Editor’s Note: This article was originally written on June 2, 2025 and is being republished here for archival purposes.
These proposed tax hikes have not gone unchallenged. Civil society groups and political leaders have voiced concerns that the policies are being driven by external pressures, not local economic realities.
In a bid to stabilize its economy and unlock a $750 million loan facility, Nigeria is under mounting pressure from the World Bank to implement wide-ranging tax reforms, including an increase in Value-Added Tax (VAT). This loan is part of a broader $2.25 billion financial support package approved by the World Bank in June 2024, aimed at bolstering the Nigerian government’s economic reform agenda and providing relief to millions affected by recent subsidy removals and inflationary pressures.
Background: Nigeria’s Economic Challenges
Nigeria, Africa’s largest economy, has been grappling with chronic fiscal deficits, high inflation (peaking above 28% in 2024), a weakened naira, and dwindling oil revenues — all of which have undermined growth and strained public finances. In response, President Bola Tinubu’s administration introduced a raft of reforms, most notably the removal of petrol subsidies and the unification of the foreign exchange rate.
These measures, while praised by global financial institutions, have triggered widespread hardship for ordinary Nigerians, many of whom face soaring food prices, increased transportation costs, and declining purchasing power. The government subsequently turned to the World Bank for assistance to cushion the socio-economic impact and support policy sustainability.
World Bank Loan and Conditional Tax Reforms
In June 2024, the World Bank approved a $2.25 billion loan to Nigeria, consisting of two components:
- $1.5 billion under the Reforms for Economic Stabilization to Enable Transformation (RESET) program to support macroeconomic stabilization and pro-poor spending.
- $750 million under the Accelerating Resource Mobilization (ARMOR) program, Reforms focused specifically on enhancing Nigeria’s domestic revenue mobilization through comprehensive tax reforms.
Key Tax Reform Measures
To meet the conditions of the ARMOR program and increase Nigeria’s tax-to GDP ratio (currently below 7%, one of the lowest globally), the Federal Inland Revenue Service (FIRS) and the Federal Ministry of Finance have outlined several fiscal policy actions:
VAT Increase: A phased increase of VAT from 7.5% to 10% by the end of 2025, with projections to reach 12.5% by 2026 and potentially 15% by 2030.
Telecom and Electronic Transfer Taxes: Reinstatement of previously suspended 5% excise duties on telecom services and new levies on electronic transfers.
Excise Expansion: New taxes are being proposed for betting, gaming, and products with negative health or environmental impacts. Tax Administration Modernization: The government plans to deploy digital invoicing, e-filing, and risk-based audits to enhance compliance and reduce evasion
Public Reaction and Political Criticism
These proposed tax hikes have not gone unchallenged. Civil society groups and political leaders have voiced concerns that the policies are being driven by external pressures, not local economic realities.
The Human Rights Writers Association of Nigeria (HURIWA) accused the government of adopting “austerity measures” tailored to appease the World Bank and IMF, warning of the potential for civil unrest.
Former Vice President Atiku Abubakar criticized the timing of the VAT increase, arguing that it would further impoverish the average Nigerian and stifle business growth.
Despite public opposition, President Tinubu’s administration insists that the tax reforms are necessary for fiscal sustainability. Government officials argue that increasing non-oil revenues will reduce Nigeria’s dependence on crude exports, stabilize inflation, and improve the country’s sovereign credit rating.
The administration also points out that many of the World Bank-mandated reforms include social safety nets, such as the N25,000 monthly cash transfer for 15 million vulnerable households. However, implementation has been slow; by late 2024, only about 4 million households had received the payments.
Future Outlook
The SEC is equipped with enhanced surveillance capabilities, including the ability to monitor market activities in real-time. This enables prompt detection and response to potential risks and instances of market manipulation, strengthening overall market stability.
Nigeria’s ability to balance fiscal reform with social protection remains precarious. Economists warn that over-reliance on consumption taxes could disproportionately impact low- and middle income households, while small businesses may struggle with compliance burdens.
The success of the government’s strategy will hinge on transparent implementation, public engagement, and effective deployment of relief measures. Meanwhile, the World Bank and international observers will be closely watching to ensure that Nigeria adheres to the terms of the ARMOR program without sparking a deeper social crisis.
Compiled References:
- World Bank: Nigeria Reform Financing (June 2024)
- Tribune Online – Conditions for $1.5B Loan
- Nairametrics – Telecom Taxes Return
- The Street Journal – Tax System Overhaul
- Punch – Tax Modernization Plans
- Daily Post – HURIWA Criticism
- Nairametrics – Atiku Criticism
- AP News – Cash Transfer Program
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