For Ayo*, the sprawling Ikeja apartment that once felt like a symbol of his success now feels like a cage. His four-year-old edtech startup, a casualty of Nigeria’s tanking economy, has already been shuttered. But the government, it seems, hasn’t received the memo.

A terse email from Nigeria’s federal tax agency, the Federal Inland Revenue Service (FIRS), landed in his inbox with a thud. It claimed he owed over ₦30 million (around $20,000), not the ₦5 million he’d paid. “We had checked your accounts and it appears you were lying,” the message warned, adding that this was a “criminal offense punishable with a jail term.”

Ayo was baffled. “The company is dead,” he told Launch Base Africa. “So you are technically not taxing a dead person.” It’s a gallows-humour defence for a problem that is becoming alarmingly common in Nigeria’s tech ecosystem.

It’s a letter — or more often, a terse email — that’s landing in the inboxes of founders across the country. An Abuja-based tech consulting firm, which has narrowly avoided bankruptcy several times, reported receiving similar demands for millions of naira despite having yet to turn a profit. The question they all ask is the same: where are the taxmen getting their numbers from?

The Taxman’s ‘Best Judgement’

This week, the issue burst into public view when Tayo Oviosu, founder of fintech giant Paga, took to social media. The Lagos Internal Revenue Service (LIRS), the state-level tax authority, had sent him a personal income tax bill he claimed was more than his entire earnings.

“How can personal income tax be more than you earned?” he fumed. “Maybe it’s time for Paga HQ to move from Lagos!!!”

The ensuing debate shed light on a uniquely Nigerian approach to tax assessment known as “Best of Judgement” (BOJ). As one observer noted, it’s a fiscal strategy that appears to be based less on accounting principles and more on a vibe check of a founder’s perceived success.

“They have tagged you as a high net worth individual,” another commenter explained. “Probably looked at your residential address, what Paga is worth, being its Founder and CEO. To them what you earn is irrelevant, but who you are is what their assessment is based on.”

This approach effectively forces founders into a defensive position, compelling them to open their books to dispute an often wildly inflated initial bill. For a government under pressure, it seems to be an efficient, if aggressive, way to initiate an audit.

A Hunt for Revenue

The aggression isn’t random. It’s a direct consequence of the immense fiscal pressure on President Bola Tinubu’s administration. This June, the president signed four new tax bills into law, part of a sweeping reform agenda designed to shore up the nation’s finances.

The government’s 2025 budget outlines an ambitious target to rake in ₦36.35 trillion in revenue, a significant jump from 2024. With oil production still lagging behind targets, a huge chunk of that increase — around 44% of total revenue — is expected to come from non-oil sources. Startups, once seen as the engines of innovation, are now being viewed as untapped sources of revenue.

While the new laws offer some relief, raising the tax-exemption threshold for small companies with a turnover below ₦100 million, the broader posture from the authorities is one of aggressive collection, not concession. The message from the state seems to be: we love the idea of a vibrant startup ecosystem, but we love your potential tax revenue even more.

The Law They Forgot?

The deepest irony in this tax hunt lies in a piece of legislation passed with great fanfare just two years ago: the Nigeria Startup Act of 2022.

It was hailed as a landmark law, designed to turn Nigeria into a premier hub for digital innovation. Its provisions were a founder’s dream: a “labelled startup” would be eligible for a three-year exemption from income tax, with a possible two-year extension. It promised simplified regulations and a 5% withholding tax cap for services from non-resident companies. It was meant to be a protective shield.

Today, that shield is nowhere to be seen. Founders report that since the Act’s passage, “little progression has been made in terms of its implementation.” In the government’s urgent hunt for cash, the Act appears to be gathering dust on a shelf somewhere in Abuja, a forgotten promise from a more optimistic time.

So What Now?

Nigerian founders now find themselves in a precarious position. On one side, they face a brutal economy that has eroded their customer base. On the other, they face a government that, despite its pro-innovation rhetoric, is pursuing them with the zeal of a creditor.

For Ayo, the threat of a jail term over the finances of his dead startup is more than just a bureaucratic nightmare; it’s a warning shot to the entire ecosystem. The Startup Act was supposed to signal that Nigeria was open for business. But for now, the only signal many founders are receiving is a demand for payment.