As Nigeria grapples with economic challenges, the World Bank has tied the release of a $750 million loan to a controversial condition: a presidential order to increase excise duties on “sin goods” like alcohol, tobacco, and sugary drinks. This requirement, detailed in the World Bank’s Implementation Status and Results Report for the Accelerating Resource Mobilisation Reforms Programme-for-Results (ARMOUR), effective from October 14, 2024, to November 2028, aims to boost Nigeria’s non-oil revenue while addressing health concerns. However, with only $1.88 million (0.25% of the loan) disbursed by May 2025, the push for higher taxes has sparked debate over its impact on an already strained economy.
A Push for Non-Oil Revenue
The ARMOUR program seeks to increase non-oil revenues from 5.3% of GDP in 2022 to 7.3% by 2025 while safeguarding oil and gas earnings, which rose from 1.8% to 2.7% of GDP in 2024. The World Bank’s report, obtained by The PUNCH, specifies that at least $10 million of the loan is linked to a presidential directive raising excise duties on sin goods, with verification pending. Six other disbursement-linked results (DLRs) worth $235 million have been achieved but await confirmation, delayed by the absence of an Independent Verification Agent.
Nigeria already imposes excise duties on sin goods: tobacco carries a 30% ad valorem tax plus a specific rate of ₦5.2 per stick in 2024, while alcoholic beverages face a 20% ad valorem tax and specific rates per liter (e.g., ₦0.35 per cl for beer, ₦1.50 per cl for wines). Non-alcoholic and sweetened beverages are taxed at ₦10 per liter. Posts on X indicate the World Bank is pushing for a 117% increase on alcohol and 50% on tobacco to align with inflation-adjusted 2016 levels, potentially generating significant revenue. However, the government has yet to adopt these reforms (DLR 3.1), risking subsequent revenue targets (DLR 3.2).
Telecom Tax Revival Adds Pressure
Compounding the sin tax debate, the Nigeria Tax Bill 2024, passed by the Senate on May 8, 2025, reintroduces a 5% excise duty on telecom services, previously suspended in July 2023 by President Bola Tinubu due to inflation concerns. This tax, first enacted in the 2020 Finance Act, will raise costs for calls, texts, and data, burdening consumers and threatening digital inclusion. Telecom operators and consumer groups warn that, combined with recent tariff hikes, this could exacerbate economic pressures in a country where inflation hit 31.7% in 2024.
Economic Context and Challenges
Nigeria’s economy, Africa’s second-largest in 2023, faces its worst downturn in decades, with inflation at a 28-year high of 28.9% and food inflation at 33.9% in December 2023. The banking sector, contributing 5.01% to GDP in 2024, has seen robust growth, with assets up 50.5% to ₦17.9 trillion, partly due to high interest rates (MPR at 27.5%) and FX gains. Meanwhile, Dangote Industries’ export plans, including 16,000 tonnes of fertilizer daily by 2027, could generate $7 million daily in FX earnings, supporting non-oil revenue goals.
However, the World Bank’s conditions come at a delicate time. The exit of multinationals like Unilever and GlaxoSmithKline, driven by high electricity tariffs and taxation reforms, underscores economic fragility. The failure to rationalize tax expenditures, such as the Pioneer Status Industry Tax Incentive Scheme (DLR 2.2), and delays in e-invoicing and data-sharing systems highlight slow reform progress. The World Bank rates ARMOUR’s implementation as “Moderately Satisfactory” but maintains a “High” risk rating due to political interference and fiduciary concerns.
Expert Warnings and Economic Implications
Development economist Dr. Aliyu Ilias of CSA Advisory called the World Bank’s push “pragmatic” but warned of Nigeria’s growing dependence on external directives. “It’s sad that they will continue to tell us what to do, sometimes to the detriment of our economy,” he told The PUNCH. He noted that higher excise duties could boost GDP but urged caution to avoid overburdening consumers.
Dr. Paul Alaje, Chief Economist at SPM Professionals, echoed this, warning that simultaneous reforms in a fragile economy could strain households and businesses. “The economy is not yet in a state of rest,” he said, emphasizing that while sin taxes aim to curb harmful consumption and raise revenue, they could increase costs for local producers, reducing competitiveness. For instance, taxing imported sin goods heavily could encourage local production, but higher duties on domestic goods might raise prices, impacting affordability.
Balancing Revenue and Stability
The World Bank’s push for green taxes, including a potential 10% carbon tax on petroleum products and duties on heavy vehicles, remains contentious, with no consensus among government agencies. Meanwhile, progress in oil revenue transparency, such as the Federal Account Allocation Committee’s enhanced NNPCL reporting template set for June 2025, offers hope for fiscal accountability.
As Nigeria navigates these reforms, the challenge lies in balancing revenue mobilization with economic stability. With non-oil revenues rising to 8.4% of GDP in 2024 and tax revenues from VAT, CIT, and Customs up to 5.0%, progress is evident. Yet, the reintroduction of telecom taxes and potential sin tax hikes risk exacerbating the cost-of-living crisis. As the government weighs its next steps, careful calibration will be crucial to avoid undermining the very economic recovery the World Bank loan aims to suppor
