By Kunle Oshobi
President Bola Ahmed Tinubu’s controversial tax reform bills have dominated national discourse in recent weeks, with the administration emphasizing increased revenue collection as the pathway to national development.
While the President frequently touts his record of increasing Lagos State’s internally generated revenue during his tenure as governor (1999-2007), there is a crucial element of that success story he consistently omits: the national economic boom engineered by the Obasanjo-Atiku administration, which created the foundation for revenue growth across Nigeria, particularly in Lagos as the nation’s commercial hub.
The Uncomfortable Truth About Lagos’s Revenue Growth
Between 1999 and 2007, Lagos State’s IGR grew from approximately N14.6 billion annually to N83 billion, a remarkable increase that President Tinubu rightly celebrates. However, this growth did not occur in a vacuum. During this same period, Nigeria was experiencing its fastest economic growth since independence, with GDP expanding rapidly and the economy becoming one of the fastest-growing in Africa and the world.
At the helm of this economic transformation was Vice President Atiku Abubakar, who served as Chairman of the National Economic Council, the constitutional body responsible for coordinating economic policy across the federation. Under his leadership, and working alongside President Obasanjo, the administration implemented comprehensive reforms that liberalized key sectors, privatized moribund state enterprises, recapitalized the banking sector, revolutionized telecommunications, established pension reforms, and attracted unprecedented foreign investment, amongst several other policies that stimulated economic growth.
The Real Driver of Revenue Growth
The inconvenient reality is that over 70% of Lagos State’s IGR derives from personal income tax paid by workers resident in the state. As the Obasanjo-Atiku administration’s economic policies stimulated rapid growth in employment, business formation, and private sector expansion, Lagos, as Nigeria’s commercial nerve center, naturally became the primary beneficiary. Companies expanded, new businesses emerged, jobs multiplied, and with them came increased tax revenues.
The telecommunications revolution alone, which saw mobile phone lines grow from 400,000 in 1999 to over 100 million by 2007, created hundreds of thousands of jobs. The banking sector recapitalization transformed Nigerian banks into regional powerhouses, generating employment and economic activity concentrated largely in Lagos. Privatization of public enterprises injected efficiency into the economy and freed up capital for productive investment. The negotiated debt relief that reduced Nigeria’s external debt from $35 billion to manageable levels improved the nation’s credit rating and attracted foreign investment.
These were not Lagos State initiatives. These were federal government policies championed by the National Economic Council under Atiku Abubakar’s chairmanship, and they created the rising economic tide that lifted Lagos’s revenue boat along with boats across Nigeria.
The Irony of Current Policy Direction
Today, as President of Nigeria, Tinubu faces an economy battered by high inflation, massive unemployment, currency devaluation, and widespread poverty. Yet rather than focusing primarily on growth-oriented economic reforms similar to those that indirectly benefited his Lagos administration, his government has prioritized aggressive revenue extraction through controversial tax reforms.
The irony is profound: Tinubu credits himself for Lagos’s revenue success while ignoring that it was built on the foundation of national economic growth policies led by his current political rival, Atiku Abubakar. Now, rather than emulating that growth-first approach, his administration pursues a taxation-first strategy at a time when Nigerians are least able to bear additional burdens.
Tax Revenue Follows Economic Growth, Not Vice Versa
Economic history demonstrates repeatedly that sustainable revenue growth follows from economic expansion, not aggressive taxation of a stagnant economy. When businesses thrive, when employment increases, when incomes rise, tax revenues naturally follow. Company income taxes increase as businesses become profitable. Personal income taxes grow as more people find employment and existing workers earn better wages. Value-added tax revenues expand as consumption increases with rising prosperity.
The Obasanjo-Atiku era proves this point conclusively. By focusing on:
- Creating an enabling environment for business
- Attracting foreign investment through sound macroeconomic policies
- Liberalizing critical sectors
- Building institutions to fight corruption
- Investing in infrastructure
- Reforming the financial sector
They achieved both economic growth and increased government revenues. Lagos State collected more taxes not primarily because of better collection mechanisms, but because there were more economically active people and businesses to tax.
Lessons President Tinubu Must learn
President Tinubu should look beyond partisan politics to recognize what truly drove Nigeria’s economic success during his tenure as Lagos governor. Atiku Abubakar, as Chairman of the National Economic Council, played the leading role in implementing the economic policies that created jobs, stimulated growth, and consequently generated the tax revenues Lagos collected.
If Tinubu genuinely wants to replicate Lagos’s revenue success at the federal level, he must first replicate the growth-oriented economic policies of the Obasanjo-Atiku era. This means:
- Prioritizing Economic Growth Over Revenue Extraction Focus on creating an enabling environment for businesses to thrive, rather than imposing additional tax burdens on an already struggling population.
- Implementing Structural Reforms Invest in infrastructure, power, transportation, and telecommunications to reduce the cost of doing business and enhance productivity.
- Attracting Investment Create stable macroeconomic conditions, ensure policy consistency, and build investor confidence to attract both domestic and foreign capital.
- Building Productive Capacity Support agriculture, manufacturing, and services sectors to create employment and increase the productive base of the economy.
- Fighting Corruption Through Institutions Strengthen anti-corruption agencies and ensure transparent, accountable governance that gives citizens confidence in government.
- Liberalizing Key Sectors Open up sectors monopolized by inefficient state actors to private sector competition and innovation.
The Path Forward
Nigeria’s current economic challenges require a growth-first approach, not a taxation-first strategy. The tax reform bills, regardless of their technical merits, arrive at a moment when millions of Nigerians are struggling with unprecedented economic hardship. Imposing additional burdens on citizens and businesses now risks stifling the very economic activity needed to generate sustainable revenue growth.
President Tinubu should demonstrate the humility to learn from the success of his predecessors, even his political rivals. Atiku Abubakar’s chairmanship of the National Economic Council during Nigeria’s fastest economic growth period offers a blueprint for sustainable revenue generation through economic expansion.
The lesson is clear: grow the economy first, and tax revenues will follow. Tax an impoverished population aggressively, and you deepen poverty while strangling growth.
If President Tinubu truly wants to be remembered as the leader who transformed Nigeria’s economy, he should borrow a leaf from the Obasanjo-Atiku playbook and focus his considerable political capital on policies that expand the economic pie, rather than extracting bigger slices from an already diminished pie.
The choice is his: will he pursue the proven path of growth-driven revenue expansion, or persist with the politically expedient but economically counterproductive approach of taxing hardship? Nigeria’s future prosperity hangs in the balance.
Kunle Oshobi is the Head of Strategy and Planning of The Narrative Force.
