The Federal Government is set to lose $4 million from a World Bank loan due to its failure to meet auditing standards on a key revenue reform project covering the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service. The funds are part of the $103 million Fiscal Governance and Institutions Project, a public financial management initiative financed by the International Development Association. According to a World Bank restructuring paper dated June 2025, the revenue assurance audit covering the FIRS and Customs for the 2018 to 2021 financial years was assessed as not achieved because the reports submitted did not meet international auditing standards.
The failed audit was one of ten performance-based conditions under the project that the government could not deliver before the closing date of June 30, 2025. As a result, the Federal Ministry of Finance formally requested the cancellation of $10.4 million in project funds. The breakdown shows that $4.5 million was tied to the uncompleted Revenue Assurance and Billing System, while $1 million was allocated to the development of a National Budget Portal. Additionally, $0.9 million in technical assistance funding was left uncommitted and has also been cancelled. This latest adjustment follows an earlier restructuring in June 2024, when $22 million was dropped from the original $125 million envelope, bringing the project down to $103 million.
With the new cancellation, the total funding now stands at $92.6 million. The final disbursement on the project is projected at $96.04 million, which represents 93% of the pre-cancellation total of $103 million. Despite the reduction in funding, the project has recorded progress in other areas, including revenue performance. According to the World Bank, non-oil revenue outturn was 153% of the budgeted target in 2024, up from a baseline of 64.9% in 2018. The World Bank attributed the increase in non-oil revenue to the unification of Nigeria’s exchange rate, improved tax administration via the TaxProMax system, and reforms that automated revenue remittances from ministries and agencies.
Other areas of progress include the launch of the Electronic Register of Beneficial Owners by the Corporate Affairs Commission, which now covers about 40% of registered businesses, and the publication of a National Asset Registry and financial reports by the Ministry of Finance Incorporated. However, capital expenditure execution remains below expectations at 50%, short of the 65% target, while project monitoring and evaluation were rated as moderately unsatisfactory. The Federal Government will need to address these challenges to ensure the successful implementation of the project and achieve its objectives.
Despite these challenges, the project has made significant progress in improving the credibility of public finance and national statistics through reforms in revenue administration, budget transparency, and data systems. The loss of $4 million from the World Bank loan due to failed audit highlights the need for the Federal Government to improve its auditing standards and compliance with international best practices. While the project has recorded progress in other areas, the government must address the challenges and shortcomings identified in the project to ensure its successful implementation and achieve its objectives. With the final disbursement projected at $96.04 million, the government must ensure that the remaining funds are utilized effectively to achieve the project’s objectives and improve the country’s public financial management systems.
