The Federal Government of Nigeria is advancing significant tax reforms aimed at enhancing tax revenue and efficiency while fulfilling the conditions for a $750 million loan from the World Bank.
This loan is part of a larger $2.25 billion package approved by the World Bank on June 13, 2024, designed to stabilize Nigeria's economy and support its vulnerable populations.
The loan package includes a second component, the Nigeria Reforms for Economic Stabilisation to Enable Transformation (RESET) Development Policy Financing Programme, which has already seen the government secure $751.88 million of the approved $1.5 billion.
However, disbursement of the initial $750 million loan remains pending, contingent upon meeting specific fiscal and governance criteria outlined in the Accelerating Resource Mobilisation Reforms (ARMOR) programme.
Key objectives of the ARMOR programme include implementing tax and excise reforms to boost Value-Added Tax (VAT) collections and enhancing tax compliance through improved administration.
The World Bank's agreement specifies that loan disbursements will occur only after measurable progress is achieved in these areas, such as increasing VAT collections to 1.8% of non-oil GDP, registering 660,000 VAT filers, and launching an e-invoicing system for VAT traders.
To further increase VAT revenue, the Federal Government is considering legislation to raise the VAT rate from 7.5% to 10% by 2025, with plans for further increases in subsequent years. The proposed bill outlines a gradual rise in VAT rates up to 15% by 2030.
Additionally, the government plans to reintroduce excise taxes on telecommunications services and electronic money transfers as part of a comprehensive overhaul of Nigeria's tax framework.
A new bill proposes a 5% excise duty on telecom services and gaming activities, reflecting a broader strategy to enhance revenue generation.
