Tax penalties, interest charges and backdated assessments by the Nigeria Revenue Service (NRS) are putting financial pressure on Nigerian civil society organisations, forcing some to draw down reserves, delay activities and consider downsizing or closure, a report has found.
The report, titled Compliance or Constriction? Assessing the Nigeria Revenue Service Tax Drive and Its Impact on the Sustainability of Nigerian Civil Society, said the tax enforcement campaign between 2023 and 2025 exposed nonprofit organisations to unexpected financial liabilities that could undermine their ability to deliver public-interest programmes.
The study, prepared by Dayo Olaide and Olalekan Saidi, found that 23 of the 53 nonprofit organisations surveyed had been approached by tax authorities during the period, representing 43.4 per cent of respondents.
All 23 organisations reported receiving some form of financial demand, while 14 said the assessments included penalties or interest in addition to the principal tax liabilities.
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The report warned that retrospective assessments could create substantial financial shocks for organisations that depend largely on donor-funded projects, operate with limited reserves and have little flexibility to accommodate unplanned expenses.
It noted that many nonprofits were already facing tighter donor funding, shorter grant cycles and rising operational costs when the tax demands arrived.
The report said the resulting pressure could weaken organisational sustainability, particularly among smaller and community-based groups with limited financial buffers.
The report found that penalties and interest featured in different stages of organisations’ responses to tax demands, including cases where nonprofits had paid their assessments in full.
Of the six organisations that reported paying their demands in full, five said penalties had been applied. Six of the nine organisations with unresolved cases also reported penalties.
One of the two organisations that disputed or rejected their assessments reported penalties, while one of the four organisations operating under negotiated payment plans reported the same.
The findings suggest that disputing a tax assessment or negotiating a payment arrangement does not necessarily remove the additional financial burden associated with penalties and interest.
According to the report, the combination of principal assessments, penalties and interest often produces liabilities that organisations did not anticipate when preparing their budgets.
The study said existing grant agreements frequently do not allow organisations to charge such unexpected liabilities to project funds, leaving them to find alternative sources of payment.
For nonprofits with limited unrestricted income, the additional costs can force difficult choices between meeting tax obligations and maintaining planned activities.
The report also found that larger organisations faced more complex combinations of tax demands, including value-added tax (VAT), withholding tax and stamp duties, while some smaller and newer organisations reported narrower tax exposures.
However, the study noted that even relatively small assessments could cause serious difficulties for organisations with limited reserves.
More than half of the surveyed organisations facing demands in the ₦5 million to ₦20 million bracket and those facing demands above ₦20 million reported very severe financial effects.
The report added that half of the organisations facing demands below ₦1 million also classified the impact as very severe.
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