Taxing a Broken Society: Why Nigeria’s Proposed Bank Transaction Levy Threatens Social Stability.

By George Omagbemi Sylvester

“A Constitutional, Economic, and Moral Indictment of Governance Failure.”

Nigeria stands at a perilous crossroads. At a time when inflation is crushing household incomes, insecurity has become normalized and public trust in government is dangerously eroded, the proposal to impose an additional 7.5 percent charge on bank transactions is not merely an economic policy error and it is a profound governance failure with grave social implications.

This is not a debate about whether taxation is necessary. Every modern state requires revenue. The real question is legitimacy: when, how and under what moral and constitutional conditions can a government tax its citizens? In Nigeria’s current condition, this proposed levy fails every serious test of democratic governance, economic rationality and constitutional responsibility.

The Constitutional Breach: Taxation Without Welfare. Nigeria’s 1999 Constitution is unequivocal. Section 14(2)(b) states that “the security and welfare of the people shall be the primary purpose of government.” This clause is not aspirational rhetoric; it is the philosophical foundation of the Nigerian state.

Yet, after years of deteriorating public services, escalating poverty, collapsing security architecture and declining human development indicators, the Nigerian state can no longer credibly argue that it has fulfilled this foundational obligation.

According to the World Bank, over 63 percent of Nigerians (more than 133 million people) are multidimensionally poor, lacking access to basic healthcare, education, nutrition and clean water. Inflation, driven by subsidy removal and currency depreciation, exceeded 28 percent in 2024, eroding real incomes at a pace unmatched in decades. Insecurity continues to disrupt agriculture, commerce and daily life, while unemployment and underemployment remain stubbornly high.

In this context, imposing an additional financial burden on citizens for merely accessing their own money constitutes what legal scholars describe as regressive extraction with a form of fiscal policy that disproportionately punishes the poor while offering no commensurate public benefit.

As constitutional lawyer Professor Itse Sagay, SAN, once observed, “Taxation is justified only where citizens can see and feel the presence of the state in their daily lives.” In Nigeria today, that presence is largely absent.

Economic Reality: A Tax on Survival, Not Wealth. From an economic standpoint, a bank transaction levy is among the most regressive forms of taxation. Unlike progressive income or wealth taxes, transaction charges do not distinguish between surplus and subsistence. They penalize traders, small businesses, salary earners and informal workers who rely on frequent banking transactions to survive.

Nobel laureate Joseph Stiglitz has consistently warned that “unfair tax systems undermine social cohesion and weaken the legitimacy of the state.” When citizens perceive taxation as punishment rather than contribution, compliance gives way to resistance, avoidance and economic disengagement.

Nigeria’s economy is already suffering from declining productivity, shrinking consumer demand and capital flight. Adding a transaction levy risks pushing more economic activity into cash-based informality, weakening financial inclusion and undermining the very tax base the government seeks to expand.

Political Philosophy and the Collapse of Consent. Political legitimacy is not sustained by coercion but by consent. John Locke was clear: governments exist to protect life, liberty and property. Where property is arbitrarily taken without reciprocal protection, the social contract fractures.

Similarly, Jean-Jacques Rousseau argued that laws lose authority when they no longer reflect the general will or promote the common good. In Nigeria’s case, policies that deepen hardship while public officials enjoy unchecked privileges create what scholars term a legitimacy deficit.

Even Thomas Hobbes, often cited in defense of strong authority, warned that when the state becomes more frightening than the chaos it claims to prevent, social order collapses. History (from pre-revolutionary France to more recent cases of fiscal unrest across the Global South) demonstrates that economic injustice is often the spark of political instability.

Utilitarian Failure: Pain Without Public Gain. From a utilitarian perspective, the policy is equally indefensible. Jeremy Bentham’s principle of “the greatest good for the greatest number” is entirely absent. The pain imposed by the levy is collective and immediate; the benefits, if any, are speculative and opaque.

There is no transparent framework showing how revenues from this levy would translate into improved healthcare, education, security or infrastructure. Without such clarity, the policy appears not as reform but as fiscal desperation, shifting the cost of state failure onto citizens already at breaking point.

Economist Dambisa Moyo has cautioned that “states that rely excessively on extraction rather than productivity eventually face social backlash.” Nigeria risks becoming a textbook case.

Comparative Governance: Why Citizens Resist Unjust Extraction. Across the world, citizens tolerate taxation when it is visibly linked to social benefits. In countries with strong welfare systems, taxes fund healthcare, education, housing and social protection. Even in resource-rich states with controversial governance records, citizens often receive direct material benefits that sustain a fragile social bargain.

Nigeria’s tragedy lies in its constitutional promise without constitutional delivery. Chapter Two of the Constitution outlines socio-economic rights, yet Section 6(6)(c) renders them largely non-justiciable, creating what many scholars describe as a structural contradiction: rights promised but not enforceable.

Legal philosopher Ronald Dworkin argued that “a political community must treat all its members with equal concern and respect.” Policies that extract from the poor while protecting elite consumption violate this foundational principle.

The Moral Argument: When Law Loses Authority. The ancient maxim lex iniusta non est lex (an unjust law is no law at all) remains central to jurisprudence. Laws that deepen suffering without serving justice lose moral authority, even if they retain formal legality.

Nigeria’s governance crisis is not merely economic; it is ethical. Excessive public spending on political offices, opaque budgeting, and persistent corruption scandals undermine any moral justification for further taxation.

As former UN Secretary-General Kofi Annan warned, “A government that ignores the suffering of its people forfeits the moral right to demand sacrifice.”

A Warning, Not a Threat. This analysis is not a call to disorder. It is a warning grounded in history and reason. Societies pushed beyond endurance do not require incitement to react; pressure alone is enough. Governments that mistake silence for consent often discover too late that endurance has limits.

Nigeria still has a choice. Genuine fiscal reform must begin with cutting the cost of governance, enforcing accountability, expanding productivity and restoring public trust. Taxation must be the final step not the first reflex of a failing system.

Closing Reflection: The Test of Statesmanship. Great leadership is measured not by how much it can extract from its people, but by how effectively it can serve, protect, and uplift them. Nigeria’s current trajectory risks converting fiscal policy into a catalyst for deeper alienation.

History is unforgiving to governments that treat citizens as expendable revenue sources. Stability is not enforced; it is earned. And legitimacy, once lost, is far harder to recover than revenue.

George Omagbemi Sylvester

Political Analyst & Columnist

Published by SaharaWeeklyNG