The World Bank has urged Nigeria to implement higher excise duties on “sin goods” like alcohol, tobacco, and sugary drinks as part of the conditions for accessing a $750 million loan aimed at improving non-oil revenue generation. A recent report by the Bank ties a $10 million disbursement to the issuance of a presidential directive to hike these taxes. While the broader programme, launched in October 2024 and scheduled to run until 2028, seeks to reduce Nigeria’s reliance on oil revenues, only $1.88 million of the total loan has been disbursed so far, with several milestones still awaiting formal verification.
Recent fiscal changes have already increased costs for Nigerians, particularly with the reintroduction of a 5% excise duty on telecom services under the Nigeria Tax Bill 2024. This move, passed by the Senate and approved by President Tinubu, is raising concerns about affordability and digital inclusion. The tax had previously been suspended in 2023 due to inflation concerns but is now being revived as part of broader tax reforms. Consumer groups and telecom operators argue that the levy will increase the burden on already stretched households.
While the World Bank has acknowledged some improvements in Nigeria’s non-oil revenue—from 5.5% of GDP in 2023 to 8.4% in 2024—many reforms remain stalled. The Bank flagged delays in key legislative actions, such as the failure to rationalise the Pioneer Status Industry Tax Incentive Scheme. Additionally, initiatives like green tax implementation and excise reforms for health and environmental protection are yet to move forward due to lack of consensus among government agencies.
Progress in digital tax infrastructure and environmental safeguards has also lagged. The rollout of systems like e-invoicing for VAT and risk-based audit selection are pending, hindered by data quality issues. Other components—like taxpayer grievance mechanisms and e-waste strategies—remain underdeveloped, weakening the programme’s intended impact. Despite this, Nigeria has seen marginal gains in transparency in oil revenue reporting with a new FAAC template set for implementation by June 2025.
Economic experts have responded with mixed views. While some see the tax hikes as a necessary move for boosting revenue and aligning with global practices, others warn of their economic implications. Dr Aliyu Ilias and Dr Paul Alaje both stressed the need for cautious implementation, citing the risk of overburdening citizens and destabilising a fragile economy. They acknowledged the potential fiscal benefits but warned against the deepening influence of external lenders on Nigeria’s domestic policy choices.
Source: Punch