Nigeria’s government revenue surged dramatically from N6.8 trillion in 2023 to N12.4 trillion in 2024, representing an impressive 82.4 percent increase, according to the latest Nigeria Development Update published by the World Bank. This sharp rise is attributed primarily to the unification of the country’s foreign exchange (FX) rates, strengthened tax administration, and reforms in treasury remittances from Ministries, Departments, and Agencies (MDAs).
The report, titled “Building Momentum for Inclusive Growth,” highlights that these key fiscal reforms have boosted Nigeria’s revenue-to-GDP ratio from a modest 2.9 percent in 2023 to 4.5 percent in 2024. This milestone marks significant progress in Nigeria’s effort to improve public financial management and expand its revenue base to fund critical development projects.
The World Bank underscored the pivotal role played by the FX rate unification policy implemented in recent years. Previously, revenues from oil sales, customs duties, and other FX-linked sources were remitted to the Federation Account using an official exchange rate that was roughly 53 percent lower than the parallel market rate. This discrepancy led to massive revenue losses estimated at N6.2 trillion.
With the unification of the official and parallel FX rates, government revenue from oil exports and customs duties surged significantly. The new unified rate reflected a more realistic market value of the naira, reducing revenue leakages and enhancing the government’s capacity to mobilize funds.
Another major contributor to the revenue increase was the enhanced tax administration spearheaded by the Federal Inland Revenue Service (FIRS). The rollout of the digital TaxPro Max platform revolutionized tax collection, enabling better compliance and broader tax coverage.
Additionally, the introduction of withholding Value Added Tax (VAT) at source in selected sectors further expanded non-oil revenue. This measure led to an 86.1 percent increase in locally collected VAT in 2024 compared to the previous year, reinforcing Nigeria’s drive to diversify its revenue sources beyond oil.
The report also highlights the December 2023 reform targeting revenue remittances from MDAs and Government-Owned Enterprises (GOEs). This policy standardized and automated transfers of independent revenues directly to the treasury, preventing revenue leakages and improving cash flow management.
As a result, independent revenues contributed an additional 0.8 percentage points to Nigeria’s revenue-to-GDP ratio in 2024, signaling better financial discipline and transparency in public sector revenue management.
Despite these gains, the World Bank cautioned that Nigeria’s revenue collection remains below potential. It pointed out that arbitrary tariff deviations and import bans distort prices, encourage smuggling, and undermine customs enforcement. The Bank estimates that eliminating such trade restrictions could boost customs revenue by up to 66 percent.
Currently, Nigeria imposes tariffs that are twice as high as the sub-Saharan African average and enforces bans on multiple imports, which contribute to higher consumer prices and reduced trade competitiveness. The report recommends aligning tariffs with the ECOWAS Common External Tariff (CET) starting with food items, which would enhance household welfare and support regional trade integration.
The World Bank also noted that import bans increase consumer prices by an estimated 5.8 percent on average, disproportionately affecting poorer households who spend a larger share of their income on food and medical products. Lifting these bans could lower Nigeria’s poverty rate by approximately 2.6 percentage points, offering much-needed relief amid rising living costs.
The World Bank’s findings underscore the importance of continuing fiscal reforms to boost government revenues sustainably. With a more competitive naira and improved revenue administration systems, Nigeria is well-positioned to expand its fiscal space, invest in infrastructure, social services, and stimulate inclusive economic growth.
However, the institution warns that more reforms are necessary to address revenue shortfalls and improve customs enforcement. A strategic reorientation of trade policies, reduction in trade barriers, and further digitalization of tax processes will be critical to harnessing Nigeria’s full revenue potential.