The Federal Government is moving forward with a suite of tax reforms, including value-added tax increases, to secure a $750 million loan from the World Bank.
According to The PUNCH, this loan, which is part of a broader $2.25 billion support package approved in June 2024, aims to fortify Nigeria’s fiscal stability and support vulnerable communities.
According to the agreement, the $750 million tranche will only be disbursed once Nigeria achieves measurable progress in specified fiscal reforms.
The reforms, implemented under the Accelerating Resource Mobilisation Reforms program, focus on increasing VAT collections, enhancing customs and tax administration, and protecting oil and gas revenues through greater transparency and fiscal compliance.
“The goal is to increase VAT and excise rates on health and environmentally sensitive products, strengthen the country’s tax administration, and secure oil and gas revenue,” a senior official familiar with the ARMOR program said.
A key provision under ARMOR requires VAT collections to reach 1.8% of Nigeria’s non-oil Gross Domestic Product. To further boost revenue, the Federal Government has introduced a bill proposing a phased VAT increase from 7.5% to 10% by 2025, eventually reaching 15% by 2030.
As per the bill, “VAT shall be charged on the value of all taxable supplies at the following rates: (a) 2025 year of assessment, 10%; (b) 2026 to 2029 years of assessment, 12.5%; (c) 2030 year of assessment and thereafter, 15%.”
Under the same legislation, the government proposes a five percent excise duty on telecommunications, gaming, and betting, as well as reinstating excise taxes on telecom services and electronic money transfers.
To enhance compliance, the World Bank funds will also support Nigeria’s Federal Inland Revenue Service and Nigeria Customs Service through technical assistance and infrastructure development.
FIRS is set to receive $5 million to create a VAT lottery and e-invoicing system, aiming to bolster VAT collections and improve audit capabilities through advanced software.
In addition to FIRS, NCS will also benefit from $5 million earmarked for administrative reforms, including a central control room with disaster recovery capacities.
This initiative is expected to improve the agency’s response to operational challenges and increase tax compliance.
According to a representative from FIRS, “The funding will enable us to establish risk-based audit programs for VAT and Corporate Income Tax, which will strengthen our ability to enforce compliance and streamline tax collection processes.”
The ARMOR program also includes measures to reduce tax expenditures. The Federal Government plans to terminate exemptions on corporate bond interest and rationalize the Pioneer Status Incentive scheme by year-end, which could release an additional $10 million from the loan.
Additionally, a proposed Economic Development Incentive Certificate will offer tax breaks for capital investments.
Applicants will submit requests to the Nigerian Investment Promotion Commission with a non-refundable fee of 0.1% of the capital investment, capped at N5 million.
“The NIPC shall recommend the application to the Minister, for approval or otherwise, including the projected tax expenditure impact report,” the proposed bill outlines.
These proposed reforms and policies underscore Nigeria’s commitment to fiscal reform, with a particular emphasis on expanding tax revenues and securing fiscal stability through structured, phased compliance measures.
With these changes, the government aims to reach fiscal benchmarks required by the World Bank, ultimately unlocking the much-needed $750 million to address Nigeria’s economic challenges.
