Nigeria Shifts to Tax-Driven Revenue Model as Oil Income Plummets by 26% Over 15 Years

Nigeria’s federal revenue landscape is undergoing a historic transformation, with tax and non-oil income increasingly driving government finances. According to a new report by Quartus Economics, tax revenue has grown by over 87% in the past 15 years, while reliance on oil earnings has steadily declined. In 2024, taxes accounted for more than 87% of federally collected revenue, contrasting sharply with non-tax revenues, which fell from over 52% in 2014 to just 12.9% last year.

The decline of oil income underscores Nigeria’s long-standing vulnerability to global commodity shocks. Oil revenue, which made up 73.9% of total federation revenues in 2010, fell to 25.8% in 2024. Meanwhile, non-oil revenue has steadily climbed from roughly 25% to nearly 75% during the same period, driven by sustained reforms in tax administration, policy updates, and the expansion of the VAT rate from 5% to 7.5% in 2022.

Over the last 15 years, Nigeria generated a total of N161.1 trillion in federation revenues, almost evenly split between oil and non-oil sources. However, fiscal pressures from the 2014 oil price crash led to slower economic growth, with GDP per capita plummeting from $4,332 to $1,120 by 2024. Poverty also worsened, pushing an additional 65 million Nigerians below the poverty line, and public debt rose sharply, nearly tripling over the past decade.

Despite these challenges, revenue performance has strengthened dramatically in recent years. Between 2023 and 2025, Nigeria collected N62.3 trillion in tax revenues, with non-oil sectors contributing over 73% of the total. The report notes that structural reforms, improved tax administration, and centralised revenue collection through Executive Order 9 have broadened the tax base, reduced oil dependency, and boosted fiscal resilience.

Looking ahead, the report emphasizes that Nigeria’s transition to a tax-driven economy represents a turning point for fiscal stability. While debt levels remain manageable, weak returns on borrowed funds remain a risk. The government’s ability to convert growing tax revenues into tangible improvements in infrastructure, productivity, and living standards will determine whether this new revenue model delivers lasting benefits for Nigerians.

source: The Guardian