Policy Brief: DDI of Nigeria’s Audit Failure Under the World Bank Fiscal Governance Project

Date: June 2025

Context: Nigeria is set to forfeit $4 million in performance-based funding from the World Bank due to a failure to meet international auditing standards for key revenue-generating agencies—the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS). The funding loss forms part of a broader $10.4 million cancellation under the $103 million Fiscal Governance and Institutions Project, financed through an IDA credit facility. Diplomatic and Developmental Implications (DDI) of Nigeria’s Audit Failure Under the World Bank Fiscal Governance Project

Key Issues:

1. Loss of Performance-Based Funds:
   • $4 million tied to audit of FIRS and NCS deemed unachieved.
   • $4.5 million for Revenue Assurance and Billing System uncompleted.
   • $1 million for a National Budget Portal unaccounted.
   • $0.9 million in technical assistance funds left unused.
2. Auditing Standards Not Met:
   • Office of the Auditor-General submitted audit reports for FY 2018–2021 that failed to meet international standards.
   • Independent Verification Agent assessed these reports as inadequate.
3. Project Restructuring and Reduced Scope:
   • Initial $125 million envelope was reduced to $103 million in 2024.
   • With this latest $10.4 million cancellation, total project funding drops to $92.6 million.Oil Drilling in Northern Nigeria Resumes, Says NNPC
   • https://www.thecheernews.com/dangote-group-pays-n450-billion-in-taxes-in-2024-affirms-commitment-to-national-development/

Diplomatic Implications:

1. Eroded Credibility with Bretton Woods Institutions:
   • Future loans and grants may come with stricter terms.
   • Nigeria could face diminished influence within World Bank and IMF African constituencies.
2. Diminished Donor Confidence:
   • Other international donors (e.g., USAID, EU, DFID) may become reluctant to provide direct funding or technical support for fiscal reforms.
   • Increased likelihood of funds being channeled through third-party auditors or agencies.
3. Setback to Regional Leadership Role:
   • Nigeria’s advocacy for more flexible African development financing may be weakened.
   • Perception of Nigeria as a fiscal reform model may be compromised.
4. Impacts on Public Financial Management Reform Agenda:
   • Potential rollback or stagnation in audit modernization and transparency tools (e.g., Open Treasury, IFMIS).
   • Reduced support for agencies like the Corporate Affairs Commission and Budget Office.
5. Loss of Investor Confidence:
   • Foreign and domestic investors may question the government’s ability to enforce transparency in tax and customs administration.
   • PPPs and fiscal-risk sharing models could become harder to negotiate.

Developmental Implications:

1. Delayed Revenue Modernization:
   • Incomplete billing system and failed audits hinder the government’s ability to track and collect taxes efficiently.
2. Weak Institutional Oversight:
   • Office of the Auditor-General’s competence and independence are now under scrutiny.
3. Poor Project Delivery Culture:
   • Signals systemic issues in project monitoring and accountability.
4. Loss of Reform Momentum:
   • Missed targets undermine broader reform credibility, even as non-oil revenue performance has improved.

Recommendations:

1. Commission Independent Review:
   • Immediate review of the failed audit process with public disclosure.
2. Capacity Building for OAuGF:
   • Investment in training, tools, and international audit standard compliance.
3. Enhanced Oversight and Reporting:
   • Real-time tracking and public dashboards for performance-based reform milestones.
4. Re-engagement with World Bank:
   • Submit a corrective action plan and request technical assistance for audit reform.
5. Reform Communication Strategy:
   • Clarify progress made and challenges faced to maintain international and domestic confidence.

Conclusion: Nigeria’s audit failure under the World Bank’s Fiscal Governance Project has far-reaching diplomatic and developmental consequences. Prompt corrective actions are essential to restore confidence, re-engage donors, and prevent a broader loss of institutional credibility.

Prepared by: Dayo Adesulu, Editor-in-Chief, The Cheer News, dayoadesulu@gmail.com