As Nigeria begins the implementation of its New Tax Law, a fresh analysis by Andersen Nigeria has warned that the reforms may inadvertently widen the economic gap between high-performing and low-performing states unless subnational governments urgently align their tax reforms with infrastructure strategy.
The report argues that while the new framework aims to harmonize taxes and improve compliance, it will not automatically fix states with weak Internally Generated Revenue (IGR) profiles.
Lateef Surakatu, Partner and Head of Business Advisory Services at Andersen in an article published on Tuesday stated that the new tax regime is poised to reward states that have built taxable economies while penalizing those that have failed to do so.
According to Surakatu, tax laws do not create economic activity but merely formalize and capture what already exists. Consequently, states with weak road networks, informal markets, and limited urban services have very little formal economic activity to tax, and the new law will only serve to expose these structural vulnerabilities.
The analysis relied on data from the National Bureau of Statistics (NBS) 2024 Subnational IGR report, released in October 2025, which highlighted a sharp divergence in revenue performance. The data revealed that out of the N3.65 trillion generated nationwide, Lagos State alone accounted for N1.26 trillion, whereas over 20 states generated less than N40 billion each.
The report emphasized that this gap is driven not by enforcement capacity, but by economic structures shaped by infrastructure.
Andersen categorized the states into three clusters based on their infrastructure-enabled economic density. The top performers, such as Lagos, Rivers, and the FCT, generate above N200 billion annually due to dense transport networks, ports, and advanced land administration systems.
In contrast, the bottom performers are constrained by poor connectivity and high informality, rendering tax enforcement both costly and politically sensitive.
The firm identified infrastructure as the heavy lifter for revenue generation, noting that it expands the economic base by reducing transaction costs and increasing business density. Furthermore, the report pointed out that infrastructure is essential for unlocking land and property revenues, as property taxes are only effective where infrastructure creates value. It also serves as an incentive for formalization, pulling businesses out of the shadows and making them visible and bankable.
To navigate the new tax landscape, Andersen advised policymakers to prioritize investments in economic corridors rather than isolated projects.
The report urged states to fix land administration systems before raising property taxes and to align infrastructure planning with revenue strategies.
Surakatu concluded that states cannot tax their way out of underdevelopment but must build their way into sustainable fiscal independence, as infrastructure remains the foundation of IGR growth.