Focus on Nigeria’s Non-oil Revenue Potential

Obinna Chima

The Presidency declared during the week that the nation is witnessing a historic shift in its public finances, with non-oil revenues driving the country’s strongest fiscal performance in decades.

Presidential spokesperson, Bayo Onanuga, who revealed the refreshing departure from the old cycle, stated that between January and August 2025, total government collections peaked at N20.59 trillion, a 40.5 per cent increase compared with the N14.6 trillion recorded in the same period in 2024.

According to Onanuga, N15.69 trillion came from non-oil sources, accounting for three out of every four naira collected, describing the figures as a decisive break from decades of dependence on crude oil exports.

“This is a watershed moment for our economy. For the first time in decades, oil is no longer the dominant driver of government revenue. Reforms, compliance, and digitisation are powering a more resilient economy,” Onanuga was quoted to have said.

In chest-thumping fashion, President Bola Tinubu said the cheering data are proof that the government’S reforms to expand the revenue base and strengthen compliance are working.

“We have laid the foundations for a fairer, stronger fiscal system that will deliver for all Nigerians. Our revenues are growing because we are making every naira count, and because Nigerians are responding to reforms that are in the interest of the country,” the president declared.

The surge in non-oil inflows was as a result of a combination of reforms. These included the Nigeria Customs Service’s automation, digitised tax filings, tighter enforcement, and broadened compliance. For instance, the Nigeria Customs Service collected N3.68 trillion in the first half of the year, surpassing its target by N390 billion and already meeting 56 per cent of its full-year goal. Similarly, the Federal Inland Revenue Service has expanded digitised tax administration, bringing more businesses and individuals into the net. No doubt, inflation and exchange rate revaluation also contributed to the increase in non-oil revenue.

Indeed, for decades, Nigeria’s public finances have been shackled to the unpredictable swings of the international oil market. As an oil-rich country, Nigeria depends on crude oil as a major source of foreign exchange and revenue to the government. Crude oil revenue has constituted about 80 percent of foreign exchange earnings in the last four decades. And given the oligopolistic nature of the crude oil market, Nigeria has little control over both the price and output, thus becoming highly vulnerable to external shocks. With a greater chunk of foreign exchange earnings coming from crude oil export, changes in crude oil prices affect the country’s external reserve and the value of the naira exchange rate.

This structural dependence creates both vulnerability and complacency as successive governments relied on oil rents to finance budgets, fund infrastructure, and sustain subsidies, while neglecting the harder but more resilient path of diversifying revenue sources. Lack of diversification and poor management of resources result in severe financial strains on the public sector whenever oil prices decline. The over-reliance on resource windfalls often leads to budgetary imbalances, fiscal mismanagement and fiscal indiscipline.

That is why the latest non-oil revenue data clearly reflects a profound structural shift in Nigeria’s economy and its governance capacity. If the path is sustained, it can provide the fiscal stability required to build infrastructure, fund social investment programmes, and reduce borrowing pressures that have over the years being a source of concern to citizens.

Nigeria has long proclaimed the need to diversify away from oil. Over the years, there have been different economic programmes focused on diversifying the economy from its heavy reliance on crude oil revenue. From Vision 2020, the National Economic Empowerment and Development Strategy, The Yar’Adua Administration’s Seven Point Agenda, the Economic Recovery and Growth Plan, Transformation Agenda, Nigeria Agenda 2050 (NA 2050), among several reform blueprints, highlighted the potential in non-oil revenue and the need to diversify the economy. However, execution often lagged, and oil’s allure remained irresistible.

Therefore, to sustain this momentum, the federal government must shun the temptation to impose heavier burdens on compliant taxpayers, but instead broaden the tax net by capturing more of the informal economy.

Also, the government must take steps to ensure the simplification of tax regimes by pushing for mobile-based compliance tools and incentives for small businesses to formalise to ensure inclusivity.

Additionally, reforms in revenue agencies must be institutionalised with legal safeguards and autonomy to prevent reversals under future administrations. It is equally vital that the government invests these revenues wisely to guarantee trust and enhance compliance. Nigerians will support taxation when they see tangible improvements in roads, schools, hospitals, and power supply. Linking revenue growth directly to visible projects strengthens the social contract and encourages compliance.

Today, the heavy reliance on indirect taxes like VAT and customs duties means the system remains vulnerable, and the federal government must take steps to improve direct taxation from wealthy individuals and corporations who continue to underpay.

Sustaining the focus on non-oil revenues also involves going beyond taxation. Export diversification is crucial, as steps must be taken to ensure that manufacturing, services, and agriculture contribute significantly to foreign earnings. Trade in agricultural goods between Nigeria and the rest of the world is still relatively small. Today, the Nigerian agricultural sector is replete with diverse opportunities. Being able to effectively harness these opportunities will drive agricultural development and expand agricultural export. For instance, analysis by the Nigerian Export Promotion Council (NEPC) showed that the total amount of estimated untapped potential by 2021 for Nigerian exports of cocoa beans to the ten best markets (Germany, Malaysia, Singapore, Turkey, Netherlands, Italy, Japan, France, Mexico and Indonesia) is around $425 million, according to a PWC report.

In the same vein, the estimated worth of cocoa butter for the top ten markets was put at $81.9 million, while the value of untapped potential in the market for cocoa paste by 2021 stood at $6.3 million. The untapped market potential for sesame seeds to the top ten markets (China, Japan, South Korea, Mexico, Poland, France, Lebanon, the United States, Canada and the UK) was estimated at US$170 million. The Nigerian agricultural sector is replete with diverse opportunities. Being able to effectively harness these opportunities will drive agricultural development, expand agricultural export, and boost non-oil revenue.

At the subnational level, state governments should take responsibility for mobilising revenues from property taxes, agricultural levies, and service charges rather than depending entirely on federal allocations.

Reforming the country’s outdated Land Use Act could unlock vast opportunities in real estate taxation and capital formation. At the same time, the government must build trust by ensuring that enforcement is impartial and not unduly targeted at small businesses while large corporations and politically connected elites avoid payments.

The non-oil sector has huge potential for foreign exchange earnings and can bring about huge employment generation and poverty reduction through the extensive backward linkages it offers.

To sustain the momentum, discipline, innovation, and inclusion are required, as this could mark the beginning of Nigeria’s long-awaited economic rebirth and create a future where oil no longer dictates the country’s destiny, but just one of many contributors to a truly diversified, resilient, and inclusive economy.