Each morning in Abuja’s Kubwa district, Aisha checks her phone and starts processing orders. Messages arrive via WhatsApp broadcasts, Instagram DMs, and occasionally TikTok inquiries. Payments come quickly, and parcels are ready by afternoon. Contact from tax authorities, she says, has never been part of the process.
“I move goods every week. But honestly, I don’t even know where to start with taxes. Nobody has ever contacted me,” the 29-year-old online fashion vendor told me.
Aisha is part of Nigeria’s rapidly expanding social commerce sector, which is a loosely regulated digital marketplace that could surpass $10 billion in annual transaction value within a few years, driven by rising smartphone adoption and digital payments. Now, federal authorities are taking a closer look.
Officials at the Nigeria Revenue Service (formerly known as the Federal Inland Revenue Service) have intensified internal efforts to understand how to capture revenue from this emerging market, according to two tax advisers familiar with the discussions. The challenge is significant: thousands of largely unregistered micro-merchants operate across encrypted platforms, generating high volumes of small, fragmented transactions.
For a government under fiscal pressure, the potential revenue is clear. For traders who value accessibility and low oversight, increased scrutiny is less welcome.
The Marketplace Without Walls
Scroll through Nigerian Instagram or join a WhatsApp sales group, and the scale becomes clear. Vendors sell imported perfumes, thrift fashion, small electronics, and skincare, often without business registration, tax IDs, or physical storefronts.
Nigeria had over 122 million internet subscriptions as of 2024, according to telecommunications data, helping fuel informal digital retail. For many young Nigerians, particularly women and first-time entrepreneurs, social commerce has become a key rung on the income ladder.
Yet the ecosystem’s speed, informality, and decentralization also make it difficult to regulate.
Quiet Moves in Abuja
Publicly, authorities have announced no sweeping enforcement drive. Behind the scenes, however, the digital informal economy is on Abuja’s radar.
Nigeria’s tax-to-GDP ratio was roughly 10.8 percent in 2023, below the African average of about 16 percent and far from the government’s medium-term target of 18 percent. With oil revenues volatile and debt-service costs high, widening the non-oil tax base is a priority.
An official at the Nigeria Revenue Service said the agency is “studying emerging digital business models” but declined operational details. Analysts describe the current phase as groundwork: mapping transaction flows, payment rails, and logistics data, with any major enforcement likely phased out.
A Lagos-based consultant said, “There is clear revenue leakage in social commerce. The challenge is how to capture it without destabilizing thousands of micro-businesses.”
Logistics Firms See the Surge First
Delivery companies provide a front-row view of the boom. At a mid-sized Abuja hub, operations manager Chinedu Okeke said parcel volumes from social media vendors have more than doubled since 2022.
“Today, well over half of our intra-city deliveries originate from Instagram and WhatsApp sellers. Yet most shipments have little tax visibility beyond waybills,” he said.
The Compliance Gap
Legally, individuals and businesses earning income must register and pay taxes. In practice, compliance in social commerce remains low. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) estimates that the country has over 39 million micro, small, and medium enterprises, most of them informal. Social commerce is rapidly adding to this number.
“The issue is not whether these businesses are taxable; they are. “The question is whether the government can bring them into the net cost-effectively without harming a fast-growing sector,” said a senior Abuja-based tax analyst.
Billions at Stake
Precise valuation is elusive, but digital retail activity likely runs into billions of naira monthly. Even modest compliance gains could yield significant revenue. Aggressive enforcement, however, carries risks: vendors could fragment operations, shift to cash-on-delivery, or retreat further into informality.
Among Abuja’s sellers, awareness of potential tax scrutiny is rising. Some see formalization as inevitable and possibly beneficial; others worry about added costs.
What Smart Enforcement Might Look Like
Analysts suggest a phased approach: simplified registration channels, modest presumptive tax bands tied to turnover, data sharing with payment processors and logistics firms, and voluntary disclosure windows. Success depends on sequencing and incentives.
An Abuja policy analyst also said, “You start with education and incentives, not raids. Formalization works best when businesses see value: access to finance, legitimacy, growth — not just obligations.”
Nigeria’s Next Revenue Frontier
Social commerce provides income for thousands and democratizes retail, but leaving it untaxed is unsustainable.
For now, billions circulate through Nigeria’s shadow retail networks, they are visible in courier vans and bank alerts, only partially visible to the Nigeria Revenue Service. How Nigeria moves next will determine whether it secures revenue or risks pushing vendors further into the informal economy.
