The World Bank, as a condition for a $750 million loan granted to Nigeria for non-oil revenue mobilization, has mandated the Nigerian government to issue a presidential order increasing excise duties on goods deemed harmful to health, often referred to as “sin goods,” such as alcohol, tobacco, and sugary drinks. This stipulation is a key requirement under the “Accelerating Resource Mobilisation Reforms Programme-for-Results,” which began in October 2024 and is slated to run until November 2028. The World Bank’s latest Implementation Status and Results Report reveals that a disbursement of $10 million is contingent upon this presidential directive, highlighting the significance placed on this particular reform. As of May 2025, Nigeria has received only a fraction of the total loan amount, with $1.88 million disbursed, although additional amounts linked to achieved milestones await verification. The World Bank underscores the urgency of this measure, noting that the current excise rates on these goods are significantly low and their increase is crucial for achieving revenue targets.
The implementation of the directive involves raising existing excise duties on tobacco, alcoholic and non-alcoholic beverages. Current rates, established in June 2022, include a combination of ad valorem and specific taxes that rise annually. Tobacco is subject to a 30% ad valorem tax plus a specific rate per stick. Alcoholic beverages like beer, wine, and spirits are taxed per litre, with an additional ad valorem rate for wines and spirits. Non-alcoholic sweetened beverages carry a per-litre duty, while a previously introduced 5% excise duty on telecom services, though suspended, has been reintroduced in the Nigeria Tax Bill 2024, adding to the financial burden on consumers. The World Bank highlights the potential negative impact on subsequent revenue targets if the sin tax reform, designated as Disbursement-Linked Result (DLR) 3.1, is not implemented, with the related DLR 3.2, measuring actual additional revenues generated, remaining incomplete. This delay, coupled with the slow progress on implementing green taxes (DLR 3.4) due to disagreements on specific tax mechanisms, is impacting the disbursement of significant portions of the loan.
The World Bank report emphasizes the urgency of the situation, urging the Nigerian government to expedite the procurement of an Independent Verification Agent to confirm the achievement of milestones already met. The report reveals that while plans exist within government committees to increase health taxes starting January 2026, practical discussions haven’t commenced. The bank’s report also notes the lack of consensus among government agencies on green taxes, particularly regarding excise duties on larger-engine vehicles and a proposed carbon tax on petroleum products. Despite these challenges, Nigeria has seen some progress in improving non-oil revenue, which has risen from 5.5% to 8.4% of GDP between 2023 and 2024. This increase is attributed to policy measures such as the removal of foreign exchange subsidies, taxpayer education initiatives, and the introduction of VAT withholding in certain sectors.
However, the World Bank report also highlights significant delays in other crucial reform areas. The rationalization of tax expenditures, specifically the Pioneer Status Industry Tax Incentive Scheme (DLR 2.2), has not been met. Although a draft bill to replace the scheme with the Economic Development Tax Incentive was presented to the National Assembly, the exclusion of the Ministry of Finance from the governance framework and the bill’s failure to be enacted by the end of 2024 represent major setbacks. Further delays are evident in establishing a taxpayer complaints redressal system, a citizens’ engagement framework, and an e-waste management strategy, which are crucial for the programme’s environmental and social safeguards. Technological advancements, such as the e-invoicing system for VAT traders and data-sharing automation between the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service, are also facing implementation hurdles.
Despite these challenges, there has been progress in oil and gas revenue reporting. The Federal Account Allocation Committee (FAAC) approved a revised reporting template for the Nigerian National Petroleum Company Limited (NNPCL) in March 2025, with implementation starting in June 2025. This new template demands more transparency from NNPCL on the allocation and use of domestic crude, outstanding debts, and regulatory payments. This development marks a positive step towards fulfilling DLR 9.3, aimed at enhancing transparency in oil revenue remittances. Furthermore, Nigeria has witnessed an improvement in net fiscal oil revenues as a percentage of GDP, another disbursement-linked target achieved and awaiting verification.
The World Bank’s overall assessment of the program remains “Moderately Satisfactory,” but with a “High” risk rating, citing potential political interference, fiduciary concerns, and challenges in stakeholder engagement. Reactions from economic experts within Nigeria are mixed. While some acknowledge the potential benefits of increased excise duties on sin goods, particularly for revenue generation and GDP growth, there are concerns about the external influence dictating Nigeria’s economic policies. Others caution against rushing the implementation of these hikes, emphasizing the need for careful consideration of their broader economic impact in a country still grappling with inflation and structural instability. They warn that implementing numerous reforms simultaneously within a fragile economy could overburden households and businesses, advocating for a more cautious approach.
