Tax Expenditure Management and Public Finance Efficiency in Nigeria

This study examines the management of tax expenditures in Nigeria and their implications for public finance efficiency. Tax expenditures, defined as revenue foregone through exemptions, deductions, credits, and preferential rates, represent a significant but frequently underestimated component of Nigeria's fiscal framework. Unlike direct expenditures subject to annual appropriation scrutiny, tax expenditures often escape systematic review, creating fiscal opacity and potential inequity. Using a professional documentary and qualitative research design, the study reviews the Federal Government's tax expenditure statements published in the Medium Term Expenditure Framework documents, analyses the cost of major tax exemptions including VAT zero-ratings, pioneer status grants, and capital allowances, and conducts interviews with eight fiscal policy analysts from the Federal Ministry of Finance and the National Assembly budget office. Thematic analysis and comparative policy review are employed. The study expects to find that Nigeria's total annual tax expenditure substantially exceeds published estimates due to incomplete reporting and inconsistent categorisation. It further finds that many existing exemptions lack formal sunset clauses and cost-benefit documentation, making fiscal rationalisation politically difficult. Recommendations include establishing a mandatory annual tax expenditure report as a budget document, introducing cost-benefit review requirements for all exemptions above a defined fiscal threshold, embedding sunset clauses in new incentive legislation, and strengthening the capacity of the National Assembly to scrutinise tax expenditure claims. Keywords: tax expenditure, fiscal efficiency, public finance, exemptions, budget management.