How Bayelsa achieved a 250 percent tax revenue boom — and how the new tax laws may affect it
For a state that has long lived under the shadow of its own oil wells, Bayelsa’s latest tax numbers read almost like fiction. Known for being heavily dependent on federal allocations, Bayelsa just pulled off an unlikely feat in 2024 — a 250% surge in tax revenue within a single year.
According to BudgIT’s recently released State of States report, Bayelsa’s tax receipts jumped from ₦18.21 billion in 2023 to an unprecedented ₦63.67 billion in 2024, with personal income tax alone soaring from ₦14.12 billion to ₦55.19 billion. The increase is so steep that taxes now make up more than 85% of the state’s Internally Generated Revenue (IGR) — an impressive climb from 67% the year before.
BusinessDay investigates what truly drove Bayelsa’s tax boom — and what this could signal for its fiscal health.
Bayelsa Ranks Second Nationwide for IGR Growth
Bayelsa’s 2024 performance didn’t happen in isolation. In BudgIT’s newly released State of States report, the oil-rich state ranked second nationwide for percentage growth in IGR at 173.69% YoY, marking one of the most significant fiscal turnarounds of the year.
Over the past decade, Bayelsa’s IGR has climbed from modest beginnings to ₦74.44 billion in 2024 — a 754.28% increase in ten years and the highest relative rise ever recorded by the state. Yet, what makes 2024 particularly noteworthy is that taxes now account for 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 growth is seen in the Personal Income Tax (PIT). From
N14.2 billion in 2023, the figure jumped up to N55.19 billion in 2024. Another growth worthy of mention is the Development levy which doubled from N2.17 billion in 2023 to N4.5 billion in 2024.
It is interesting to note that there was not necessarily a growth in industrial or commercial business operations in Bayelsa state during the period, nor was there an increase in tax rates to justify a 250% growth in Pay-As-You-Earn (PAYE) tax. The government just took tax compliance very personally, and blocked leakages.
News reports from 2024 show that the government automated tax collection systems and digitized its internal revenue process to block leakages. The state also established a database to track economic activities within its territory, and identify eligible taxpayers who were previously not in the net. Quite simply, you can say that while the federal government was still initiating tax reforms, Bayelsa State was already implementing some of these moves.
A resident and civil servant who works with the Bayelsa state Integrated Financial Management System told BusinessDay that the government took big steps to plug leakages in its tax collection.
“Now, there is this e-ticketing system where the government gives POS machines to the guys going around and taking small street tax like sanitation, transport and the likes. So, instead of people paying cash to those guys that go around, you pay using the POS. The tickets that are generated from that are what is now logged into the system” he explained.
This explains a major step taken to block the leakages, and sounds like one other state could learn from. During the 2024 fiscal year, the Bayelsa State Board of Internal Revenue (BSBIR) also pursued legal action against businesses that failed to file returns or remit Pay-As-You-Earn (PAYE) taxes for its workers, and also took steps to collect personal income tax for workers deployed to the state temporarily.
Q2 2024 recorded two court cases of interest: Popham Walter Odusote Limited v. Bayelsa State Board Of Internal Revenue, and Bayelsa State Board of Internal Revenue v. M.I Nigeria Limited, with over N1.13 billion claims in unremitted PAYE taxes.
In both cases, as detailed in Olaniwun Ajayi’s 2nd Quarter Tax Practice Newsletter, the BIRS was making a case for workers deployed to work in the state for up to 90 days to have their income tax remitted to the Bayelsa state government, even if they have full residence in another state.
The ruling authorised the state to use a Best of Judgement Assessment (BoJA) if a taxpayer fails to file a return or provide requested documents, and allows the entity a 30-day period to object the tax demand notice, after which it becomes final and conclusive.
https://www.olaniwunajayi.net/blog/wp-content/uploads/2024/07/OALP-Tax-Practice-2nd-Quarter-Newlsetter-July-2024.pdf
This ruling highlights the importance of timely and valid objections on the part of taxpayers/companies, and sets a precedent for the state tax agency to finalise revenue claims against uncooperative businesses and individuals. If the state government sustains this energy and follows the legally stated procedures to pursue these tax claims, it could unlock steady tax revenue gains in subsequent years.
The government is also collaborating with employers to fully deduct and remit PAYE as well as other levies like the Bayelsa State Infrastructural Maintenance Levy and Health Insurance Scheme Levy as backed by the law.
As far back as 2013, the state government had started driving for a full implementation of the Personal Income Tax Act (PITA) amended in 2011. But it would seem that 2024 was the year, these gains fully kicked in.
How Bayelsa can build on the tax gains
Bayelsa’s fiscal milestone is commendable, but there are questions as to how this may be sustained. In a chat with BusinessDay, Peter Nwofia, Tax partner at Forvis Mazars noted that the tax revenue may be impacted under the new tax laws which take effect from January 2026.
“The new tax laws give more allowance and reliefs to low-income earners. So, many states including Bayelsa, could see the tax revenue go down significantly. 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 taking effect, the first N800,000 is taxed at 0%, and the next N2.2m is taxed at 15%. This means there will be a dip in PIT revenue. What may compensate for that is if they have sufficient high-income earners resident there because those ones will be required to pay more under the new acts,” Nwofia explained.
Nwofia urged the state government to get its revenue board to look at the new tax laws, identify all the taxes that should accrue to it, and collaborate with the necessary players to ensure that such taxes are remitted accordingly.
He suggested; “The government can collaborate with banks that use agents to reach the riverine areas, and ensure that they remit the proper withholding tax on commissions paid to their mobile money agents. The government can also set up a clear policy to guide the payment of stamp duties, and track them to ensure they are remitted. It is also within the powers of the state government to review and collect development levy, and as far back as 2020, Kano state was collecting N500 as development levy.”
On the issue of oil companies, and other businesses in the states remitting the PIT to the states of residence, Nwofia noted that the law provides for itinerant workers to also remit tax to the state where they work and this could be explored across sectors to bring even service providers and consultants within the tax net.
Is Bayelsa now oil-independent?
Not by a long shot. Bayelsa ranks 11 out of 35 states in terms of FAAC dependence (Index A). Despite the huge tax gains, the IGR is still dwarfed by the massive federal allocations coming, especially since the removal of the fuel subsidy.
Despite the steep growth in the tax revenue, IGR still accounted for only 8.57% of the total recurrent revenue in 2024, while FAAC accounted for 91.43% of Bayelsa’s recurrent revenue. This is a continuation of the trend from the last decade where FAAC always accounted for over 90% of total recurrent revenue. While the IGR could cover 94% of personnel cost for the year, it could only cover 39.80% of the total operating expenses.
But should this be a point of concern?
Ayo Teriba, an economist and the CEO of Economic Associates (EA), told BusinessDay that it would be unfair to expect Bayelsa State to be able to survive without federal allocations.
“Bayelsa predominantly has oil, and that is what the federal government gets the FAAC from. Lagos has no oil but every other thing they have can be exploited 100%. If anyone expects Bayelsa to be 100% independent of federal allocations or the oil money, then they should be allowed to exploit their oil 100% independently. That FAAC allocation is their money. If the federal takes my oil, and after selling it, they give a fraction to me as allocation, it is my money and I am deserving of it.”
He noted that even the federal government is heavily dependent on the said allocations, with its IGR unable to meet its operating expenses. Teriba added that for a country operating federalism, the funds from the federal allocation accounts belong to all the parts of the federation.
How can this surge translate into lifestyle differences for Bayelsa residents?
The National Bureau of Statistics (NBS) 2022 Multidimensional Poverty Index listed Bayelsa as the second poorest state in Nigeria, after Sokoto. There are no recent data or reports to suggest that much has changed.
The state government must begin to consider actionable steps to translate its revenue gains into an improvement 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 developing other sectors.
As seen in the chart below, the state government is channeling more than half of its spending into capital expenditure. CAPEX has increased over the decade from N31,052 in 2015 to N137,253 in 2024, but how can this spending be channeled in the right places?
Ibrahim Tajudeen, Head of Research at Chapel Hill Denham, recommended sustained public and private investments in strategic sectors.
“We have a very youthful population so any investment around job creation can accelerate the tax inflows. That way it will be sustainable because each household will not only pay income tax, but also consumption tax on other things since their spending power and disposable income has improved. It then becomes a situation of jobs creating jobs.”
He identified the manufacturing, and tourism sectors as low-hanging fruits that can engage more residents in productive labour. The tourism sector can also bring more people with purchasing power to stimulate activities for both the formal and informal economy.
This is in line with the suggestion in the BudgIT report urging the state to explore the Blue Economy through Public Private Partnerships that cut across sustainable fishing, aquaculture, and marine resource management.
So, while the growth is commendable and leaves lessons for other states, Bayelsa state government has its work cut out for it as the new tax laws take effect in January 2026.
Summary (for social media)
Bayelsa’s 250% Tax Boom — a Turning Point or Just a Lucky Break?
BudgIT’s recently released State of States report shows that Bayelsa state more than tripled its tax revenues in one year. How did this happen? And what does this portend for the future? BusinessDay drew insights from experts to answer these questions.
