For decades, oil has defined Nigeria’s political landscape, where abundant reserves have made the country Africa’s biggest oil producer , the world’s 6th largest exporter, including holding the 10th largest proven oil reserve in the world. With proven oil reserves of about 37 billion barrels, successive governments have relied on petroleum rents to fund the state, reward political loyalty, and avoid the politically risky task of taxing citizens. Scholars of rentier state theory have long argued that resource-rich countries are structurally predestined to low taxation, weak accountability, and shallow state-society relations (Mahdavy, 1970; Beblawi, 1987). In systems like these, rather than negotiating consent, political elites often opt for rent distribution. This logic neatly captures Huntington’s famous dictum “No taxation, no representation.” If citizens are not taxed, they rarely demand representation, while governments that are not reliant on taxes rarely feel accountable.
However, Nigeria today presents a striking anomaly. Ahead of the 2027 general elections, President Bola Ahmed Tinubu has pushed through with an ambitious tax reform bill, following the politically explosive removal of fuel subsidies upon his swearing-in as president in 2023. Both reforms have notably triggered public dissent, protests, and elite resistance. From a rational choice vantage point, these moves appear irrational. Why would an incumbent president seeking re-election in 2027 willingly provoke mass outrage and disrupt entrenched patronage networks? I argue that Tinubu’s tax reform reflects not ideological conversion but fiscal desperation amid structural constraints and a strategic recalculation of political survival. More importantly, this move may push Nigeria’s hesitant movement away from rentier politics toward a more classical model of state-building, one that is rooted in taxation, state-society relations, and accountability.
Rentier State Theory and Nigeria’s Political Economy
Rentier state theory rests on the simple premise that when governments derive most of their revenue from easy external rents rather than domestic taxation, they do not need their citizens. As Beblawi (1987) famously argued, taxation creates demand for accountability, while easy rents create autonomy for the state. In the same vein, Michael Ross (2001) demonstrated empirically how oil wealth weakens democratic institutions by reducing both citizen demands and state responsiveness. Nigeria represents an archetype of this model. Oil has historically accounted for over 80% of government revenue and 90% of foreign exchange earnings. This revenue structure enabled political elites to sustain vast patronage networks, subsidize fuel consumption, and manage public dissent without engaging in serious fiscal with Nigerian citizens. From a rentier state point of view, leaders in such systems behave predictably. Invoking Mancur Olson’s logic of collective action and Anthony Downs’s electoral theory, they suggest that incumbents avoid policies that impose immediate, visible costs on large populations, especially before elections. Therefore, policies like tax reforms and subsidy removals violate this logic because they are concentrated costs with diffuse long-term benefits, thereby making them politically costly. President Tinubu’s actions, therefore, represent a sharp pivot from both rentier state theory and rational-choice predictions.
Why is Tinubu Willing to Sacrifice Such Enormous Political Capital?
A convincing explanation for this situation is not political courage, but fiscal necessity. Nigeria’s rentier model is evidently not viable anymore. First, oil rents are collapsing in real-time due to crude oil theft, pipeline vandalism, underinvestment, and OPEC production quotas which have significantly reduced effective oil revenue derivation. According to Lagos Local News, Nigeria has repeatedly failed to meet its OPEC production targets since 2022. Second, Nigeria’s public finances are under extreme stress as debt servicing consumes over 60% of federal revenue, leaving little room for capital spending on health, education, and infrastructure. The IMF explicitly warned that Nigeria risks fiscal unsustainability unless it expands domestic revenue mobilization. Taking this into perspective, taxation is no longer merely an option, it is existential. Tinubu’s tax reform bill aims to harmonize Nigeria’s fragmented tax system, expand the tax base, reduce multiple taxation, and increase compliance rather than simply raise the tax rates. The government have insisted that this tax reform is simply about efficiency and fairness, not punishment. From a rational-choice angle, President Tinubu appears to be willing to take this short-term pain against a long-term economic collapse, which could be even more electorally damaging, as inflation, currency instability, and unpaid salaries have historically toppled governments faster than unpopular reforms.
Subsidy Removal, Taxation, and the End of Rentier Bargains
Fuel subsidies served as the obvious symbol of Nigeria’s rentier state nature. Cheap fuel historically functioned as a quasi-welfare system and, at the same time, a political pacifier. However, its removal in 2023 sparked nationwide protests and labor strikes. But then subsidies have evidently become fiscally indefensible, costing billions annually while benefitting urban elites disproportionately. Removing those subsidies was the first signal that Nigeria could no longer “buy peace” with oil rents. With that, tax reform served as the only logical sequel. Put together, both subsidy removal and taxation mark the dismantling of Nigeria’s rentier exchange politics, where citizens received material benefits without fiscal contribution and elites governed without accountability. This pivot also intersects with fiscal federalism because Tinubu’s proposal to alter VAT sharing formulas exposed deep underlying regional tensions, particularly between revenue-generating southern states and poorer northern states. The backlash forced Tinubu to make revisions, thereby highlighting how taxation inevitably politicizes distribution and representation, precisely what rentier states avoid.
Is Nigeria Entering a Phase of Classical State Building?
Historically, modern states were built through taxation. As Charles Tilly notably argued, “war made the state, and the state made war”, but taxation financed both. More broadly speaking, scholars like Margaret Levi have demonstrated how taxation creates a bargaining space where citizens comply only when states deliver services and fairness. Nigeria’s tax reform saga might represent an early but fragile step toward this model. If citizens are taxed more directly, they will likely demand better governance, transparency, and service delivery. This could possibly foster good state-society relations and could also deepen democratic accountability, but only if revenues are visibly and transparently converted into public goods. Even within Nigeria itself, there lies a precedent. Lagos State under Tinubu and his successors dramatically increased internally generated revenue (IGR) and used it adequately to fund infrastructure. While not entirely perfect, the relative success of Lagos state demonstrates that taxation can strengthen state capacity when coupled with administrative competence. Nonetheless, the risks remain substantial because if taxation expands without improved service delivery, corruption control, and institutional trust, the reforms could backfire, thereby consequently fueling cynicism rather than citizenship.
Conclusion
President Bola Ahmed Tinubu’s tax reform is not a rejection of rentier politics by choice, but a decision made in the face of constraints. Nigeria’s oil-based political economy is arguably exhausted, as the old model of distributing rents to maintain loyalty is fiscally unsustainable in an era of declining oil revenues, rising debt, and demographic pressure. By implementing the tax reform bill ahead of the 2027 elections, Tinubu is engaging in a high-risk political experiment. He is wagering that Nigerians will eventually accept short-term hardship in exchange for long-term stability, or at least thinking that the alternative is worse. Whether this marks Nigeria’s transition toward a true tax0based state depends on what comes next. Taxation without accountability will deepen resentment and provoke dissent, while taxation with visible public benefits could finally anchor a genuine social contract. For the first time in decades, Nigeria is being forced to confront a fundamental political question: what does citizenship mean in a post-rentier state?
