By Oladoja M.O
Nigeria’s new tax law regime arrives at a moment when questions of domestic resource mobilization have moved decisively from the margins of fiscal discourse to its centre. The reform is ambitious in both scope and intent. It consolidates previously fragmented statutes, modernizes tax administration, strengthens compliance mechanisms, and expands the state’s technical capacity to mobilize revenue in an increasingly constrained macro-economic environment.
Read on its own terms, the law represents a serious effort to stabilize public finance and reduce long-standing inefficiencies in the tax system. But tax laws, particularly of this magnitude, should not be mere instruments of collection, rather reflections of what a state understands taxation to be for.
When examined from the perspective of national health financing, Nigeria’s new tax law reveals not hostility to health, or ignorance of its importance, but striking institutional restraint, a deliberate decision to keep taxation largely neutral to the direct financing of public health.
This neutrality is especially significant because it runs counter to the evolving global understanding of domestic resource mobilization (DRM). In contemporary public finance, DRM is no longer conceived simply as the ability of a state to raise revenue, but as its capacity to do so in a manner that deliberately underwrites social protection, safeguards human capital, and reduces long-term economic vulnerability, where health occupies a central place.
Ill-health is not a random misfortune but a predictable social risk, one that drives household impoverishment, reduces labour productivity, and places sustained pressure on public finances. For this reason, many countries have increasingly integrated health financing into their tax systems, whether through general taxation, earmarked levies, or hybrid arrangements that link tax administration directly to social insurance and prevention financing.
It is against this backdrop that Nigeria’s new tax law must be read.
The law unquestionably strengthens the means of mobilization. A unified tax administration framework, enhanced enforcement powers, clearer compliance obligations, and improved data coordination substantially upgrade the state’s fiscal machinery. In theory, this expanded administrative capacity could support innovative approaches to financing social sectors, including health. In practice, however, the law exercises marked caution. Health appears within the tax framework, but only at the margins, and only in forms that preserve the traditional separation between revenue mobilization and social sector financing.
This pattern becomes evident when examining how health-related elements are treated across the law. Contributions to the national health insurance scheme are recognised as allowable deductions for personal income tax purposes. This recognition is not insignificant; it affirms health insurance contributions as socially legitimate expenditures deserving of fiscal relief. Yet the logic remains passive. The tax system responds only after individuals have already contributed. It does not actively mobilize resources for health, nor does it deploy its collection infrastructure to expand coverage, pool risk, or subsidize access. The fiscal relationship ends at recognition, not generation.
A similar logic governs the treatment of consumption taxes. Essential medicines, pharmaceuticals, and certain medical equipment continue to benefit from favorable VAT treatment. These provisions are defensible on equity grounds, particularly in a system where out-of-pocket spending remains high. But from a financing perspective, their effect is limited. They shield households from additional burden, yet they do not generate fiscal space for the health system. Again, health is insulated from taxation, not financed through it.
The clearest illustration of this restrained approach lies in the treatment of excise duties on tobacco, alcohol, and sugar-sweetened beverages. These taxes are frequently framed as “sin taxes,” ostensibly justified by their potential to alter harmful consumption patterns. In principle, excise taxation is meant to operate through a behavioural channel: higher prices reduce consumption, lower consumption reduces disease burden, and reduced disease burden lowers long-term health expenditure. In Nigeria’s case, however, this logic remains largely theoretical.
First, the excise rates themselves are modest. The levy on sugar-sweetened beverages, for instance, is widely recognised as too low to produce a meaningful price shock capable of altering consumption behaviour. Similar concerns apply to alcohol and tobacco, where cultural entrenchment, affordability, and illicit trade further blunt the intended deterrent effect.
Second, there is no publicly available evidence demonstrating that consumption of these products has declined since the introduction or adjustment of excise duties. On the contrary, available market indicators and anecdotal trends suggest that consumption has increased. Crucially, the state does not appear perturbed by this outcome. Higher consumption translates into higher excise revenue, and excise duties, in practice, function as reliable inflows to the general federal pool.
This reveals a deeper truth about how sin taxes are governed in Nigeria. Despite their rhetorical association with public health, excise duties are not treated as health instruments. They are treated as revenue lines. There is no systematic effort to measure behavioural change, no routine publication of consumption data linked to tax policy, and no formal evaluation of health impact. In policy terms, a behavioural instrument that is not measured is indistinguishable from a revenue instrument.
The absence of evidence of reduced consumption is not merely a data gap; it is an indication that behavioural change is not being actively governed as an objective.
From a health financing perspective, this has serious implications. Excise taxes generate revenue, yet none of that revenue is structurally linked to health financing. No portion is dedicated to prevention programmes, health insurance subsidies, or system strengthening. The public bears the health consequences of continued consumption, rising non-communicable diseases, increasing treatment costs, and productivity losses, while the fiscal gains accrue centrally, unconnected to the sector that absorbs the burden. In effect, Nigeria taxes harm, tolerates its persistence, and finances neither its prevention nor its consequences through the tax system.
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This outcome is unlikely to be accidental. The new tax law is too carefully constructed for its silences to be incidental. Rather, it reflects a broader fiscal philosophy that prioritizes flexibility, central discretion, and revenue pooling over sector-specific commitments. Earmarking, even in its softer forms, constrains the treasury’s freedom to allocate resources across competing priorities. From a public health financing standpoint, this caution is costly. It leaves health structurally dependent on discretionary budgets, weak insurance enforcement, donor support, and household spending, even as the state’s revenue-collection capacity improves.
The result is a growing asymmetry. Nigeria now possesses an increasingly sophisticated tax apparatus without a correspondingly sophisticated approach to financing social risk. Revenue mobilization is advancing, but allocation logic remains largely unchanged. Health remains acknowledged but peripheral, recognised, accommodated, and indirectly supported, yet excluded from the core architecture of taxation.
None of this implies that the new tax law should have transformed itself into a health financing statute. No! Tax laws cannot, and should not, bear the full weight of social policy. But in an era where domestic resource mobilization is increasingly framed as a means of financing development rather than merely sustaining government, the continued treatment of health as fiscally incidental is striking. The administrative infrastructure now exists to do more than collect revenue efficiently. What is missing is the institutional decision to deploy that capacity deliberately to protect households from the economic consequences of ill-health.
The most important lesson of Nigeria’s new tax law for national health financing, therefore, lies not in what it includes, but in what it leaves unresolved. The law strengthens the state’s ability to mobilize resources, yet remains silent on whether that capacity should be harnessed to address one of the most predictable and economically damaging social risks. As Nigeria deepens its commitment to domestic resource mobilization, the critical question will not simply be how much revenue can be raised, but how intentionally that revenue is aligned with protecting human capital. A tax system that grows in efficiency without growing in social purpose, risks becoming technically impressive but socially thin.
