Nigeria’s President Bola Tinubu newly signed four finance bills into n a set of major reforms aimed at restructuring the tax system in Nigeria.
The new laws will simplify revenue collection, reduce the tax burden on some individuals and businesses, while also helping to raise much-needed government income revenue by making collection more efficient, says the government.
President Tinubu in a statement to mark the second anniversary of his administration last month said, “The tax reforms will protect low-income households and support workers by expanding their disposable income,”
The four new laws are:
The Nigeria Tax Act, which merges various rules into a single, easier-to-understand code and eliminates more than 50 small, overlapping taxes. The presidency has said that reducing the number of taxes and eliminating duplication, will make doing business easier
The Tax Administration Act, which sets common rules for how taxes are collected across federal, state, and local governments
The Nigeria Revenue Service Act, which replaces the Federal Inland Revenue Service (FIRS) with a new, independent agency – the Nigeria Revenue Service (NRS)
The Joint Revenue Board Act, which improves co-ordination between levels of government and creates a Tax Ombudsman and Tax Appeal Tribunal to resolve disputes
Together, these new laws aim to create a fairer and more efficient tax system across the Nigeria and the impact is expected to be significant especially for low-income earners, small businesses and informal traders.
For people earning up to 1m naira ($650; £470) a year, a rent relief of 200,000 naira ($130) will be applied, effectively reducing their taxable income to 800,000 naira ($520). This means they will no longer pay income tax, according to Andersen Nigeria, a tax and business advisory firm.
Sellers of essential goods and services such as food, healthcare, education, rent, power, and baby products will no longer have to charge a Value Added Tax (VAT), helping families better afford their basic needs.
Small businesses with annual turnover below 50m naira ($32,400) will no longer pay company income tax. They will also be allowed to file simpler returns, without needing audited accounts.
Large businesses will benefit from reduced corporate tax rates, dropping from 30% to 27.5% in 2025 and 25% in subsequent years.
They will also now be able to claim tax credits for VAT paid on expenses and assets, meaning they can get back the 7.5% that would have been paid as VAT.
There are also tax incentives for charitable groups, co-operatives, educational and religious organisations, provided their earnings do not come from commercial activities.
In essense, low-income households stand to benefit the most, as many will no longer have to pay income tax while also enjoying price relief on essentials. A typical family spending most of their income on rent, food and transport will see lower costs due to the VAT exemptions.
Small businesses should also see positive changes through more streamlined bureaucracy, which could help boost compliance and encourage informal traders to enter the tax system.
High-income individuals and luxury consumers may feel the pinch slightly, with higher VAT now expected on luxury goods and premium services, and capital gains tax imposed on large share sales.
The argument about the old, outdated, inefficient and unfairly harsh on the poor tax system gave birth to the new tax reform. Nigeria’s tax-to-GDP ratio, a key measure of how much tax the country collects relative to its economy is just over 10%, far below the African average of 16–18%.
Tinubu’s administration wants to grow that ratio to 18% by 2026 without raising taxes on basic goods or overburdening struggling citizens.
By simplifying tax rules and encouraging voluntary compliance, officials hope to raise more money for funding infrastructure and public services, such as healthcare and education, as well as reduce the reliance on borrowing money.
Many small business owners welcome the exemption from company income tax but say they remain wary of how it will be enforced in practice.
Meanwhile, Taiwo Oyedele, who chairs the Presidential Fiscal Policy and Tax Reform Committee, struck a hopeful tone during a recent town-hall meeting.
“Ninety per cent of Nigerians support the tax reform bills,” he said, but cautioned that “successful implementation will depend on awareness and trust”.