Nigeria is set to forfeit $4 million from a World Bank loan after failing to meet international auditing standards for a revenue reform initiative involving the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service. This loss is part of a broader $10.4 million cancellation from the $103 million Fiscal Governance and Institutions Project, a public financial management program funded through a credit facility from the International Development Association (IDA).
According to a World Bank restructuring paper dated June 2025, the revenue assurance audit for FIRS and Customs, covering the 2018–2021 financial years, was deemed inadequate by the Independent Verification Agent. The audit, allocated $4 million, did not comply with international standards, resulting in its classification as “not achieved.” This shortfall was one of ten performance-based conditions (PBCs) that Nigeria failed to meet before the project’s closing date of June 30, 2025.
The Federal Ministry of Finance formally requested the cancellation of $10.4 million in project funds, comprising $9.5 million tied to unmet PBCs and $0.9 million in uncommitted technical assistance funds. Other unfulfilled conditions included the incomplete Revenue Assurance and Billing System, allocated $4.5 million, and the development of a National Budget Portal, budgeted at $1 million. The Budget Office of the Federation provided no evidence of progress on the portal, contributing to the funding cancellation.
**A Shrinking Project Scope**
This cancellation follows a prior reduction in June 2024, when $22 million was cut from the original $125 million project envelope, reducing the total to $103 million. With the latest adjustment, the project’s funding now stands at $92.6 million. The final disbursement is projected at $96.04 million, representing 93% of the pre-cancellation total.
Launched in June 2018 and effective from May 2019, the Fiscal Governance and Institutions Project aimed to enhance the credibility of Nigeria’s public finance and national statistics systems through reforms in revenue administration, budget transparency, and data management. Despite the audit failure, the project achieved notable successes in other areas. Non-oil revenue performance in 2024 reached 153% of the budgeted target, a significant improvement from 64.9% in 2018. The World Bank attributed this to Nigeria’s exchange rate unification, the adoption of the TaxProMax system for improved tax administration, and automated revenue remittances from government ministries and agencies.
**Mixed Progress Amid Challenges**
The project also surpassed expectations in data transparency, with the publication of ten reconciled economic and fiscal datasets against a target of six. Additionally, the Corporate Affairs Commission launched an Electronic Register of Beneficial Owners, covering approximately 40% of registered businesses, and the Ministry of Finance Incorporated published a National Asset Registry and financial reports.
However, challenges persist. Capital expenditure execution fell short at 50%, missing the 65% target, and project monitoring and evaluation were rated as moderately unsatisfactory. These gaps highlight the difficulties Nigeria faces in meeting the rigorous requirements of international funding agreements, particularly in areas requiring technical precision and accountability.
**Implications for Nigeria’s Financial Reforms**
The forfeiture of $4 million due to audit shortcomings underscores the need for stronger oversight and capacity building within Nigeria’s public financial management systems. The failed audit not only impacts the immediate project but also raises concerns about Nigeria’s ability to maximize external funding for critical reforms. The cancellation of $10.4 million in total funds further limits resources available for improving revenue collection and fiscal transparency, areas vital to Nigeria’s economic stability.
Despite these setbacks, the project’s achievements in non-oil revenue and data publication demonstrate progress in modernizing Nigeria’s financial systems. Moving forward, addressing gaps in auditing standards and project execution will be crucial to securing and effectively utilizing future international loans. Strengthening collaboration between agencies like the Office of the Auditor-General and the Budget Office could help Nigeria meet global benchmarks and avoid similar losses.
Key Takeaways
– Nigeria will lose $4 million from a World Bank loan due to substandard audits of FIRS and Customs for 2018–2021.
– The cancellation of $10.4 million includes funds for unmet performance-based conditions and uncommitted technical assistance.
– The Fiscal Governance and Institutions Project, now at $92.6 million, achieved strong non-oil revenue growth and data transparency.
– Improved auditing standards and project execution are essential to maximize future international funding.
