Limitation laws prescribe the period within which an aggrieved party can initiate an action to enforce a legal right. These laws seek to encourage parties to enforce their legal rights timeously and to avoid stale claims. There are several justifications for limitation laws. However, two of such justifications are prominent. The first is that it would be unfair to the defendant to institute a stale claim since the defendant, due to passage of time, may have lost certain pieces of evidence that were available at the time the cause of action accrued. The second is that it is in the public interest that there should be an end to litigation. Surely, limitation laws affect the right of action and not the cause of action. Thus, at the expiration of the relevant limitation period, the aggrieved party still has a cause of action, but the right of action is extinguished.
In Nigeria, the primary statutes of limitation are the limitation laws of the various states and the Limitation Act which applies in the Federal Capital Territory, Abuja. These laws provide for time limits for actions based on tort, contract, recovery of land, enforcement of judgment, arbitration etc., but they do not apply to tax claims. In other words, the limitation laws applicable in Nigeria exclude tax matters from their scope. In this respect, the Limitation Act in its Section 1(2) establishes that the “Act shall not apply to any proceedings for the recovery of a sum due in respect of a tax which is for the time being under the care and management of the Federal Board of Inland Revenue…. or any proceedings for the recovery of any fine or penalty incurred in connection with a tax or duty.”