Nigeria’s tax revenue as a percentage of its gross domestic product (GDP) is expected to strengthen in 2026, buoyed by the commencement of the tax reforms aimed at harmonising different tax rules, enforcing compliance, and boosting the country’s fiscal position.
The tax reforms, which took effect on the first day of January 2026, are projected to improve Africa’s most populous economy’s tax-to-GDP ratio from an estimated 9.5 percent to 10.2 percent this year and 12.5 percent by 2027, according to an outlook report by professional services and advisory firm PwC.
Even with the expected increase, Nigeria’s tax revenue remains below the 15 percent as a share of GDP benchmark set aside by the World Bank and IMF in their domestic revenue mobilisation frameworks for financing core government functions.
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“Nigeria’s tax-to-GDP ratio is estimated to have increased to 9.5%, reflecting recent gains from improved revenue mobilisation, enforcement, and administrative reforms,” PwC said.
“In 2026, tax revenue mobilisation is expected to strengthen further, driven by the phased implementation of tax reforms, tighter compliance enforcement, expanded use of digital revenue systems, and improved remittance discipline across revenue-generating agencies.”
Nigeria’s tax collection has been relatively low compared to its peers. Ghana, for instance, has a tax-to-GDP ratio of 16 percent; Kenya holds an estimated 15 percent; Senegal boasts of about 20 percent, though lower than South Africa’s 23 percent.
With the new reforms, Africa’s fourth-largest economy is aiming to move its share of tax revenue to GDP from about 10 percent to 18 percent in the next three years, effectively providing more fiscal buffers to embark on infrastructural and social spending
According to the report, debt pressures are expected to slow in 2026, driven by the projected rise in tax revenue and improvement in collection. But fiscal vulnerabilities persist, as debt service is budgeted at N15.52 trillion against projected revenue of N34.33 trillion, implying a debt service-to-revenue ratio of 45 percent.
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In addition, the 2026 budget deficit of N23.85 trillion (4.28% of GDP) sustains elevated financing needs, limiting fiscal space and increasing exposure to refinancing, interest rate, and exchange rate risks.
Public debt-to-GDP, according to PwC estimates, is said to have declined from 42.9 percent in 2024 to 39.8 percent in 2025, supported by strong nominal GDP growth, the statistical effects of GDP rebasing, and improved fiscal receipts.
“Debt pressures may ease in 2026, supported by effective tax reforms and stronger revenue mobilisation,” PwC said.
Debt service, recurrent expenditure may slow capital spending
PwC says that capital spending needed for growth may be constrained due to rising debt service and recurrent expenditure, warning that such a trend may “crowd out fiscal space in 2026.”
Debt service is budgeted at N15.52 trillion, representing 26.7 percent of total expenditure. That’s 45.2 percent of projected revenue, materially crowding out capital and social spending.
“A growing share of revenue is absorbed by interest and principal payments, crowding out capital and social spending. Fiscal flexibility diminishes, increasing vulnerability to revenue or macroeconomic shocks.”
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Recurrent expenditure, on the other hand, remains structurally rigid, driven largely by personnel and statutory obligations. Personnel costs, including pensions, are estimated at N10.75 trillion, accounting for 70.5 percent of recurrent (non-debt) spending, which limits short-term fiscal flexibility when revenues underperform.
Capital expenditure is budgeted at N26.08 trillion, signalling policy intent to support growth and infrastructure delivery and rebalance spending toward productive investment.
PwC, however, warns that weak execution, delayed releases, and procurement bottlenecks mean the realised growth impact in 2026 may fall short of budgeted allocations, increasing the risk that higher spending does not translate into proportional economic outcomes.