which shows the heavy reliance of the economy on revenues from the sector, primarily through taxation. Therefore an effective tax regime is vital to the survival of its economy as well as national development. The paper thus analyses the Mineral and Petroleum Tax (MPT) regime in Nigeria under relevant national legislations and subsidiary instruments to determine the extent to which it complies with global “good” practice in MPT. It lays down the benchmark of what represents good practice in MPT in federal regimes using necessary indices and examples of other effective federal taxation regimes and then reviews the Nigerian MPT in light of the outlined criterion. It finds the regime to be stable, clear and sufficient in terms of investment incentives. However, the regressive nature and lack of fiscal decentralization of the regime combine to make it internationally non-competitive.