OPS: Reforms will drive economic growth
ONOME AMUGE
President Bola Ahmed Tinubu recently signed into law four landmark tax reform bills, signaling an ambitious overhaul of the nation’s fiscal and revenue administration framework, a move widely hailed as a watershed moment for Nigeria’s economic trajectory. The legislative package, crafted to stimulate economic growth, aims to unlock billions in investments and boost national revenue, fundamentally reshaping how Africa’s most populous country collects and manages its financial resources.
The quartet of bills comprising the Nigeria Tax Bill (Ease of Doing Business), the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill, are set to take effect from January 1, 2026. Their enactment marks the culmination of nearly two years of intensive deliberation since President Tinubu, on July 7, 2023, established the Presidential Committee on Fiscal Policy and Tax Reforms, entrusting its leadership to Taiwo Oyedele, a distinguished fiscal policy partner and Africa tax leader at PriceWaterhouseCoopers.
A cornerstone of this reform is the consolidation of tax collection responsibilities. Under the new dispensation, key revenue-generating agencies, including the Nigeria Customs Service and the Nigerian Upstream Petroleum Regulatory Commission, along with various federal ministries, departments, and agencies, are expected to relinquish their current tax collection mandates. This pivotal shift establishes the newly formed Nigeria Revenue Service (NRS) as the sole body empowered to collect all federally chargeable taxes, a development that promises to trigger a sweeping restructuring across Nigeria’s labyrinthine federal revenue architecture.
President Tinubu, speaking at the signing ceremony held at the State House in Abuja, projected a vision of an invigorated, business-friendly Nigeria. “We have opened the door for new economic and business opportunities. We are showing that Nigeria is truly ready and open for business. Easy in, easy out,” he declared.
The President underscored the transformative potential of the legislation, signaling a definitive turning point in the nation’s fiscal direction. “We are in transit. We have changed the rule. We have changed some of the misgivings. The question of our tax-to-GDP and all other formulas will be obsolete,” he asserted.
At the heart of the new tax laws lies a philosophy that prioritises economic stimulation and social equity over mere revenue maximisation. Taiwo Oyedele, the architect of the reforms, emphasised that the primary objective is not to increase the tax burden on citizens but rather to invigorate economic activity and enhance the efficiency of tax collection by identifying and tracking tax evaders.
“This tax law will not give you cash in your pocket, but at least it won’t take your cash away if you are poor,” Oyedele stated. Under the new regime, Nigerian households earning N250,000 or less per month will be entirely exempt from personal income taxes.
Defining what constitutes a poor household in the Nigerian context, Oyedele explained the committee’s pragmatic approach, noting that they “came up with a N120,000 or N130,000 per two people working in a household of five.” This calculation indicates that if the combined monthly earnings of a household of five are around N250,000, they are considered capable of meeting their basic needs, though without luxuries, and therefore should not be subject to taxation. “They are poor, and they shouldn’t pay taxes,” he affirmed.
Furthermore, the reforms introduce a progressive tax structure designed to alleviate pressure on low and middle-income earners while slightly increasing contributions from the wealthiest segment of society. Oyedele noted, “We have eliminated the tax component for people at the bottom, we have reduced it for people at the middle, and we have increased slightly for people at the top.” Specifically, middle-income households earning between N1.8 million and N2 million a month will benefit from lower tax rates, while top earners (those making N2 million and above monthly, comprising less than 5 percent of the total workforce) will contribute marginally more.
Notably, the reforms retain Value Added Tax (VAT) at 7.5 percent and Corporate Income Tax (CIT) at 30 per cent, dispelling earlier concerns among some stakeholders about potential increments to these key taxes that could have further burdened businesses and consumers.
Abiodun Kayode-Alli, a senior manager for tax and regulatory services at PwC, echoed the sentiment of the reforms being a long-overdue and landmark achievement. “It’s actually a landmark achievement that we’ve been able to do this. They say it’s better late,” he remarked. Kayode-Alli further elaborated on the specific gains for individuals and businesses. Beyond the reduction in personal income tax, he highlighted the VAT exemption on basic necessities such as food and transport. This measure, he noted, is poised to directly alleviate the cost of living for millions of Nigerians and could even lead to further price reductions as producers, no longer bearing certain implicit costs, pass on the savings.
For small and medium-sized enterprises (SMEs), the reforms address a critical issue. Kayode-Alli pointed out that the previous N25 million corporate income tax exemption threshold was set in 2020 when the Naira-dollar exchange rate was around N300. He observed that today, with the Naira having depreciated to N1500-N1600 to the dollar, that same N25 million is equivalent to $16,000, severely diminishing its protective effect. He noted further that the new act, by increasing this threshold significantly (with versions citing N50 million or N100 million), aims to re-establish meaningful tax relief for a larger segment of smaller businesses.
The elephant in the room: Implementation and potential pitfalls
Despite the widespread optimism surrounding the legislative intent, a recurring theme among analysts and industry leaders is the critical importance of effective implementation. Paul Alaje, a senior partner at SPM Professionals, pointed out several key concerns. While acknowledging the positive aspects, Alaje pointed to a specific provision that could allow for a future increase in VAT.
“The Bill has a provision for further increase in VAT which will have an effect on cost of commodities, reduce purchasing power and further hike inflation. This will not be good for economy and Nigerians especially at a time government is planning to tame inflation,” he warned.
Alaje also noted that the new law’s reliance on digital presence and capacity is currently lacking across much of Nigeria. “The Law requires digital presence and capacity building which is currently lacking at the moment. Also, the Law requires collaboration with state governments to be implemented and if that synergy is not there, it will be difficult,” he cautioned.
The reality that over 250 of Nigeria’s 774 local governments lack mobile network access further underscores the digital infrastructure deficit that must be addressed for seamless implementation. Nevertheless, Alaje commended the zero corporate tax for businesses with a turnover of less than N50 million as a huge positive and encouragement for Nigerians that want to do business. He believes the government is rightly targeting the small percentage of large business entities, acknowledging that the vast majority of Nigerians already pay very little tax.
Adesina Adedayo, former president of the Chartered Institute of Taxation of Nigeria (CITN), echoed the sentiment regarding political will. He admitted that a lack of political will has often impeded the effective implementation of laws in Nigeria but expressed optimism that this case might be different. He urged stakeholders and tax experts to meticulously scrutinise the contents of the acts to ensure alignment with government policy.
Uche Uwaleke, Nigeria’s first professor of capital markets, described the signing as a bold and commendable development capable of positively transforming the country’s tax landscape. He commended the provisions for eliminating multiple taxes that have burdened businesses, seeing the new laws as powerful tools for job creation, income redistribution, and economic growth. “With low-income earners now exempted from tax, and the tax threshold for small businesses now increased from N25m to N50m, the new tax regime is more progressive and fairer,” Uwaleke asserted, contrasting it with the previous system where even loss-making businesses were sometimes required to pay 0.5 per cent of their turnover as tax. He concluded that the new tax laws would undoubtedly improve Nigeria’s ease of doing business, thereby attracting more investments. Uwaleke also highlighted the Nigeria Revenue Service (Establishment) Act’s promise to plug leakages caused by fragmented collection efforts, but like others, tempered his optimism with a caveat: “What remains to be seen is how well all these will be implemented. In this regard, a phased implementation approach is recommended.”
Meanwhile, the organised private sector has largely thrown its weight behind the reforms, viewing them as a necessary step for economic revitalisation. The Lagos Chamber of Commerce & Industry (LCCI), in a statement by its Director General, Chinyere Almona, commended the four tax reform bills as a landmark, noting their passage after extensive stakeholder consultations. The LCCI sees these reforms as a significant milestone in Nigeria’s journey toward a more transparent, efficient, and growth-aligned fiscal framework.
The LCCI anticipates multifaceted impacts across inflation, trade competitiveness, tax compliance, and investor confidence. The harmonisation of fragmented tax laws and the digital and institutional upgrades are expected to provide the private sector with a more robust platform for growth and competition.
On inflation, the LCCI offered a nuanced view: “In the short term, as businesses re-price, the broader tax net and initial compliance adjustments may trigger a slight increase in core inflation, estimated between 40–60 basis points. However, in the medium term, the reduction of tax inefficiencies and a shift from monetary financing to sustainable revenue should help ease price pressures.” The chamber cited government projections anticipating headline inflation falling to 15 per cent by end-2026, a significant reduction from May 2025’s 27.6 per cent. The exemption of essential goods and services from VAT is expected to directly ease the cost of living for millions.
The LCCI also foresees a substantial improvement in Nigeria’s trade competitiveness. It stated that by introducing a unified filing system and streamlining state and federal tax processes, businesses could experience a reduction in compliance time by up to 40 per cent. This efficiency gain is projected to lower transaction costs and boost Nigeria’s export competitiveness, especially under the African Continental Free Trade Area (AfCFTA). A more streamlined tax system is also considered a significant draw for foreign direct investment (FDI).
Tax compliance, a perennial challenge in Nigeria, is another area where the reforms are poised to deliver tangible gains. Nigeria’s tax-to-GDP ratio, currently at 7.9 per cent, remains among the lowest in sub-Saharan Africa. The establishment of a single taxpayer ID, risk-based audit protocols, time-bound refund mechanisms, and taxpayer protection instruments like the Office of the Tax Ombudsman are expected to broaden the tax base and curb the dominance of the informal sector. With full implementation, the LCCI projects a substantial increase in non-oil tax revenues by N3.2 trillion over the next two years, pushing the tax-to-GDP ratio towards 12 per cent by 2027.
The chamber strongly urged the immediate rollout of a public-facing implementation roadmap, suggesting pilot e-tax systems in high-volume states such as Lagos, Rivers, and Kano. It advocated for robust and aggressive engagement with relevant stakeholders as a template for critical conversations regarding the nation’s economy and political cohesion, suggesting that the six-month period leading up to full implementation in January 2026 should provide ample time for pilot phases and ensure optimal performance.
The Nigeria Employers’ Consultative Association (NECA) also expressed enthusiasm, with its director-general, Adewale-Smatt Oyerinde, hailing the new laws as a step in the right direction for driving economic growth.
Oyerinde noted that the Organised Private Sector (OPS) has struggled to address taxes, levies, and fees for over a decade, and the efficiency of tax collection has been a long-standing concern for all rational stakeholders. “So, when Mr President came up with the Presidential Committee, we think it was a step in the right direction and the committee did a very humane job coming up with that bills,” he remarked.
Despite controversies and what he termed “unnecessary distractions,” Oyerinde welcomed the signing as the beginning of the reform. Like others, however, he acknowledged that “implementation will always come with its own challenges that we are all not aware of, for now.” He affirmed that NECA, having actively contributed inputs during the bills’ drafting, is now keenly interested in the implementation phase and ready to deepen engagement with the Federal Inland Revenue Service (FIRS), the principal agency tasked with driving the conversation.
On his part, Oluseun Onigbinde, CEO of BudgIT, a civic tech organisation championing fiscal transparency, reaffirmed the unprecedented nature of these reforms, emphasising their alignment with the urgent need to boost Nigeria’s domestic revenue streams.
However, Onigbinde cautioned that a robust tax regime, while foundational, is not a silver bullet for Nigeria’s economic challenges. He stressed that a truly conducive business environment demands concurrent attention to broader systemic issues, including the inviolability of the rule of law, meticulous exchange rate management, and sustained investment in critical infrastructure and institutions. He also realistically anticipates that the new tax act will require subsequent adjustments.
Despite his generally positive assessment of the reform as a major step forward, Onigbinde expressed a personal desire for swifter implementation, lamenting that full operationalisation is slated for January 2026 rather than sooner.
