Nigeria’s Federal Government may introduce higher excise duties on alcohol, tobacco, and other so-called “sin goods” from 2026 as part of far-reaching fiscal reforms linked to a $750m financing programme supported by the World Bank, according to an official implementation status report on the facility.
The proposed tax increases are embedded in the Nigeria Accelerating Resource Mobilisation Reforms Programme-for-Results, a multi-year initiative designed to boost non-oil revenues, strengthen fiscal sustainability, and reduce the country’s exposure to volatile oil income.
In its latest Implementation Status and Results Report, the World Bank described Nigeria’s current excise rates on alcohol and tobacco as “very low” by international standards, adding that concrete policy work is now underway to review and raise those rates under the programme framework.
How the $750m World Bank loan is shaping Nigeria’s tax reforms
$750m World Bank loan pushes FG to review alcohol, tobacco taxes
According to the report, the review of excise duties on sin goods is one of several reform actions tied to disbursements under the $750m World Bank loan, which was approved in June 2024 and became effective in October of the same year. The programme is scheduled to run until November 2028.
Nigeria currently operates a hybrid excise duty regime on alcohol and tobacco products, combining ad valorem taxes with specific levies.
A 2020 tax summary published by PwC shows that alcoholic beverages—including beer, wines, and spirits—are subject to a 20 per cent ad valorem excise duty alongside fixed charges per litre. Cigarettes attract a similar 20 per cent ad valorem duty plus a specific tax per stick.
While this structure places Nigeria among countries using mixed excise systems, the World Bank noted that the overall tax burden on these products remains relatively low when compared with global public health and revenue benchmarks.
Documents obtained from the World Bank further reveal that Nigeria’s Tariff Review Board has already endorsed proposals to raise excise duties on beer, stout, wines, whisky, and tobacco products for the 2026–2028 period.
The proposals are expected to be submitted to the Minister of Finance to ensure implementation from January 2026.
Under the programme’s Disbursement Linked Results framework, a presidential order increasing excise duties on sin goods has been identified as a key reform milestone, although it is currently classified as “not due”.
Nevertheless, the World Bank said preparatory policy work to support the increase is progressing.
Revenue mobilisation beyond oil
The push to raise sin taxes forms part of a broader strategy under the $750m World Bank loan to expand Nigeria’s non-oil revenue base and improve fiscal resilience.
The report showed that Nigeria has already exceeded a major revenue benchmark under the programme. Value Added Tax collection as a share of non-oil GDP rose to 2.30 per cent by December 2024, surpassing the programme’s target of 1.80 per cent set for 2027.
The World Bank attributed the improvement to several measures, including the introduction of VAT withholding in key sectors such as telecommunications and banking, enhanced taxpayer education, and the removal of what it described as an “implicit foreign exchange subsidy”.
However, the report also highlighted mixed outcomes in compliance indicators. Online on-time VAT filing compliance declined to 32 per cent in 2024 from 41 per cent in 2023, even though the absolute number of compliant taxpayers increased.
Expected VAT filers rose from about 2.51 million in 2023 to 3.63 million in 2024, while online on-time filers increased from just over one million to about 1.17 million.
The expansion of the taxpayer base, the World Bank explained, led to a lower compliance ratio despite higher overall participation.
A similar pattern was observed in company income tax filings. Online on-time CIT compliance improved sharply to 41.5 per cent by March 2025 before easing to around 34 per cent, reflecting the growing number of registered taxpayers under the reform programme.
Green taxes and environmental levies
Beyond sin taxes, the World Bank report pointed to gradual progress in environmental taxation, although it acknowledged delays and internal policy disagreements.
Nigeria currently lacks green excise taxes on many environmentally harmful products. However, the Tariff Review Board has agreed to reinstate a green surcharge on vehicles as part of a broader fiscal policy package to be forwarded to the President through the Minister of Finance in early 2026.
In addition, the Nigeria Tax Act 2025 introduced a five per cent carbon levy on petroleum products. The implementation of this levy, however, is contingent on regulations yet to be issued by the finance ministry.
The report noted that there is still no full consensus within government on certain green excise proposals, particularly those targeting heavy vehicles with engine capacities above 2.0 litres.
Transparency concerns in oil revenue reporting
On oil revenue transparency, the World Bank recorded uneven progress. Although the Federal Account Allocation Committee approved a revised reporting template for the Nigerian National Petroleum Company Limited in March 2025, implementation has lagged.
According to the report, the Ministry of Finance later disclosed that the revised template had not yet been deployed.
FAAC subsequently directed NNPCL to submit revenue reports containing minimum information, including details on domestic crude allocation usage, outstanding liabilities, forward crude oil sales, and unpaid fiscal or regulatory obligations such as gas flare penalties.
The World Bank warned that delays in applying the revised template could undermine one of the programme’s key performance indicators, which tracks enhanced NNPCL reporting to FAAC.
Programme performance and disbursement status
Overall implementation of the $750m World Bank loan programme was rated “moderately satisfactory”, although the overall risk level remains high.
Out of 27 disbursement-linked results under the facility, six had been fully achieved as of the review date, while 19 were reported to be making good progress.
Completed reforms include the removal of tax exemptions on interest earned from corporate bonds, the introduction of capital gains taxation on transactions above N100m, the launch of the Federal Inland Revenue Service’s e-invoicing system, and the rollout of the Nigeria Customs Service’s Authorised Economic Operator programme.
By November 2025, more than 1,900 large taxpayers had adopted the FIRS e-invoice platform, processing VAT invoices valued at N146bn. The customs service had also accredited over 50 entities under the AEO framework, with several hundred more under review.
Financial data in the report showed that about $109.9m—roughly 14.7 per cent of the total $750m facility—had been disbursed as of January 2026.
The loan is scheduled to close in November 2028, with some components expected to be restructured to reflect Nigeria’s rebased GDP figures and updated taxpayer data.
Development economist and Chief Executive Officer of CSA Advisory, Dr Aliyu Ilias, described the World Bank’s push for higher excise duties as expected, given Nigeria’s commitment to the loan framework.
“Once we submit ourselves to the World Bank, we should expect conditions tied to disbursement,” he said.
“Increasing excise duties is not necessarily a bad thing. It can improve revenue mobilisation and contribute positively to GDP.”
However, Ilias expressed concern about Nigeria’s growing dependence on externally driven policy prescriptions, warning that such influence could sometimes conflict with domestic economic priorities.
Despite the political sensitivity surrounding higher taxes on alcohol and tobacco, the report suggests that the measure is central to Nigeria’s strategy to align fiscal policy with public health and environmental objectives while reducing vulnerability to oil price shocks.
About The Author
