Fiscal, tax reforms have expanded revenue, improved economy

• CPPE calls for fiscal discipline from subnationals

Nigeria’s fiscal and tax reforms have delivered important progress in expanding revenue and improving fiscal sustainability. This was the submission of the Centre for the Promotion for Private Enterprise Chief Executive, Dr. Muda Yusuf, yesterday.
Dr. Yusuf, an economist, in a position paper on the country’s fiscal and tax reforms in the last two years, a copy of which was made available to The Nation, charged that arising from what has been achieved thus far, the next phase must focus on deepening revenue diversification, enhancing spending efficiency and aligning fiscal outcomes with real economic performance. This, he said, can be achieved with prudent management, stakeholder collaboration, and social sensitivity. He added that these reforms can lay a solid foundation for a more resilient, productive and inclusive Nigerian economy.
According to the CPPE boss, two landmark policy measures, notably the removal of fuel subsidy and the unification of exchange rates, have significantly boosted government revenues, expanded fiscal space and improved the capacity for public investment.
The CPPE though contended that the country is undergoing a major fiscal transition aimed at strengthening revenue mobilisation, fiscal sustainability and economic resilience, the dividend are already visible. It noted that collections from Value Added Tax (VAT) and Company Income Tax (CIT) have increased, reflecting stronger compliance and a gradual recovery in economic activities. Notably, the subnational governments are reporting higher revenues and increased allocations to agriculture, infrastructure, and social development.
Although the economist agreed that rising inflation and currency depreciation have moderated the real value of these gains, underscoring the need for prudent fiscal management and realistic expectations, it nonetheless insisted that the recent reforms have driven strong nominal revenue growth.
“Fuel subsidy removal freed trillions of naira in fiscal resources; exchange rate unification boosted naira-denominated oil revenues; VAT and CIT collections improved through enhanced compliance and enforcement. Despite these advances, the real fiscal impact is tempered by high inflation and exchange rate pressures. It is therefore important to assess fiscal outcomes in both nominal and real terms to maintain credible expectations and policy balance,” Dr. Yusuf said.
Dr. Yusuf noted that noted that recent tax measures have introduced several positive features into the economy including reliefs for producers and priority sectors; higher exemption thresholds for low-income earners and small businesses; zero-rated VAT on essential goods such as food, pharmaceuticals, and educational materials.
He however said that private sector concerns remain over compliance costs, the increase in capital gains tax from 10 per cent to 30 per cent and possible welfare implications of personal income tax changes. He therefore appealed that effective implementation should be guided by stakeholder consultation, flexibility and evidence-based adjustments.
The CPPE boss regretted that despite Nigeria’s large economy and population, the country’s budget remains relatively small when compared to other economies with less population.
A 2025 comparison of national budgets in U.S. dollar terms highlights Nigeria’s fiscal limitations. In the current fiscal year, Nigeria’s $36.7 billion budget is dwarfed by South Africa’s $141 billion; Algeria’s $126 billion; Egypt’s $91 billion and that of Morocco which is $73 billion.
“This limits fiscal capacity for transformative investments in infrastructure, human capital and social welfare. The situation underscores the urgency of revenue diversification, public-private partnerships, and enhanced non-tax revenue mobilization,” he explained.
The CPPE submitted that with limited fiscal space, spending efficiency is paramount. Priority areas it noted should include infrastructure comprising roads, power, ports and digital infrastructure, with the aim to reduce business costs and improve competitiveness; productivity, to be targeted at supporting manufacturing, MSMEs, and technology-driven enterprises; food security, that is investment in agriculture, storage, irrigation and logistics to stabilise prices and supply; security, strengthening of law enforcement, intelligence, and military capability and human capital through increased investment in health and education to build a skilled and productive workforce.
“Governments at all levels should minimie waste, link spending to measurable outcomes, and comply strictly with fiscal responsibility benchmarks,” the CPPE admonished.
The CPPE agreed that state governments play a pivotal role in national fiscal sustainability and given that many of these subnationals have benefited from higher federal allocations, improved internally generated revenue (IGR) and expanded investments in key sectors there is a need for them to align fiscal priorities with local economic needs — supported by transparency and accountability , to promote balanced national development and reduce dependence on federal transfers.
“The long-standing five per cent fuel levy for road maintenance, legislated since 2007, has never been implemented due to affordability and social concerns. While its fiscal rationale is clear, activation should consider economic conditions, timing, and social welfare implications to ensure broad acceptance and minimal disruption,” Dr. Yusuf said.
He therefore recommended that there is a need to adjust fiscal assessments for inflation and exchange rate effects and communicate outcomes transparently.
“There is also the need to broaden and diversify the revenue base by improving tax efficiency, expand the tax net and optimise non-tax revenues and national assets. Also important is the need to prioritise high-impact spending by focusing on infrastructure, food systems, productivity, and security. Strengthening subnational fiscal capacity by supporting fiscal autonomy, accountability and efficient resource use in states; implementation of tax reforms with flexibility by maintaining continuous dialogue with stakeholders and refine policies as needed and also by reinforcing fiscal discipline by ensuring strict adherence to fiscal responsibility frameworks across all levels of government,” Dr. Yusuf submitted.