Market News

BY Sami Tunji

The World Bank has asked the Federal Government to issue a presidential order raising excise duties on “sin goods” such as alcohol, tobacco, and sugary drinks as a key requirement under the $750m loan granted to Nigeria to reform its non-oil revenue mobilisation efforts.

This requirement was captured in the World Bank’s latest Implementation Status and Results Report for the “Accelerating Resource Mobilisation Reforms Programme-for-Results”, which became effective on October 14, 2024, and is expected to close by November 2028.

A copy of the report was obtained by The PUNCH from the bank’s website. In its latest implementation review for the Accelerating Resource Mobilisation Reforms Programme, the bank stated that the disbursement of at least $10m is tied to the issuance of this presidential directive.

The reform programme aims to raise Nigeria’s non-oil revenues while safeguarding earnings from the oil and gas sector. As of May 2025, Nigeria has only received $1.88m, representing 0.25 per cent of the total loan amount.

However, six disbursement-linked results worth $235m have reportedly been achieved and are awaiting verification. The bank noted that “a Presidential order increasing excises on ‘sin’ goods, in place,” is the formal verification required to unlock the fund attached to this result, while noting that excise rates on sin goods are very low.

The PUNCH observed that Nigeria currently imposes excise duties on tobacco, alcoholic, and non-alcoholic beverages, with recent increases introduced from June 1, 2022. Tobacco products attract a 30 per cent ad valorem tax plus a specific rate rising annually from N4.2 per stick in 2022 to N5.2 in 2024.

Alcoholic beverages such as beer, wines, and spirits are taxed through specific rates per litre, increasing each year through 2024, alongside a 20 per cent ad valorem rate for wines and spirits. A N10 per litre duty applies to non-alcoholic and sweetened beverages, while a five per cent excise on telecom services was introduced but suspended.

However, Nigerians are set to face increased costs for telecom services after the president’s approval of the Nigeria Tax Bill 2024, which reintroduces a controversial 5 per cent excise duty on telecom services.

The bill, passed by the Senate on May 8, 2025, will increase the price of mobile calls, text messages, and data services for consumers. This new tax, along with recent tariff hikes, has raised concerns within the telecom sector.

Operators warn that the move will burden consumers and hamper the country’s efforts to broaden digital inclusion. The excise duty was first introduced in the Finance Act of 2020 under former President Muhammadu Buhari.

It was part of an effort to expand the scope of excise taxes, but was met with strong opposition from telecom operators and consumer groups. They argued that the tax would add to the already high cost of essential services in a struggling economy.

In response to these concerns, President Bola Tinubu suspended the tax in July 2023, citing its potential to worsen inflation and restrict access to digital services. However, the excise duty is now set to return as part of a broader tax reform initiative, as the Senate passed the bill in May 2025.

The bill mandates that both domestic and international telecom providers offering services in Nigeria collect and remit the five per cent tax, which will ultimately be passed on to consumers.

The PUNCH further observed that the sin tax reform, listed under DLR 3.1, has yet to be implemented, and the World Bank warned that its absence could adversely impact subsequent revenue targets. DLR 3.2, which measures actual additional revenues generated from such excise taxes, remains incomplete.

The World Bank report read, “The government has not yet adopted legislative orders to reform excises on pro-health goods and services (DLR 3.1). This may adversely impact revenue targets from pro-health taxes (DLR 3.2).”

The bank’s team urged the government to “accelerate the procurement of the Independent Verification Agent” to fast-track the confirmation of these achieved milestones.

The report stated that although the Trade Tariff Committee and the Presidential Committee on Fiscal Policy and Tax Reforms have plans to adopt a health tax increase framework effective January 2026, discussions on the matter have not commenced.

It said, “TTC and PCRPTR have plans to adopt a framework to increase health taxes effective January 2026, but joint discussions have not yet started.”

The World Bank also linked disbursement of another $30m to the implementation of green taxes (DLR 3.4), but Nigeria has yet to reach a consensus on this.

“There is still no consensus among key government agencies responsible for the reform,” the report stated, citing ongoing debates over excise duties on heavy vehicles with engines larger than 2.0 litres and the possibility of a 10 per cent carbon tax on petroleum products proposed by the presidential tax committee.

However, Nigeria has made modest progress in some other areas of the programme. Non-oil revenue has risen from 5.5 per cent of GDP in 2023 to 8.4 per cent in 2024. Tax revenue from VAT, CIT, and Customs also increased from 3.8 per cent of GDP in 2023 to 5.0 per cent in 2024.

The bank attributed this progress to policy measures such as the removal of implicit foreign exchange subsidies, taxpayer education, and the introduction of VAT withholding for specific sectors like telecoms and banking.

However, the World Bank noted delays in legislative reforms, particularly the rationalisation of tax expenditures. The government failed to meet DLR 2.2, which required the rationalisation of the Pioneer Status Industry Tax Incentive Scheme.

Although a draft bill was submitted to the National Assembly in October 2024 to replace the scheme with a new Economic Development Tax Incentive, the exclusion of the Ministry of Finance from the governance framework and the failure to enact the law by the end of 2024 meant the target was missed.

“The DLI on rationalising tax expenditures (DLR 2.2) was not met, though a draft tax bill was submitted to the National Assembly in October 2024.

“However, exclusion of the Ministry of Finance in the approval process for the new Economic Development Tax Incentive to support balancing of sector objectives to tax policy and fiscal affordability objectives, plus inability to enact the law by 31 December 2024, were setbacks to the result,” the report stated.

The report also flagged slow implementation across other areas of the programme. While the Programme Coordination Unit has been partially constituted with key specialists onboarded, recruitment is still ongoing for Monitoring and Evaluation, Communications, and Environmental and Social Officers.

Action points such as the development of a taxpayer complaints redressal system, a citizens’ engagement framework, and an e-waste management strategy have been delayed. The World Bank stressed that these components were critical to the programme’s environmental and social safeguards.

Other disbursement-linked results, such as the rollout of an e-invoicing system for VAT traders and data-sharing automation between the Federal Inland Revenue Service and the Nigeria Customs Service, are still pending.

While a pilot e-invoicing system has been launched by FIRS and the Merchant-Buyer solution has been developed, adoption among traders is yet to begin. Also, efforts to introduce a risk-based audit selection system are ongoing but hampered by data quality issues.

In a related development, reforms to oil and gas revenue reporting were highlighted. The bank confirmed that the Federal Account Allocation Committee in March 2025 approved an enhanced reporting template for the Nigerian National Petroleum Company Limited.

The implementation of the new FAAC template is scheduled to begin in June 2025.

This template will require NNPCL to provide comprehensive disclosures on the use of Domestic Crude Allocation, existing liabilities, forward crude sales, and outstanding fiscal and regulatory payments, such as gas flare penalties. The FAAC template reform falls under DLR 9.3 and is expected to increase transparency in oil revenue remittances.

The report also revealed that net fiscal oil revenues as a percentage of GDP improved from 1.80 per cent in 2023 to 2.70 per cent in 2024, marking one of the disbursement-linked targets that has been completed and awaits verification.