Shortly after completing his National Youth Service Corps (NYSC) programme in 2016, Emmanuel Ifeanyi got a job with a tech firm in Yaba area of Lagos, Nigeria’s commercial hub. Ever since then, he has paid his taxes to the Lagos State Government, but the 28-year-old resides in Alagbole-Akute, an Ogun State community located on the edge of Lagos State.

“I have lived in Alagbole-Akute area of Ogun state since I came to Lagos looking for job but I have paid all of my taxes to Lagos State government,” Mr Ifeanyi told PREMIUM TIMES in an interview.

“It breaks my heart that I cannot possibly channel my taxes to the purse of Ogun State government because that’s where I live. But, honestly, I really don’t know how to go about it.”

The tech expert explained further that he chose to stay in the Ogun community because of its relatively cheaper cost of accommodation compared to Lagos, but commuting has been quite difficult due to the poor state of infrastructure.

“From Ajuwon to Lambe to Akute to Denro, the roads are a complete mess,” he said.

“I honestly feel that many of us who live in Ogun and pay taxes to Lagos State are depriving the state (Ogun) of revenue to fix roads and bridges and build hospitals but you’d realise that many do this largely out of ignorance or because their taxes are deducted at source.”

Unlike Mr Ifeanyi, Shina Ayoola told PREMIUM TIMES he does not care “that much” that his taxes are being paid into the coffers of Lagos government. Mr Ayoola, a resident of Joju area of Sango-Otta in Ogun State, works with a manufacturing firm in Ikeja, the Lagos state capital.

“My company pays my taxes into the pockets of Lagos government and I really don’t care that much,” he said with nonchalance. “After all, I see what the government does with the taxes in Lagos, unlike my part of Ogun State.”

Aside Messrs Ifeanyi and Ayoola, many Nigerians living in communities on the borders of Lagos and Ogun pay their income taxes mostly to the Lagos State Government. In places like Agbara, Akute, Agbado, Denro, Alagbole, Sango, Ajuwon, Ojodu-Isheri , Ibafo, Mowe and other parts of Ifo and Obafemi Owode Local Government Areas of Ogun State, residents pay their taxes in Lagos, ostensibly because many of them work in Lagos.

The development raises concerns with regards to state governments’ revenue drive and delivery of infrastructural projects. It also raises questions about the friction among states with regards to the dictates of the Personal Income Tax Act (PITA).

Poor road in Alagbole-Akute, an Ogun border community.
PITA and Residency Rule

The Personal Income Tax (Amendment) Act 2011 was officially gazetted in January 2012, with an effective date of June 14, 2011, the date the bill was signed into law by the Nigerian president.

The act provides that Personal Income Tax shall be paid for each year of assessment on the total income of every individual based on the state where the tax payer resides, in the relevant year of personal income tax assessment, and not based on where the individual tax payer works or carries on business.

In terms of what constitutes income, Section 3 of the amended act defines income chargeable to include any “… salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain.”

Taxable income is assessed to tax at graduated rates ranging from 7 percent to 24 percent, depending on the income band being assessed. The maximum tax rate is put at 24 percent of an individual’s income, a note by the KPMG Professional Services said.

A major source of concern in the PITA arrangement is the residency rule. Due to the inter-state controversies that this generates, the act states explicitly that an individual tax payer’s place of residence is the place where such an individual lives or uses as his residence most frequently in Nigeria. The residence, in effect, does not include a tax payer’s hotel room, vest-room or office.

In the case of individuals with multiple residences, Section 32 provides, in paragraph 1(d), that: “in the case of an individual who works in the branch office or operational site of a company or other body corporate, the place at which the branch office or operational site is situated is where payment is made…”

The clause explained further that operational site shall include oil terminals, oil platforms, flow stations, quarries, construction sites with a minimum of 50 workers, among others.

Due to variegated factors, many Nigerians who work in some states live in other states. Mr Ifeanyi told this newspaper that the factors may include proximity to place work, low cost of accommodation, security concerns, transport network, and sundry career opportunities.

Gabriel Fakayode, a finance and tax analyst, told PREMIUM TIMES that the dichotomy in peoples’ states of residence and work places raises serious issues in income tax payment.

“When people live in Ogun, and work in Lagos State for instance, there is always a problem with Income Tax payment,” he said.

“Although the law has been tested and provisions are now clear that the state of residence deserves the benefit of PIT collection, there are still many challenges.

“For instance, the absence of accurate documentation and data in Nigeria is a major problem. Many people pay their taxes to Lagos government and live in Ogun State because Ogun doesn’t have their data and their Lagos-based offices remit their taxes directly from source. It’s the same for those living in Niger and Nasarawa and paying taxes to Abuja. This is a huge problem and state governments lose millions in tax revenues.”

In July 2015, former Ogun State Governor, Ibikunle Amosun, lamented that about 760,000 people residing in two of the 20 Local governments in the state pay their income tax to the Lagos government. The situation, the governor said, robbed the state of millions of naira in terms of Internally Generated Revenue (IGR) annually.

Mr Fakayode said that states suffering losses in this area would need to focus on accurate data collection to solve the problem, block leakages and generate more revenue.

“They also need to make people see the benefits of tax payment by delivering on infrastructure,” he quipped.

Despite residing in Ogun State, some residents pay taxes to Lagos where they work, contrary to what the rule says.
Like Ogun, like others

Findings by this newspaper showed that aside from the Ogun-Lagos personal income tax debacle, other states in Nigeria also face the burden of losing tax revenues to bigger and economically viable states.

Abdullahi Sambo, a civil servant resident in Kwankwashe community in Suleja LGA of Niger state, works in Abuja. He told this newspaper, however, that he pays his income tax in Abuja largely due to the ease of payment.

“One thing some of these neighbouring states lack is easy means of tax payment,” he told PREMIUM TIMES in a telephone conversation.

“As a resident of Kwankwashe, it is far easier for me to pay or do official things in Abuja than in Niger State where you may have to go to Minna, the capital, in most cases. Yet I live in a community that is effectively in Niger State.

“So even for those working in an informal economy or those who can easily channel their taxes to the right sources, the mode of tax payment is always a major concern.”

Apart from Niger state, Nasarawa is another neighbouring state that loses so much revenue to Abuja due to logistics and poor data collection, Mr Sambo explained.

Mr Ifeanyi agrees with Mr Sambo’s assertion, adding that those who reside in Alagbole face similar concerns in tax payment and other official obligations.

“There is a liaison office in Ojodu but quite often, you may have to travel to Abeokuta to fix basic stuff,” he said.

“How do you then convince anyone to do a travel of about 100km to Abeokuta when he can fix the same thing without much stress either online or at nearby Ikeja, a journey of less than 10km?

“State governments losing taxes in border communities have to do more in technology integration in tax collection and ease payment by bringing the government nearer to the people in those border communities.”

Other neighbouring states that have these peculiarities in PITA payment challenge in Nigeria include Rivers and Bayelsa; Ondo and Ekiti; Osun and Oyo; Anambra and Delta; among others.

Opportunity Cost

Mr Ifeanyi lamented that a possible effect of poor income tax collections in border communities is the poor state of infrastructure in those communities.

“Border communities all over Nigeria often face serious problems of neglect and poor infrastructure,” he said.

“That’s the opportunity cost. There isn’t any better example than the Alagbole-Akute-Ajuwon area of Ogun state and its dilapidated roads and abandoned bridges. I do think that this residency challenge in PITA and poor tax collection may be a major cause of the neglect.”

Mr Sambo also shares Mr Ifeanyi’s sentiment on the poor state of infrastructure in border communities. He however argued that the neglect may not be necessarily tied to the residency concerns surrounding income tax payment.

“Border communities are largely far away from capital cities where political leaders reside and so it is also easy for them to abandon infrastructure in those communities,” he said.

“I do agree, however, that if there is improvement in tax collected from these communities, the infrastructure could as well improve.”

Mr Sambo urged governments at all levels to harmonise the PITA arrangement and ensure that the resources are judiciously used for the growth of the communities.


In the last week of May, the governments of Lagos and Ogun states signed a Memorandum of Understanding (MoU) on joint development of infrastructure in borderline communities between the states.

At a ceremony in Abeokuta, the Ogun State capital, Governors Babajide Sanwo-Olu and Dapo Abiodun inaugurated the Lagos-Ogun Joint Development Commission (LOJDC), “a sustainable development agenda under which Lagos and Ogun States will combine resources to meet present socio-economic needs and prepare for the future”.

An important part of the partnership showed that both governments would focus on revenue and taxation, including PAYE remittances and boundary town revenue management and collection.

Before the recent MoU was signed, the relationship between both states has endured, despite occasional frictions. During the tenure of former governor Babatunde Fashola, the Ogun State government succeeded in getting Lagos to remit 20 percent of taxes paid by Lagos workers who reside in Ogun State to the coffers of the state.

Mr Fakayode believes that the new partnership has potential to facilitate effective enumeration and data sharing about citizens resident in border town areas, as well as efficient and regular remittances of personal income taxes of Ogun residents working in Lagos State.

“This will definitely boost the internally-generated revenue (IGR) of both states, especially Ogun state,” he quipped.

He added that it will also reduce tax leakages and increase the number of taxable persons across the states, adding that other states in similar conditions should be encouraged to enter into similar agreements to ease tax payment.

Mr Ayoola on his part encouraged governments to deepen the confidence people have in the tax payment system through delivery of infrastructure that could encourage payment.

Mr Sambo on his part called on disadvantaged state governments to ease tax payment and embrace innovative digital processes that would enhance PITA payment in border towns, widen the tax net, and block leakages.

“This would open up opportunities for more revenue that could drive growth and development, especially in these often neglected border communities,” he added.


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