Nigeria’s public finance landscape recorded a major milestone in 2025 as Federation Account inflows climbed to ₦23.06 trillion within the first ten months of the year, signalling improved fiscal coordination, stronger revenue enforcement, and the early impact of sweeping tax reforms.
The figure, disclosed by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), represents one of the strongest revenue performances in recent years and reflects the federal government’s ongoing efforts to stabilise public finances amid declining oil dependence and persistent macroeconomic pressures.
Speaking at a two-day National Stakeholders’ Discourse on Enhancing Fiscal Efficiency and Revenue Growth under the Nigeria Tax Act, 2025, held in Abuja, RMAFC Chairman Mohammed Shehu described the surge as evidence of growing fiscal discipline across revenue-generating agencies.
According to Shehu, total accruals into the Federation Account between January and October 2025 stood at ₦23,058,248,707,725.50, underscoring what he called a “clear departure from years of revenue leakages and weak coordination.”
Federation Account inflows reflect improved fiscal discipline
The RMAFC chairman noted that the sharp rise in Federation Account inflows marked a steady improvement over previous years, with gross accruals recorded at ₦11.93 trillion in 2023 and ₦21.43 trillion in 2024.
He attributed the upward trend to a combination of fiscal reforms, stronger audits, digital tracking of revenues, and improved collaboration among revenue agencies, including the Federal Inland Revenue Service, the Nigerian Customs Service, and other collection bodies.
According to him, tighter monitoring and real-time reconciliation of revenue streams have significantly expanded the pool of funds available for distribution among the Federal Government, states, and local governments.
“The growth we are seeing is not accidental. It is the result of deliberate reforms, enhanced tracking, and improved coordination across agencies responsible for revenue mobilisation,” Shehu said.
He added that the improved Federation Account inflows point to gradual progress toward a more sustainable and resilient public finance framework, particularly as Nigeria seeks to reduce its historic overreliance on crude oil earnings.
Reducing exposure to oil-driven revenue shocks
Shehu stressed that Nigeria’s long-standing dependence on oil revenue had exposed the economy to repeated boom-and-bust cycles, making long-term planning difficult and undermining fiscal stability.
For decades, fluctuations in global crude prices have translated into volatile revenue inflows, often forcing governments at all levels to resort to borrowing to fund basic obligations.
“The Nigerian economy has suffered from unpredictable revenue streams driven by oil price volatility,” he said.
“These cycles have weakened fiscal planning and limited the country’s capacity to build buffers against shocks.”
He explained that reforms aimed at strengthening non-oil revenue sources are beginning to show results, as reflected in the rising Federation Account inflows, even amid a challenging global economic environment.
Nigeria Tax Act 2025 seen as structural game-changer
Central to the discussion was the Nigeria Tax Act, 2025, which is scheduled to take effect on January 1, 2026.
Shehu described the legislation as a landmark reform designed to address deep-seated structural weaknesses in Nigeria’s tax system.
The Act consolidates multiple fragmented tax laws into a single statute, eliminating duplication, outdated provisions, and conflicting interpretations that have historically increased compliance costs for businesses and individuals.
“The Nigeria Tax Act, 2025 harmonises previously fragmented tax laws, reduces duplication, and enhances the ease of doing business,” Shehu said, adding that it would create a more predictable and coherent fiscal environment nationwide.
He also noted that the Act would reduce regional disparities in tax administration and improve transparency, thereby strengthening confidence among taxpayers and investors.
Improving macroeconomic stability supports revenue growth
The RMAFC chairman linked the rise in Federation Account inflows to broader macroeconomic improvements under the current administration.
He cited declining inflation and relative stability in the foreign exchange market as supportive factors.
According to him, headline inflation fell consecutively over four months, dropping from 21.88 per cent in July to 16.05 per cent in October, while the naira appreciated from ₦1,534 to the dollar in July to about ₦1,428 in October.
He added that economic growth has continued to be driven largely by the services and non-oil sectors, even though oil still accounts for over 90 per cent of export earnings while contributing less than 10 per cent to gross domestic product.
Oyedele: Tax reforms target fairness, not higher taxes
Also speaking at the event, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, said the reforms were designed to correct decades of inefficiencies and inequities embedded in Nigeria’s tax framework.
Oyedele described the old system as overly complex and punitive, arguing that incremental adjustments were no longer sufficient.
“These reforms should have been done decades ago. The system became so broken that we needed a complete transformation, not patchwork fixes,” he said.
He explained that the new tax laws repeal outdated statutes inherited from the colonial era and aim to stop what he described as “taxing poverty, capital, and investment.”
Under the reforms, low-income earners, including those earning the national minimum wage, will be exempted from personal income tax from January 2026, while middle-income earners are expected to benefit from reduced PAYE obligations.
VAT relief, investment incentives, and compliance gains
Oyedele disclosed that essential consumptions such as food, transport, health, education, and rent would be zero-rated for value-added tax to reduce living costs.
Businesses producing such goods, he said, would receive VAT refunds to prevent hidden taxes from being passed on to consumers.
He emphasised that the reforms are designed to increase government revenue without introducing new taxes, primarily by closing tax gaps, improving compliance, and eliminating wasteful incentives.
“We found significant tax gaps. When you fix compliance and remove inefficiencies, you raise more revenue and make the economy work better,” Oyedele said.
On capital markets, he added that most investors would be exempted from capital gains tax to support long-term investment and deepen market participation.
Stakeholders back reforms as revenue outlook improves
The National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr Jani Ibrahim, described the Nigeria Tax Act, 2025, as a critical step toward strengthening revenue mobilisation and fiscal sustainability.
He said clear and predictable tax policies would encourage investment, job creation, and sustainable growth while supporting stronger Federation Account inflows.
Meanwhile, RMAFC Commissioner Desmond Akawor said the discourse marked a defining moment in Nigeria’s fiscal journey, noting that decisions taken would shape public finance stability for years to come.
Despite the optimism, concerns remain about the inflationary risks of rising liquidity from higher statutory revenue disbursements.
Central Bank Governor Olayemi Cardoso has previously warned that increased Federation Account allocations could undermine disinflation efforts if not matched with tight monetary conditions.
Nevertheless, analysts say the sharp rise in Federation Account inflows signals that Nigeria’s revenue reforms are beginning to deliver tangible results, offering cautious optimism for fiscal stability in the years ahead.
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