Nigeria at the Crossroads – A Nation Poised Between Extraction and Enablement
Nigeria is not poor. It is poorly managed. This assertion, once whispered in policy circles, has now become an undeniable truth staring us in the face. With vast natural resources, a youthful and energetic population, a thriving informal economy, and a deep well of entrepreneurial instinct, Nigeria possesses the raw ingredients not only for national transformation but for global leadership.
Yet, despite this abundance, the country remains trapped in cycles of economic underperformance, mass poverty, and civic frustration. Why? Because Nigeria is yet to make the most important transition any postcolonial state must undergo: the shift from a gatekeeping, extractive state to a productive, enabling one.
Our government institutions; federal, state, and local, have for too long behaved like rent collectors, not facilitators of prosperity. Rather than creating conditions that nurture enterprise and expand opportunity, the state often places itself as an obstacle by imposing excessive taxation, duplicative regulations, and arbitrary enforcement on citizens and businesses alike.
The message is clear: succeed despite the system, not because of it. But this model is unsustainable. It breeds informality, corrodes public trust, and perpetuates a vicious cycle where wealth creators are punished while rent seekers are rewarded. It is a model that has exhausted its legitimacy and usefulness. And if Nigeria is to have any hope of meeting the 21st-century development challenge, let alone fulfilling the kind of projections envisioned in Goldman Sachs’ recent forecast, it must undergo a structural and philosophical overhaul.
In its widely discussed long-term outlook, Goldman Sachs projected that Nigeria could become the fifth-largest economy in the world by 2075, surpassing economic powerhouses like Germany and Japan. This isn’t just a feel-good statistic. It’s a call to ambition. It signals what Nigeria could become if it abandons the self-inflicted wounds of bad policy, elite impunity, and extractive governance—and embraces a national strategy of productive empowerment. But the road from where we are to where we could be is not paved with good intentions. It must be charted through clear choices, courageous reforms, and a new social contract.
This piece sets out to frame that journey not as an abstract wish list, but as a concrete paradigm shift: from extraction to enablement. I argue that if Nigeria wants to build a prosperous, inclusive, and competitive economy, it must reimagine the role of the state not as a controller, but as a collaborator. Not as a collector of unearned taxes, but as a builder of shared value. The enabling state is one that clears the path, builds the road, and lets its people drive. It is a state that understands that the true source of national wealth is not oil, not foreign aid, and not central planning but the creativity, sweat, and enterprise of ordinary Nigerians.
The challenge before us is immense. But it is not insurmountable. Other countries have made this transition. South Korea, the UAE, Singapore, and even parts of Latin America have shown that with visionary leadership and a clear national development model, poor countries can become prosperous within a generation. Nigeria has no excuse. This is our moment to choose: to continue down the road of underachievement, or to rise with resolve and purpose. And if we do, if we build an enabling state worthy of the people it serves, then the future described in Goldman Sachs’ forecast will not be an anomaly; it will be our reality.
Historical Background
To understand Nigeria’s present fiscal and developmental challenges, one must begin by tracing the legacy of its colonial economic architecture. The roots of the extractive governance model lie not in a uniquely Nigerian failing, but in the deliberate design of colonial administration. The British colonial government in Nigeria, like elsewhere in its empire, did not exist to enable indigenous enterprise or uplift local populations. Its core purpose was to extract value, raw materials, taxes, labour, and control, to serve the imperial economy.
This extractive orientation manifested in the early forms of taxation imposed by colonial authorities, including the infamous hut tax, poll tax, and later, the income tax ordinance. These taxes were not tied to productivity or service delivery but enforced through coercion. The purpose was not to stimulate the domestic economy, but to finance colonial administration and infrastructure geared toward export commodities. In effect, taxation became a tool of domination, not development; a legacy that endures subtly to this day.
When Nigeria gained independence in 1960, the new republic inherited not just political authority but institutional frameworks, legal systems, and a fiscal structure modelled on colonial priorities. The state remained centralized, bureaucratic, and extractive. Rather than being reimagined to serve citizens in a democratic context, the machinery of government simply changed hands, from foreign to indigenous elites. The discovery and commercialisation of crude oil in the 1970s further entrenched this trajectory.
With oil revenues flooding federal coffers, the Nigerian state grew increasingly insulated from its citizens. The social contract became distorted: rather than tax its people and earn their accountability, the state became dependent on oil rents and saw less need to cultivate a productive, tax-paying citizenry. Governance became more about rent distribution than nation building. This disconnect weakened the imperative to build enabling institutions, nurture productivity, or foster broad based prosperity.
Oil wealth also distorted the fiscal federalism that had once characterized Nigeria’s early post-independence years. In the 1950s and 60s, regions competed economically and retained significant control over their resources and revenues. This competition drove innovation and relative efficiency in places like the Western Region under Obafemi Awolowo and the Eastern Region under Michael Okpara. But the oil boom and subsequent centralization of revenue collection eroded that model.
Today, over 50% of Nigeria’s consolidated revenue is federally collected and disbursed, creating a dependency syndrome at subnational levels and blunting incentives for internally generated revenue reforms. In this context, taxation continues to carry the stigma of injustice. Citizens often perceive taxes not as a contribution to shared development, but as a shakedown by an unaccountable state. Compliance is low not because Nigerians lack patriotism, but because the experience of governance is often extractive, inefficient, and corrupt. The moral legitimacy of taxation has been eroded by decades of poor service delivery, bureaucratic hurdles, and a perception that taxes disappear into a black hole of mismanagement.
Moreover, attempts at expanding the tax base have often been executed in ways that reinforce this mistrust. Multiple taxes, levies, and informal fees proliferate, especially at the local government level. For the average Nigerian entrepreneur or informal trader, dealing with government agents is often an experience laced with extortion, arbitrariness, and harassment.
Therefore, the issue is not whether Nigeria collects “too little tax” as is often claimed. It is that the value for money equation is broken. People do not resist taxation simply because they are unwilling; they resist because they have seen too little in return. The colonial mindset, of the state as an overlord and the citizen as a subject, still haunts the Nigerian fiscal imagination. Changing this legacy requires more than reforming tax codes. It requires a psychological and institutional reinvention of the relationship between the state and its citizens. It demands a new ethos where the government earns the right to tax by first enabling productivity, delivering visible value, and operating transparently. In essence, Nigeria must complete the unfinished business of decolonizing its governance not merely politically, but economically and structurally.
Regulatory and Tax Burdens – A Barrier to Nigeria’s Productive Renaissance
While tax collection is essential to the function of any state, it must be nested within a coherent policy framework that encourages wealth creation. In Nigeria, however, the prevailing experience for many businesses, especially small and Medium Sized Enterprises (SMEs), is not one of an enabling ecosystem, but of a suffocating labyrinth.
Over the decades, a toxic combination of regulatory overreach, arbitrary enforcement, and fragmented taxation has turned the process of doing business into an endurance test rather than an invitation to grow. The problem begins with the multiplicity of taxes and levies, many of which are duplicative, ill defined, or outright unconstitutional.
Nigeria’s tax ecosystem includes federal, state, and local authorities, each with the power to impose various forms of taxation. In theory, this reflects a federal structure. In practice, it has created overlapping jurisdictions and confusion. A single business may be liable for corporate income tax, value-added tax (VAT), education tax, development levy, signage fees, waste disposal charges, and other “informal” fees collected by state or local agents. Many of these are enforced without clear legal basis or supporting services. The result is a system in which compliance costs are exorbitantly high, not just in financial terms, but in time, energy, and bureaucratic frustration.
For micro entrepreneurs and traders operating on thin margins, the burden is often unsustainable. Rather than register their businesses and face a gauntlet of levies, many retreat into informality, thereby shrinking the taxable base and perpetuating the very fiscal shortfall the government seeks to correct. This creates a perverse cycle: the government, desperate for revenue, imposes more taxes on a narrow formal sector; that sector, feeling overburdened, contracts further or finds creative ways to avoid tax altogether.
In the absence of strategic reform, the tax net does not expand, it collapses inward. Worse still, regulatory agencies often act not as partners in enterprise, but as predators. Businesses report being harassed by multiple regulatory bodies; each demanding fees, penalties, or unofficial payments. Rather than providing guidance, many regulators operate with a punitive mindset, wielding shutdowns and fines as their primary tools. Environmental inspectors, fire safety officials, local government agents, and even sanitation officers are known to swoop down on small businesses without warning or due process.
This behaviour is not merely anecdotal. The World Bank’s “Ease of Doing Business” index, which formerly ranked Nigeria poorly, highlighted issues such as the complexity of starting a business, dealing with construction permits, and paying taxes. Although Nigeria made improvements on paper through reforms like the Presidential Enabling Business Environment Council (PEBEC), the lived experience for most entrepreneurs remains arduous, especially outside Lagos and Abuja.
Particularly troubling is the state of local government revenue generation. Constitutionally empowered to promote grassroots development, many local governments have instead become centres of rent seeking. In place of providing public goods, such as clean markets, basic healthcare, and local security, they focus on extracting fees from the informal sector with little accountability. Petty traders, okada riders, and artisans are routinely extorted by task forces acting under dubious authority. This is not taxation; it is predation disguised in uniform. What is lost in this environment is the very foundation of economic growth: trust, productivity, and long term investment. Entrepreneurs are less likely to reinvest their profits or expand operations when they fear arbitrary penalties or regulatory hostility. Foreign investors, too, are wary of opaque systems where enforcement is unpredictable and political interference common. Even local capital stays on the sidelines, opting for short-term, speculative ventures rather than long-term industry-building.
Contrast this with what happens in productive, enabling states. In countries like Estonia, Rwanda, or Singapore, regulation is digitized, simplified, and transparent. Taxation is predictable, fairly administered, and tied to visible services. Most importantly, government agencies operate as service providers, not extortionists. Entrepreneurs are seen as partners in national development not adversaries to be squeezed.
The irony is that Nigeria has no shortage of talent or enterprise. From tech innovators in Yaba to textile traders in Aba, from farmers in Benue to logistics firms in Port Harcourt, the country teems with people ready to work, build, and create. What is missing is the policy environment that unleashes rather than hinders them.
Indeed, the true cost of Nigeria’s regulatory and tax burden is not merely fiscal, it is existential. It erodes the social contract, breeds cynicism, and perpetuates a low trust society. Citizens begin to see government not as an institution that delivers, but as one that obstructs. Over time, this undermines national cohesion, discourages patriotism, and fuels the very tax evasion the state seeks to combat.
To break this cycle, Nigeria must shift its paradigm from coercive extraction to strategic enablement. Taxation should follow productivity and not precede it. Regulation must be service driven, not punitive. And the government must earn the right to tax by visibly delivering value. Only then can Nigeria build a broad based, inclusive, and thriving economy.
The Enabling State Paradigm – From Gatekeeper to Growth Partner
In the annals of national development, few ideas are as powerful or as misunderstood as the concept of the enabling state. It is not a weak state, nor is it a minimalist one. It is a state that knows when to lead and when to get out of the way. It is a government that sets the stage for prosperity by investing in public goods, streamlining regulation, and earning the trust of its citizens. Crucially, the enabling state does not treat enterprise as a threat, it sees it as an engine. And it taxes productivity only after it has made productivity possible.
For decades, Nigeria’s governance model has followed the opposite script. Rather than creating the conditions for wealth, it often acts as a gatekeeper, imposing high entry costs, regulatory hurdles, and burdensome taxation before value is even created. The consequence has been a stifled economy, widespread informality, and a brittle tax base. By contrast, countries that have embraced the enabling state paradigm have experienced remarkable economic transformations, often within a generation.
Consider Singapore: in the 1960s, it was a struggling port city with no natural resources. But through visionary leadership, lean bureaucracy, smart investment in human capital, and a relentless focus on ease of doing business, it reinvented itself into one of the world’s most competitive economies. Singapore’s government didn’t wait to be rich before building infrastructure, it invested first and taxed later. The results speak for themselves. Or Rwanda: a landlocked, post-conflict country that many had written off.
Today, it is a poster child for public sector reform in Africa, with one of the continent’s most efficient bureaucracies. Government services are digitised, corruption is systematically tackled, and businesses are supported rather than hunted. Rwanda’s transformation was not born of natural wealth, it came from state intentionality and a deliberate move from control to enablement.
Even South Korea, now a member of the OECD, offers lessons. Once one of the poorest countries in the world, it achieved rapid industrialization through a close, though disciplined, partnership between government and the private sector. The state identified priority sectors, supported infrastructure, invested in education, and fostered a competitive environment. Importantly, it also taxed in a way that reflected rising incomes, not suppressed them. These countries, diverse in context and geography, share one insight: development happens when the state acts as a platform, not a predator. When it builds roads and ports before taxing commerce; when it registers businesses in days, not months; when it provides reliable power and broadband instead of issuing fines for noncompliance with conditions it itself makes it impossible.
Nigeria has glimpses of this model in places. The reforms introduced in Lagos State over the past two decades; on traffic management, environmental services, tax administration, and infrastructure, hint at what is possible. The rise of the tech sector, largely driven by private innovation but supported in part by investment in broadband and payment infrastructure, shows how an ecosystem can grow when not suffocated by bad policy. But these examples are exceptions, not the rule. What Nigeria needs now is not isolated reforms, but a new governing philosophy. The enabling state must become the central idea of governance at all levels – federal, state, and local.
This shift demands specific commitments:
– Policy stability and regulatory clarity that give investors the confidence to plan long-term.
– Digitization of government services to eliminate rent-seeking and reduce bureaucratic friction.
– Strategic infrastructure investment, especially in power, transport, and logistics, to lower the cost of doing business.
– Educational reform that aligns skills with industry needs, empowering youth to contribute meaningfully to the economy.
– Tax reform that widens the net by simplifying compliance and linking taxation to visible service delivery.
At its heart, the enabling state trusts its people. It sees them not as potential violators to be monitored, but as partners in building a great nation. This trust is not naïve, it is reciprocal. Citizens, when treated with dignity and fairness, respond with cooperation, creativity, and contribution. And yet, enablement is not about abdication. An enabling state must still regulate, enforce, and redistribute. But it does so intelligently, efficiently, and transparently. It prioritizes outcomes over optics. It listens more than it lectures. It innovates alongside its people. Nigeria is not too late to embrace this paradigm. Indeed, the country stands to gain more than most.
With a youthful population, growing urban centers, and a latent entrepreneurial class, the potential for a productivity boom is real. But it will not happen by default. It must be designed and that design must be led by a state that sees its role not in extraction, but in elevation. The enabling state is not a luxury. It is the foundation of modern development. It is the platform on which dreams are built, jobs are created, and nations are transformed. The time to build it is now.
Strategic Recommendations: Laying the Foundations for an Enabling State in Nigeria
Transforming Nigeria from a gatekeeping to an enabling state will not be achieved through rhetoric or fragmented reform. It requires a deliberate, whole of government reorientation anchored in a long-term national vision. To build a society where wealth is not only created but fairly taxed and reinvested, Nigeria must commit to a new strategy: one that removes obstacles to productivity, restores public trust, and aligns the state’s fiscal interest with the economic empowerment of its people. Below are seven strategic priorities that should anchor this new vision:
Simplify and Harmonize the Tax System
Nigeria’s tax archite
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