Nigeria is pressing forward with a comprehensive tax reform agenda, aiming to unlock $750 million in World Bank funding as part of a broader $2.25 billion loan package approved earlier this year to stabilise the country’s economy and support vulnerable citizens. The funding, tied to specific governance and fiscal conditions under the Accelerating Resource Mobilisation Reforms (ARMOR) programme, mandates substantial changes in tax administration and transparency to stimulate VAT revenue, boost compliance, and improve customs oversight.
According to the loan agreement, made public on Sunday, Nigeria’s Ministry of Finance committed to an array of targets to ensure the loan’s disbursement. These include raising VAT collections by adopting a 10% rate by 2025, adding $105 million to the loan total, and targeting a further increase to 12.5% by 2026. The ARMOR initiative, central to the fiscal overhaul, demands stricter VAT compliance, enhanced digital systems for tax processing, and excise hikes on products tied to health and environmental impacts.
Under the loan’s Disbursement Linked Indicators, progress towards VAT expansion and digital compliance systems will trigger incremental disbursements, with benchmarks such as an e-invoicing system for VAT traders, an increase in excise on telecom and digital financial services, and the registration of 660,000 VAT filers. Additionally, increased customs oversight, facilitated through $5 million investments in data-sharing and risk-based audits for the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS), forms a core part of the governance measures.
Another significant element in the reform strategy includes the proposed Economic Development Incentive Certificate, which rewards firms that invest in capital projects. The tax bill introduces an application fee of 0.1% of the capital expenditure, capped at ₦5 million. Qualified firms would be subject to presidential approval and detailed reporting to ensure transparency and track sectoral impacts.
While some see these measures as necessary steps towards sustainable revenue, others warn of potential burdens on businesses and consumers. Tax policy analysts are closely watching the bill’s progress through Nigeria’s National Assembly, particularly proposals to streamline existing tax incentives and introduce a Green Channel for customs that rewards compliance. As Nigeria navigates these reforms, the ARMOR programme reflects the government’s ambitious commitment to tax reform in the hopes of securing economic stability and meeting urgent development needs.
