For a state that has long lived in the shadow of its own oil wells, Bayelsa's latest tax figures seem almost like a fantasy. Bayelsa, known for being highly dependent on federal allocations, achieved an unexpected feat in 2024 – increasing tax revenues by 250% within a single year.
According to Budgit’s recently released State of the States report, Bayelsa’s tax receipts increased from ₦18.21 billion in 2023 to an unprecedented ₦63.67 billion in 2024, with personal income tax alone increasing from ₦14.12 billion to ₦55.19 billion. The growth has been so rapid that taxes now account for more than 85% of the state's internally generated revenue (IGR) – an impressive increase from 67% last year.
BusinessDay investigates what's really driving Bielsa's tax surge – and what it might indicate for its financial health.
Bayelsa ranks second nationwide for IGR growth
Bielsa's 2024 performance did not come in isolation. In Budgit's recently released State of the States report, the oil-rich state ranks second across the country with a percentage growth of 173.69% in IGR, one of the most significant fiscal changes of the year.
Over the past decade, Bayelsa's IGR has grown from modest beginnings to ₦74.44 billion in 2024 – an increase of 754.28% in ten years and the highest relative growth ever recorded by the state. Yet, what makes 2024 particularly notable is that taxes now contribute 85.53% of Bayelsa's total IGR, up from 66.96% in 2023. The N55 billion question is: what exactly did Bayelsa do differently to achieve this extraordinary growth?
The number one driver behind this increase is seen to be personal income tax (PIT). From
N14.2 billion in 2023, with the figure increasing to N55.19 billion in 2024. Another increase worth mentioning is the development levy which doubled from N2.17 billion in 2023 to N4.5 billion in 2024.
It is interesting to note that during this period there was not the necessary growth in industrial or commercial business operations in Bayelsa State, nor was there an increase in tax rates to justify the 250% increase in pay-as-you-earn (PAYE) tax. The government took tax compliance very personally and stopped leakages.
News reports from 2024 suggest that the government automated tax collection systems and digitalized its internal revenue process to prevent leakages. The state also established a database to track economic activities within its territory and identify eligible taxpayers who were not previously covered under its purview. Quite simply, you can say that while the federal government was still introducing tax reforms, Bayelsa State was already implementing some of these steps.
A resident and civil servant working with the Bayelsa State Integrated Financial Management System told BusinessDay that the government has taken major steps to plug leakages in its tax collections.
“Now, there is this e-ticketing system where the government gives POS machines to people who roam and collects small road taxes like sanitation, transportation and so on. So, instead of people paying cash to people who roam, you pay using the POS. The tickets that are generated are now logged into the system,” he explained.
This explains a major step taken to stop the leak, and it seems like another state could learn from it. During the 2024 financial year, the Bayelsa State Board of Internal Revenue (BSBIR) also took legal action against businesses that failed to file returns or waive pay-as-you-earn (PAYE) taxes for their employees, and also took steps to collect personal income tax for workers temporarily deployed to the state.
Two court cases of interest were filed in Q2 2024: Popham Walter Odusot Limited vs Bayelsa State Board of Internal Revenue, and Bayelsa State Board of Internal Revenue vs MI Nigeria Limited, with claims over N1.13 billion in unpaid taxes.
In both cases, as reported in Olaniwun Ajayi's Second Quarter Tax Practice Newsletter, BIRS was making a case for workers deployed to work in the state for up to 90 days to remit their income tax to the Bayelsa State Government, even if they have full residence in the other state.
The ruling authorizes the state to use the Best of Judgment Assessment (BOJA) if the taxpayer fails to file a return or provide the requested documentation, and allows the entity a 30-day period to object to the tax demand notice, after which it becomes final and conclusive.
https://www.olaniwonajayi.net/blog/wp-content/uploads/2024/07/OALP-Tax-practice-2nd-Quarter-Newlsetter-July-2024.pdf
This decision highlights the importance of timely and valid objections on behalf of taxpayers/companies, and sets a precedent for the state tax agency to finalize revenue claims against non-cooperative businesses and individuals. If the state government maintains this energy and follows legally prescribed procedures for pursuing these tax claims, it can achieve stable tax revenue benefits in subsequent years.
Government is also collaborating with employers to fully deduct and pay PAYE as well as other charges supported by law such as the Bayelsa State Infrastructure Maintenance Levy and Health Insurance Scheme Levy.
In 2013 itself, the state government started working for the full implementation of the 2011 amended Personal Income Tax Act (PITA). But it looks like 2024 was the year these benefits come into full view.
Benefits of personal income tax to Bayelsons
How Bayelsa can build on tax benefits
Bielsa's fiscal milestone is commendable, but there are questions about how it can be sustained. Speaking with BusinessDay, Peter Nwofia, tax partner at Forvis Mazars, said tax revenues could be hit under the new tax laws that will come into effect from January 2026.
“The new tax laws give more allowances and relief to low earners. Therefore, tax revenues in many states including Bayelsa may be significantly reduced. The PITA amended in June 2011 taxed the first N300,000 at 7%, the next N300,000 at 11% and the next N500,000 at 15%. But with the new tax laws coming into effect, the first N800,000 was taxed at 0% goes, and the next N2.2m is taxed at 15%, this means that PIT revenues will decline, if they have enough high income earners will have to pay more under the new acts,” Nwofia explained.
Nwofia urged the state government to look into the new tax laws from its Board of Revenue, identify all the taxes it should receive, and collaborate with the necessary players to ensure that such taxes are waived accordingly.
He suggested; “The government can collaborate with banks that use agents to access riverine areas, and ensure that they make appropriate withholdings on commissions paid to their mobile money agents. The government can also establish a clear policy to guide the payment of stamp duties, and track them to ensure that it is within the powers of the state government to review and collect the development levy, and as of 2020, the Kano State Development Levy I was collecting N500.”
On the issue of remittance of PIT by oil companies and other businesses in the states to the states of residence, Nwofia said the law also provides for itinerant workers to remit the tax to the state where they work and the same can be traced across all sectors to bring service providers and consultants into the tax net.
Is Bayelsa now oil-independent?
not by a long shot. Bayelsa ranks 11th out of 35 states in terms of FAAC dependency (Index A). Despite the huge tax benefits, the IGR is still dwarfed by the larger federal allocations to come, especially since the removal of fuel subsidies.
Despite huge growth in tax revenue, IGR accounted for only 8.57% of total recurring revenue in 2024, while FAAC accounted for 91.43% of Bayelsa's recurring revenue. This is a continuation of the trend of the last decade where FAAC has always accounted for more than 90% of total recurring revenues. While IGR can cover 94% of personnel costs for the year, it can cover only 39.80% of total operating expenses.
But should this be a matter of concern?
Ayo Teriba, an economist and CEO of Economic Associates (EA), told BusinessDay it would be unreasonable to expect Bayelsa State to be able to survive without federal allocations.
“Bayelsa mainly has oil, and the federal government gets FAAC from it. Lagos has no oil, but whatever other things they have, they can be exploited 100%. If anyone expects Bayelsa to be 100% independent of federal allocation or oil money, then they should be allowed to exploit their oil 100% independently. That FAAC allocation is their money. If the federal mine takes the oil, and after selling it, they give me a fraction as an allocation, so it's my money and I'm entitled to it.”
He said the federal government is also heavily dependent on the said allocation, with its IGR unable to meet its operating expenses. Teriba said that for a country practicing federalism, funds received from federal allocation accounts belong to all parts of the federation.
How can this boom make a difference to the lifestyle of Bayelsa residents?
The National Bureau of Statistics (NBS) 2022 Multidimensional Poverty Index has listed Bayelsa as the second poorest state in Nigeria after Sokoto. There is no recent data or reports to suggest that much has changed.
The state government should start considering actionable steps to convert its revenue gains into improvements in the quality of life of its residents. As a state that has always been among the top five or top ten recipients of federal allocations, Bayelsa State has resources that can be channeled into the development of other sectors.
As can be seen in the chart below, the state government is putting more than half of its expenditure into capital expenditure. CAPEX over the past decade has increased from N31,052 in 2015 to N137,253 in 2024, but how can this expenditure be channeled to the right place?
Ibrahim Tajuddin, head of research at Chapel Hill Denham, recommended continued public and private investment in strategic sectors.
“We have a very young population so any investment around job creation can accelerate tax flows. That way it will be sustainable because each household will not only pay income tax but will also pay consumption tax on other things as their spending power and disposable income improves. This then becomes a condition for the creation of jobs.”
He identified the manufacturing and tourism sectors as low-risk low-hanging fruit that could engage more residents in productive labor. The tourism sector can also bring in more people with purchasing power to stimulate activities for both the formal and informal economies.
This is in line with the suggestion of the BudgetIT report which urged the state to explore the Blue Economy through public-private partnerships that involve sustainable fishing, aquaculture and marine resource management.
So, while the development is commendable and leaves lessons for other states, the Bayelsa State Government has its work cut out for it as the new tax law comes into effect in January 2026.
Summary (for social media)
Bielsa's 250% tax jump – a turning point or just a lucky break?
Budgit's recently released State of the States report shows that Bayelsa State has more than tripled its tax revenue in one year. How did this happen? And what does it indicate for the future? BusinessDay sought insights from experts to answer these questions.
