The only number that matters: how much money the Nigerian state, all three tiers combined, actually has per citizen.
Nigeria’s 2026 federal budget was signed at roughly N68.3 trillion, and the 36 states plus the FCT budgeted about N40.1 trillion, a combined N108 trillion. At around N1,450 to the dollar, that is roughly $75 billion for about 230 million people, or about $320 per person per year, if every naira were collected and spent as budgeted . It never is. Capital budgets are chronically under-executed, revenue projections are missed, and a large share of the federal budget is debt service. On actual consolidated spending in recent years, most analysts converge on a range of $100 to $150 per person per year. Call it $130.
For perspective:
| Country | Approx. general govt spending per capita (US$/yr) | Multiple of Nigeria |
|---|
| Nigeria | ~130 | 1x |
| Kenya | ~600 | ~5x |
| Ghana | ~550 | ~4x |
| India | ~700 | ~5x |
| Indonesia | ~900 | ~7x |
| South Africa | ~2,000 | ~15x |
| Brazil | ~3,500 | ~27x |
| UK | ~18,000 | ~140x |
$130 per person per year must cover soldiers, police, judges, teachers, nurses, roads, vaccines, debt service, pensions, and the salaries of everyone who administers all of it. It costs less than a single secondary school textbook set in many countries. It is roughly what the NHS in Britain spends per citizen every eleven days.
The root cause is well documented: Nigeria’s general government revenue has hovered around 7 to 10 percent of GDP, among the very lowest ratios in the world (World Bank puts it near 7 percent in its human capital expenditure review). The sub-Saharan African average is around 17 percent; the OECD average is over 30 percent (see chart 2).
Here is the uncomfortable thesis this article defends: a state this poor has chosen to spend its scarce fiscal capacity, and to forgo enormous potential revenue, making things artificially cheap for everyone, including the rich, instead of buying the few things only a government can buy for the poor. Nigeria does not have a “big government” problem or even primarily a corruption problem, though corruption is real. It has a composition problem. It runs a universal discount store on a corner shop’s revenue.
The user’s list is a good starting point. Here is an expanded inventory of universal underpricing, with rough orders of magnitude.
| Policy | What Nigeria does | Fiscal cost / revenue forgone (approx.) | Who captures most of the benefit |
|---|
| Petrol pricing | Historic subsidy removed May 2023, but petrol still carries no VAT and no meaningful excise; a 5% fossil fuel surcharge in the 2025 Tax Act exists on paper but its commencement is left to a ministerial order and it exempts kerosene, LPG and CNG | The old subsidy peaked near $10bn/yr (over 20% of the budget); today the forgone fuel tax alone is worth $2 to 4bn/yr | Car owners, generator owners, the top 40% of households |
| Electricity | Band A tariffs raised in 2024, but Bands B to E remain subsidized; government has carried a tariff shortfall around N2 trillion/yr | $1.5 to 2.5bn/yr and rising, since Bands B to E are roughly 90% of the customer base | Grid-connected urban households; ~40% of Nigerians have no grid power and get nothing |
| VAT | 7.5%, the lowest standard rate among major African economies, held flat in the 2025 Tax Act after a planned rise was watered down in parliament; food, healthcare, education, transport zero-rated or exempt | Raising the standard rate toward the African norm of 15% with the same exemptions could plausibly yield 1.5 to 2.5% of GDP, i.e. $3 to 6bn/yr | Everyone, but in absolute naira terms the rich consume far more taxable goods |
| Roads | Federal roads almost entirely toll-free since tolls were abolished in 2004; a handful of concessioned exceptions | Nigeria forgoes user charges on ~35,000 km of federal roads while FERMA’s maintenance budget covers a fraction of need | Vehicle owners and haulage firms; the poor mostly ride in shared transport and walk |
| Property tax | Land Use Charge/tenement rates are tiny; property tax collections are well under 0.1% of GDP nationally vs 0.5 to 1% typical for developing countries and ~2% in OECD | $2 to 5bn/yr forgone at even modest developing-country rates | Owners of urban land and buildings, the single most concentrated asset class in Nigeria |
| Federal university tuition | Tuition-free by policy; total charges commonly N45,000 to N200,000/yr (under $150), among the cheapest degrees on earth | FG spends heavily per undergraduate while UBEC basic education funds go unmatched by states | Overwhelmingly children of the top two consumption quintiles, who dominate university admission |
| Public healthcare consultation | Nominal registration/consultation fees at public facilities | Small direct cost, but the flip side is drugs and diagnostics are unfunded, so patients pay out of pocket anyway | Ambiguous; see Section 4 |
| Health insurance | NHIA premiums heavily subsidized for the formal sector | Modest cost because coverage is tiny (~5% of population insured) | Federal civil servants and formal-sector workers, not the poor |
| Kerosene, LPG, CNG | Explicitly exempted from the new fossil fuel surcharge | Small | Mixed; some genuinely pro-poor rationale here |
Add to this the quieter universal subsidies: below-cost water tariffs in many states, free-on-paper primary education whose real costs (uniforms, levies, books) are shifted to parents, and the massive implicit subsidy of the pre-2023 exchange rate regime, which handed cheap dollars disproportionately to elites before unification.
The pattern is unmistakable. Nearly every one of these policies is (a) universal rather than targeted, (b) delivered through prices rather than transfers, and (c) captured mostly by people who are not poor.
Chart 1. Standard VAT rates: Nigeria has the lowest rate among major African economies.
Chart 2. General government revenue as a share of GDP. Nigeria collects among the least in the world.
This is one of the most robust findings in all of development economics, and it rests on a simple mechanical fact: when you subsidize a price, the benefit scales with consumption, and the rich consume more.
• The IMF’s cross-country work on fuel subsidies consistently finds the richest 20% of households capture around 6 times more of a petrol subsidy than the poorest 20%, because the poor do not own cars.
• Free federal university tuition subsidizes the students who reach university. In Nigeria, children from the poorest 40% of households are dramatically underrepresented in tertiary enrollment because they were filtered out long before, by the roughly 18 to 20 million out-of-school children and by learning poverty (the share of 10-year-olds who cannot read a simple text) estimated above 70%. Free tuition is a transfer to families who got their children through secondary school, i.e. mostly the non-poor, financed by taxes and oil revenue that belong to everyone.
• Toll-free roads subsidize vehicle-kilometers. The poorest Nigerians travel few of them.
• A low VAT is the least regressive item on the list, since the poor do consume, but Nigeria already zero-rates food, medicine, education and transport, which is precisely how you protect the poor from VAT. Keeping the standard rate at 7.5% on airline tickets, restaurant meals, electronics and professional services protects the consumption basket of the upper middle class.
• Tiny property taxes are almost comically regressive as a policy stance: the one tax that falls squarely on accumulated urban wealth, cannot flee the country, and is the standard financing backbone of local services worldwide, is the one Nigeria has essentially declined to collect.
Meanwhile, the things that are genuinely pro-poor are the things Nigeria underfunds:
• Government health spending is around 0.5% of GDP, nearly the lowest in the world, and health takes 4 to 5% of budgets against the 15% Abuja Declaration target Nigeria itself championed.
• The consequence is that out-of-pocket payments are about 75% of all health spending, the fourth-highest share on earth (chart 3). “Cheap consultation” at a public clinic is an illusion of pro-poor policy: the consultation is cheap, but the drugs, diagnostics, and hospitalization that follow are cash-and-carry, and they impoverish millions of households a year.
• Education gets 6 to 8% of the federal budget against the international (Incheon) benchmark of 15 to 20%, and the money that exists is tilted toward tertiary institutions serving the few rather than the foundational years serving the many.
The paradox in one sentence: Nigeria’s government is cheap where the poor need it to spend (primary health, basic education, water, nutrition) and generous where the non-poor consume (fuel, electricity, tertiary education, untaxed property and roads).
Chart 3. Out-of-pocket share of total health spending. Nigeria at roughly 75% is among the highest on earth.
The comparison that matters is not with rich countries but with poor and lower-middle-income countries that made different choices.
| Margin | Nigeria | Kenya | Ghana | India | Indonesia | Rwanda |
|---|
| Standard VAT | 7.5% | 16% | 15% (plus levies) | GST 5 to 28% (18% modal) | 11 to 12% | 18% |
| Tax on petrol | None (VAT-exempt; surcharge dormant) | 16% VAT plus excise plus levies (~40% of pump price is tax) | Multiple levies | Heavy excise; fuel is a major revenue source | Moved from subsidy to taxation after 2015 reform | Taxed |
| Road tolling | Federal roads toll-free | Expressway tolling (Nairobi Expressway PPP) | Abolished 2021 (widely criticized, partial reintroduction debated) | ~1,000+ toll plazas; tolls fund the world’s largest highway build-out | Extensive tolled network | Limited |
| Property tax effort | Negligible | Low but rising | Low | Significant municipal source | Significant | Digitized land registry enabling collection |
| Tertiary tuition | Free at FG universities | Cost-sharing plus loans (HELB) | Cost-sharing | Fees plus scholarships; public spending tilted to school education | Fees plus scholarships | Fees plus loans |
| Health coverage of the poor | ~5% insured; 75% out-of-pocket | SHIF/NHIF expanding | NHIS covers large share, financed partly by an earmarked 2.5% VAT levy | PM-JAY insures ~500m poor people for hospitalization | JKN covers ~90%+ of population | Mutuelles de Sante: ~85 to 90% community coverage, OOP ~11% |
| Flagship transfer to the poor | Modest, patchy cash transfer registry | Inua Jamii cash transfers | LEAP cash transfers | Direct Benefit Transfer moved subsidies to ~900m bank-linked accounts | Subsidy savings converted into KIP/KIS cards for school and health | Ubudehe-targeted programs |
Three case studies deserve emphasis because they are precisely the “swap” this article recommends:
Indonesia (2005, 2015). Facing fuel subsidies that consumed up to a quarter of the budget, Indonesia cut them and simultaneously launched compensating cash transfers to tens of millions of poor households, later channeling the savings into JKN, now one of the largest single-payer health schemes in the world. Poverty fell; the budget was rebuilt around people rather than prices.
India (2013 to present). Rather than pricing LPG and food cheaply for all, India built the JAM stack (bank accounts, biometric ID, mobile) and moved hundreds of subsidy and welfare schemes to Direct Benefit Transfer, while taxing petrol heavily and tolling highways aggressively to finance an infrastructure boom. India charges the middle class for roads and fuel and pays the poor directly.
Ghana’s health VAT. Ghana finances its National Health Insurance Scheme substantially through an earmarked 2.5 percentage-point VAT levy. Citizens can see the tax and see the entitlement it buys. This is the “fiscal contract” Nigeria has never offered: Nigerians are asked to accept higher taxes in the abstract, never as the visible price of a named, guaranteed benefit.
Rwanda is the strongest rebuke to the claim that poverty excuses inaction: with per-capita government resources not far above Nigeria’s for much of the 2000s, it built community health insurance covering the vast majority of the population and pushed out-of-pocket health spending down toward 11%, one-seventh of Nigeria’s share.
The point is not austerity. The point is that every naira of universal underpricing has an opportunity cost measured in the things only government can provide. Here is the swap, ranked by political and administrative feasibility.
| Stop/shrink | Approx. annual value | Redirect to | Why the swap is pro-poor |
|---|
| 1. Collect property tax properly (Land Use Charge at realistic rates on high-value urban property, starting with Lagos, Abuja, Port Harcourt, Kano) | $2 to 5bn | State primary healthcare and urban services | Taxes concentrated wealth; funds local services the poor use; immovable base |
| 2. Activate and extend the fossil fuel surcharge; end petrol’s VAT exemption over 3 years | $2 to 4bn | Primarily a ring-fenced Road Fund for maintenance of federal, state and rural roads, with a minority share (say 10 to 20%) to respiratory and primary health, reflecting the pollution externality of fuel combustion | A classic user charge: those who burn the fuel and use the roads fund their upkeep, and the poor gain most from maintained rural feeder roads that cut transport and food costs; the health tranche compensates those breathing the fumes |
| 3. Raise VAT in steps to 12.5 to 15% while keeping food, medicine, education, transport zero-rated; earmark 2 to 3 points, Ghana-style, to visible guarantees | $3 to 6bn | Because roughly 90% of VAT proceeds flow to states and local governments under Nigeria’s sharing formula, the earmark must be designed around what subnationals deliver: state primary healthcare boards, basic schools, school feeding, water and sanitation, with disbursement conditional on published service benchmarks | The zero-rating shields the poor’s basket; the poor’s daily services (PHC, primary schools, markets, water) are constitutionally subnational, so this is the tier where extra VAT can actually reach them; conditionality plus earmarking builds the trust the government currently lacks |
| 4. Toll the top 5,000 km of federal expressways via PPP concessions with maintenance obligations | $0.5 to 1bn plus private capex | Rural feeder roads and road maintenance | The poor’s binding constraint is the untarred feeder road to market, not the free expressway |
| 5. Replace free FG tuition with means-tested fees plus expanded NELFUND loans and full scholarships for the poorest (NELFUND already reaches 450,000 students, the machinery exists) | $0.3 to 1bn reallocation | Foundational learning: teacher deployment, reading programs, matching UBEC funds so states actually draw them | Shifts money from the top of the education pyramid, where the poor are absent, to the base, where 18 to 20 million out-of-school children are |
| 6. Convert remaining electricity subsidies into a lifeline tariff for genuinely small consumers only (for example, consumption below 50kWh/month), moving Bands B to E, who are roughly 90% of the customer base and carry the bulk of the tariff shortfall, to cost-reflective tariffs over time | Larger than commonly quoted: with Bands B to E still subsidized, the shortfall is on the order of $1.5 to 2.5bn/yr and rising with the exchange rate and gas costs | Solar home systems and mini-grids for the 40% without power, plus the lifeline tariff itself | The current subsidy excludes, by definition, everyone without a grid connection, i.e. the poorest; a 50kWh lifeline protects small households precisely while ending the blanket discount to large urban consumers |
| 7. Build the plumbing: a single dynamic social registry linked to the NIN (National Identification Number) plus bank/mobile-money accounts for direct cash transfers | Costs money up front | Enables every swap above to be compensated; the NIN already covers over 100 million Nigerians, so the identity layer largely exists and the missing pieces are the registry and payment rails | Cash compensation is what made Indonesia’s and India’s reforms survivable politically |
Rough total: $9 to 20 billion per year of fiscal space, against current consolidated spending of perhaps $30 to 40 billion actually executed. This is not marginal. It is the difference between a $130 government and a $200-plus government, targeted at the bottom half.
A note on tiers: the composition of this fiscal space matters as much as its size. Property tax and roughly 90% of any VAT increase accrue to states and local governments, which is exactly where it should sit, because primary healthcare, basic education, water, local roads and (prospectively) community policing are subnational functions. The federal role in this agenda is narrower but critical: activating the fuel surcharge and Road Fund, tolling the expressway network, reforming tertiary financing, running the NIN-linked registry and transfer rails, and setting the conditionality frameworks that stop new subnational revenue from disappearing into overheads.
Chart 4. What Nigeria forgoes on universal prices versus what it allocates to basic services (illustrative orders of magnitude).
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A funded primary healthcare guarantee, built on machinery that already exists. Nigeria does not need to invent a health financing channel. The Basic Health Care Provision Fund, funded by not less than 1% of the Consolidated Revenue Fund under the National Health Act, already flows through the NPHCDA gateway (facility-level primary healthcare development supporting the subnationals) and the NHIA gateway (insuring vulnerable groups), alongside traditional federal and state health budget lines. The problem is scale and execution, not architecture: 1% of a $130-per-capita government is a few dollars per person per year. The reform agenda is therefore to top up these existing gateways, with the minority health tranche of the fuel surcharge and part of the subnational VAT earmark, so that drugs, diagnostics and skilled birth attendance are actually stocked and free at PHC level for the bottom 40%. Success metric: out-of-pocket share falls from 75% toward 40% in a decade.
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Foundational learning. The binding constraint on Nigerian growth is not too few graduates; it is that most 10-year-olds cannot read. Money follows the child into primary school: reading materials, structured pedagogy, teacher presence.
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Cash transfers with real coverage. A credible, digital, audited transfer of even N15,000 to 25,000/month to the poorest 15 to 20 million households would do more for poverty than every price subsidy combined, at comparable cost.
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Rural connectivity and irrigation over urban expressway duplication.
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Security and justice, including funded subnational policing. Security is the ultimate public good, without which none of the above functions in large parts of the country. A portion of the new subnational revenue (property tax and the states’ 90% share of expanded VAT) should be explicitly dedicated to state and community policing: recruitment, training, forensics, and accountability structures. Nigeria polices 230 million people with a single federal force that is undersized, underfunded and remote from local intelligence; the constitutional debate on state police is, at bottom, a fiscal question, and the revenue measures above are what would make decentralized policing more than a slogan. Insecurity is also regressive: it is farmers, rural traders and northern households, not the gated elite, who bear kidnapping, banditry and the collapse of farming seasons.
An article that only prosecutes the case is propaganda, so here are the strongest objections, and where they genuinely bite.
“Nigerians pay a self-help tax already.” True and important. Households privately provide their own power (generators), water (boreholes), security (vigilante levies, estate guards), and education (60%+ of Lagos pupils are in low-cost private schools). Measured properly, Nigerians’ effective burden is far above the official tax ratio. But this cuts for the argument, not against it: people are already paying 15 to 20% of income for terrible substitutes; the reform case is that pooled, taxed provision of health insurance and infrastructure is cheaper per unit than 200 million people running private mini-states.
“Government cannot be trusted with more money.” The trust deficit is the single strongest objection, and the 2023 subsidy removal illustrates it: the subsidy was removed, prices tripled, and citizens saw little visible compensation, which poisons the well for the next reform. The answer is sequencing and earmarking, not paralysis: visible, named, ring-fenced benefits (Ghana’s health levy model), published transfer rolls, and independent audit must precede or accompany each revenue measure. Reform that takes first and delivers later will fail, and deserve to.
“Timing: households are reeling.” Also true. Subsidy removal plus devaluation pushed inflation above 30% in 2024 and the World Bank estimated more than half of Nigerians in poverty. This argues for the compensation-first sequencing above, and for starting with the least regressive instruments (property tax, expressway tolls, luxury-tilted VAT items) before touching anything in the poor’s basket.
“Free tuition is social mobility.” For the individual poor student who makes it, yes, and the answer is not fees for all but guaranteed full funding for the poor (loans plus scholarships) alongside fees for those who can pay, which is exactly what NELFUND’s existing machinery permits. Charging the children of the elite $2,000 a year to fund reading programs for 20 million out-of-school children is a trade any egalitarian should take.
“Tolls and fuel taxes raise transport costs for everyone, including food prices.” Partially true; taxes on diesel and intercity haulage pass through to the poor’s consumption. That is why the sequencing above starts with petrol (private cars) and passenger expressways rather than diesel and rural roads, and why compensation via transfers matters.
“Low VAT is a competitiveness strategy.” No serious evidence supports this at 7.5% vs 12.5%. Firms cite power, insecurity, logistics, and FX volatility as binding constraints, not VAT, and the 2025 Tax Act’s expanded input VAT recovery already reduces the cascade that actually hurt firms.
Nigeria’s political settlement since the 1970s has run on an implicit deal: the state takes little from citizens and gives them cheap things, oil pays the difference, and in exchange citizens ask few questions. Oil can no longer pay the difference. What remains is the residue of the deal, universal cheapness, without the revenue that once financed it, and the result is the $130 state: too poor to protect its citizens from disease, illiteracy, and violence, yet still rich enough to keep petrol untaxed, expressways free, mansions nearly untaxed, and university free for the children of those who least need it.
The way out is not “small government” or “big government” but a different government: one that charges realistic prices to those who can pay, taxes immobile wealth and general consumption at ordinary African rates, and converts every naira of the proceeds into three visible guarantees for the bottom half: a clinic that actually has drugs, a school where children actually learn to read, and cash in the hands of the poorest households. Indonesia did this. India did this. Rwanda did this on less money than Nigeria has. The constraint is not arithmetic. It is the courage to replace cheap government with a government worth paying for.
• 2026 Federal Appropriation Act ~N68.3tn; combined state and FCT 2026 budgets ~N40.1tn (BudgIT; Punch/Economic Confidential analyses, 2026)
• Nigeria Tax Act 2025: VAT retained at 7.5%; expanded zero-rating of food, health, education, transport; 5% fossil fuel surcharge with ministerial commencement and kerosene/LPG/CNG exemptions (EY, BDO, Baker Tilly summaries)
• VAT comparisons: Kenya 16%, Ghana and South Africa 15% (statements of the Presidential Fiscal Policy and Tax Reforms Committee, Dec 2025)
• Government revenue ~7% of GDP; health budget share ~4 to 5%; government health spending ~0.5% of GDP; out-of-pocket ~75% of health spending, fourth-highest globally (World Bank Human Capital Public Expenditure and Institutional Review, 2024; WHO Global Health Expenditure Database)
• Health insurance coverage ~5% of the population (AHOP/WHO Nigeria health system profile); Basic Health Care Provision Fund: not less than 1% of the Consolidated Revenue Fund under the National Health Act 2014, disbursed through NPHCDA and NHIA gateways
• Federal university total fees commonly N45,000 to N200,000/yr; NELFUND disbursed ~N90bn to ~450,000 students by Sept 2025 (Nigerian government statements; Dubawa fact check)
• Out-of-school children: 18 to 20m and learning poverty above 70%: UNESCO/UNICEF and World Bank estimates
• Comparator programs: Indonesia BLT/JKN subsidy reforms (2005, 2015); India DBT and PM-JAY; Ghana NHIS VAT levy; Rwanda Mutuelles de Sante; Kenya Inua Jamii
• Per-capita spending comparisons are approximations from IMF WEO general government expenditure and UN population data; Nigerian actual (executed, consolidated) spending estimates vary between ~$100 and ~$150 per capita depending on exchange rate and execution assumptions
All dollar figures at approximately N1,450/US$. Orders of magnitude, not precision, are the point.