…Reforms signal new dawn for inclusive growth, investment in Nigeria

FOR decades, Nigeria’s tax system has been widely regarded as overly complex, burdensome for businesses, and inefficient in revenue generation. It discouraged investment and often penalized the poor disproportionately. Calls for reform have echoed through successive administrations, but little progress was made—until now.

President Tinubu’s administration took a bold approach by embarking on a comprehensive review of Nigeria’s tax framework. With the support of industry stakeholders and experts, the administration’s reforms aim to create a system where taxation serves as a tool for economic growth, infrastructure development, and poverty reduction, rather than a constraint.

Key Features of the New Tax Regime

Under the new framework, the Federal Inland Revenue Service (FIRS) will be renamed and restructured as the Nigeria Revenue Service (NRS), with an expanded mandate to consolidate revenue collection functions across several federal agencies—including the Nigeria Customs Service, Nigerian Ports Authority (NPA), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Nigerian Maritime Administration and Safety Agency (NIMASA).

This consolidation is expected to streamline processes, reduce redundancies, and boost transparency in revenue collection.

Some of the notable provisions in the new tax laws include:

Tax Relief for Low-Income Earners: Workers earning ₦800,000 or less annually will be completely exempt from personal income tax. Additionally, those earning below ₦250,000 per month—estimated to be more than a third of Nigeria’s workforce—will not be subject to PAYE (Pay-As-You-Earn) deductions.

Tiered Personal Income Tax: Individuals earning over ₦50 million annually will be taxed at a rate of 25%, introducing a more progressive tax structure.

SME Tax Exemptions: Small, micro, and nano businesses are exempt from corporate income tax, VAT collection, and certain withholding tax obligations. Medium and large companies will benefit from a reduced corporate tax rate—from 30% to 25%.

VAT Exemptions on Essentials: To cushion the impact on the poor, the government has retained VAT at 7.5% but exempted essential goods and services such as food items, education fees, pharmaceuticals, electricity, and medical services.

Development Levy: A new development levy ranging from 2% to 4% will be implemented to support national institutions like the Tertiary Education Trust Fund (TETFund), National Education Loan Fund (NELFUND), NITDA, and NASENI.

A Pro-Poor and Growth-Oriented Agenda

Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, explained that the primary focus of the reforms is to reduce inequality and support Nigeria’s most vulnerable populations. He emphasized that over 90% of small businesses will now operate tax-free, helping them grow and formalize without the previous compliance burdens. Oyedele added that transportation, accommodation, and housing services—which account for a large portion of household expenses—have been made VAT-exempt, a move expected to reduce the cost of living for millions of Nigerians.

Reception from the Business Community

The reforms have received strong backing from organized private sector leaders. The Nigeria Employers’ Consultative Association (NECA) commended the Tinubu administration’s boldness and sincerity in tackling a long-standing issue. NECA’s Director-General, Adewale Smatt-Oyerinde, noted that businesses have battled a fragmented tax environment for over a decade, and harmonizing tax, levies, and fees is a significant step forward.

He, however, cautioned that implementation remains a critical phase. “Assent is one hurdle; implementation is another. We are entering the most important part of this reform journey,” he said.

NECA President, Dr. Ifeanyi Okoye, echoed this sentiment, urging all stakeholders to focus on the bigger picture—empowering enterprises, creating jobs, and enhancing living standards.

Experts Weigh In

Economist and policy expert Dr. Muda Yusuf, Executive Director of the Centre for the Promotion of Private Enterprise (CPPE), described the reform as “a major milestone” in repositioning Nigeria’s tax administration. According to him, the laws offer: Elimination of outdated tax laws; Greater reliance on technology; Simplification of tax structures; Expanded incentives for small businesses and oil & gas investors.

Better revenue outlook to support infrastructure development and fiscal consolidation.

He emphasized the need for continuous monitoring, public awareness, and a willingness to make adjustments as implementation progresses. “Reform is a journey, not a destination,” Yusuf said.

Tax Justice and Social Equity

Professor Uchenna Uwaleke, Director of the Institute of Capital Market Studies at Nasarawa State University, said the new laws are not only about revenue but also about social justice. “For the first time in years, we have a tax system that classifies low-income earners as they should be—and exempts them. It is both fair and growth-oriented.”

He praised the consolidation of tax collection under the NRS as a move that could eliminate leakages and inefficiencies. However, he stressed the need for capacity building, internal controls, and public education to support implementation.

Looking ahead, the tax reforms represent one of the Tinubu administration’s most far-reaching economic policies to date. With six months before enforcement, the Nigerian government plans to roll out comprehensive stakeholder engagement and public education campaigns. If successfully implemented, the reforms are expected to significantly improve Nigeria’s ease of doing business, attract local and foreign investment, promote social equity, and strengthen the government’s ability to fund critical infrastructure and services.

While challenges remain—particularly in execution—the new tax laws signal a fundamental shift in Nigeria’s fiscal strategy: one that prioritizes fairness, growth, and the collective well-being of citizens over bureaucratic hurdles and outdated practices.

As President Tinubu’s reforms take root, Nigerians and investors alike will be watching to see whether this ambitious overhaul truly delivers on its promise of a more inclusive, prosperous future.

“If successfully implemented, the reforms are expected to significantly improve Nigeria’s ease of doing business, attract local and foreign investment, promote social equity, and strengthen the government’s ability to fund critical infrastructure and services.”

The tax guru also believed the opportunity to leverage technology, the certainty of the rules and provisions, the laws, now being in tandem with modern business and economic realities, also remain a huge relief to businesses.

In his own analysis of the new tax document, the Chief Executive Officer of Wealthgate Advisors, Mr. Adebiyi Adesuyi, sees the new tax law as a game changer in the Nigerian tax system.

He expressed optimism that the new law will go a long way in checking corruption which had been a regular feature in the old tax regime.

“Previously, every agency of the Federal Government collected taxes and revenues on behalf of the Government, spent a large percentage of their collections on salaries and irrelevant projects before remitting what they liked to the Government Treasury. The new law has addressed this type of corruption and poor tax administration.

“The Nigerian Revenue Service (NRS), created by the Law, has now replaced FIRS and it will begin to collect tax and non-tax revenues on behalf of the Government.

“Henceforth, NRS will collect taxes that were previously paid to FIRS as well as revenues payable to the Customs, Nigerian Upstream Petroleum Regulatory Commission, and Nigerian Maritime Administration and Safety Agency.

“This new arrangement will give taxpayers the benefits of unification of the tax system instead of paying revenues to the Government through different agencies. There will also be transparency in the system thereby ensuring that the Government gets what is actually collected on its behalf,” he stated.

Describing the new system as similar to Britain’s His Majesty Revenue and Custom, Adesuyi believed it would help the government to be more effective in tax administration.

On the implications for businesses, the Wealthgate Advisors boss added that it would be a good incentive for some category of business owners, and economic relief for low-income citizens, since they will be exempted from taxes.

The concerns, the fears…

But despite the universal acclamations, the Taiwo Oyedele-led tax committee has been getting since the signing of the document into law, there are concerns, too from some quarters.

For instance, some small business operators will for now, want to maintain a ‘wait-and-see attitude’, until the law becomes fully functional, and the implications well felt.

Rasheed Olaiya, who runs a printing shop, somewhere around Iyana Ipaja, in Lagos, is of the opinion that the law should be celebrated with caution, especially by businesses that fall under his own category, and expected to enjoy some tax relief.

“Until January 1, 2026 comes, and I no longer see men from the state and local governments, asking me for one levy or the other, then I can celebrate,” he stated.

Olaiya would want to know the actions his business, as a supposed beneficiary could take if some agents of government at the sub-nationals decided to defy the law, and ask him for levies already waived in the document.

Gbadebo Raheem,  a truck driver would also want to know what becomes of local government’s levies, he and his colleagues are being made to pay from town to town, when in transit.

He argued that until the new tax law effectively addressed some of these issues, and that of the area boys, that have become a menace on the road, the battle, he said, could be described as far from being won; since their activities usually act as a major disincentives to businesses.

Adesuyi’s concerns, however, is his belief that the new law would further increase the taxes collected from Southerners and their businesses, while the North continues to bring less to the national table; thereby making it increasingly difficult to restructure Nigeria, and entrench fiscal federalism.

“It will be a case of robbing Peter to pay Paul,” he concluded.

READ ALSO: Tax reform bill passage: New tax laws, better Nigeria