The Federal Government is considering raising excise duties on alcohol, tobacco, and other so-called “sin goods” as part of an ambitious drive to boost domestic revenue under a $750 million World Bank-supported financing programme.
The proposed measures form a central pillar of Nigeria’s Accelerating Resource Mobilisation Reforms Programme-for-Results, according to the World Bank’s Implementation Status and Results Report. The initiative, which became effective in October 2024 following approval in June 2024, is scheduled to run through November 2028.
The World Bank noted that Nigeria’s current excise rates on sin goods remain “very low,” prompting authorities to develop a framework to increase health-related taxes, with changes expected to take effect from this month, January 2026. The initiative is part of a broader effort to diversify government revenue away from volatile oil income and strengthen fiscal sustainability.
A 2020 PwC tax summary shows Nigeria employs a hybrid excise duty regime for alcohol and tobacco, combining ad valorem rates with specific levies. Alcoholic beverages - including beer, wines, and spirits - are subject to a 20 per cent ad valorem excise duty alongside a fixed charge per litre, while cigarettes carry a 20 per cent ad valorem levy plus a per-stick tax.
While this structure places Nigeria among countries using mixed excise systems, PwC observed that overall tax incidence remains low relative to global public health benchmarks.
The report revealed that the Tariff Review Board has endorsed increases in excise rates for beer, stout, wines, whisky, and tobacco products covering the 2026 - 2028 period.
The proposals are expected to be presented to the Minister of Finance to ensure implementation in this month. Under the programme’s Disbursement Linked Results framework, a presidential order raising excise duties on sin goods is classified as a key reform action, although it is still marked “not due” at this stage. Policy work, however, is progressing steadily.
While potentially politically sensitive, the planned tax hike is part of Nigeria’s push to mobilise non-oil revenue. Beyond sin taxes, the World Bank report highlighted notable fiscal progress. Value Added Tax (VAT) collection as a share of non-oil GDP rose to 2.30 per cent by December 2024, exceeding the programme’s 2027 target of 1.80 per cent. The increase has been credited to VAT withholding in key sectors such as telecommunications and banking, taxpayer education initiatives, and the removal of an “implicit FX subsidy.”
Yet compliance rates tell a more nuanced story. Online on-time VAT filing dropped to 32 per cent in 2024 from 41 per cent in 2023, despite an increase in absolute numbers of timely filers. Similarly, company income tax filings improved sharply to 41.5 per cent by March 2025 before easing to 34 per cent, reflecting the expansion of Nigeria’s taxpayer base.
The World Bank report also pointed to progress on excise and environmental taxation, albeit with delays and policy disagreements. While no comprehensive green taxes currently exist on environmentally harmful products, the Tariff Review Board has agreed to reinstate a green vehicle surcharge. The Nigeria Tax Act 2025 further introduced a five per cent carbon levy on petroleum products, pending regulatory implementation. Some green excise measures, such as levies on heavy vehicles with engines above 2.0 litres, still lack full consensus within government.
On oil revenue transparency, the Federal Account Allocation Committee approved a revised reporting template for the Nigerian National Petroleum Company Limited in March 2025. However, implementation has been slow, posing a risk to achieving one of the programme’s key performance indicators.
Overall, the World Bank rated programme implementation as “moderately satisfactory,” noting that six of 27 disbursement-linked results had been achieved, while 19 were making “good progress.” Completed reforms include the removal of tax exemptions on corporate bond interest, taxation of capital gains above N100 million, launch of the Federal Inland Revenue Service’s e-invoicing system, and introduction of the Nigeria Customs Service’s Authorised Economic Operator programme.
By January 2026, about $109.9 million - roughly 14.7 per cent - of the $750 million facility had been disbursed. Independent verification of performance indicators is scheduled between January and April 2026, with related disbursements expected in the second quarter.
Development economist Dr Aliyu Ilias described the planned excise hikes as “expected and pragmatic,” but cautioned that growing dependence on external conditions could influence Nigeria’s economic decisions. “It’s not a bad thing if they ask us to increase excise duty. It will contribute positively to revenue and GDP,” he said, adding, “However, it’s concerning that we are increasingly guided by external directives.”
Meanwhile, the Tariff Review Board met in early January 2026 to strengthen monitoring and evaluation of trade, fiscal, and monetary incentives. Minister of Industry, Trade and Investment Jumoke Oduwole emphasised that the exercise aims to ensure “a coordinated, whole-of-government approach” in delivering “balanced, credible and growth-driven tariff decisions.”
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