The World Bank has suggested that Nigeria could significantly boost its public revenue and human capital investments by raising public health taxes.
The recommendation was made in its latest Nigeria Development Update, From Policy to People: Bringing the Reform Gains Home, released in early October.
These taxes cover excise duties on goods harmful to health, such as tobacco, alcohol, and sugary beverages.
Although Nigeria is West Africa’s largest consumer market, the Bank notes that its current tax rates on these products remain among the lowest within ECOWAS and worldwide.
Currently, Nigeria applies an ad valorem rate of 20% on spirits, compared to 45–50% in most countries of the economic bloc, and 30% on tobacco, far below Togo (100%), Senegal (65%), or Ghana (50%).
With this “significant untapped potential,” the World Bank said the federal government should leverage such taxes to sustainably broaden its revenue base, as the measure would benefit both fiscal balance and equity.
These taxes “improve improve health outcomes while generating additional revenues (The Task Force on Fiscal Policy for Health, 2024).31 Importantly, they also increase tax progressivity, as they impact mainly the richest households: only 5 percent of the poorest consume sugary drinks compared to 80 percent among the richest, and only 3 percent of the poorest consume alcoholic beverages, compared to 18 percent in the richest group,” the report stated.
If efficiently collected, the Bank added, the additional revenue could be directed toward priority spending such as universal health coverage, helping the country achieve lasting productivity gains.
“International experience, such as the Philippines and South Africa, shows that well-designed health taxes can both strengthen health systems and mobilize financing,” the World Bank concluded.
Observers note that the recommendation comes at a sensitive time for Nigerian authorities.
Earlier this year, the Federal High Court in Abuja suspended the collection of a 10-naira ($0.0068) levy per liter of sugary drinks, calling the 2022 measure “null and void.”
