• Efficiency battle may shift to sub-national level
• Systems given six-month transition for readjustment
• Food, medicines may be cheaper next year
The long-awaited overhaul of Nigeria’s fiscal and revenue administration has taken off with the signing of four tax bills into law, yesterday, by President Bola Tinubu.
The signing ceremony, held at the Presidential Villa in Abuja, was witnessed by top government officials, National Assembly leaders and relevant committee heads.
The new tax regime means different things to different people.
While Nigerians are still apprehensive over a possible backlash when it becomes fully operational, businesses are cautiously optimistic, believing it can only get better.
The business community is elated by the possible elimination of multiple taxation regimes by unauthorised personnel at the state and local government levels.
Providing more clarifications on the tax regime that takes effect in January 2026, the Chairman of the Federal Inland Revenue Service (FIRS), Dr Zacch Adedeji, and Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, said the step sets the stage for a complete overhaul of the fiscal architecture.
Adedeji described the moment as a dream come true and hailed the President’s vision, courage, and commitment to modernising the tax system.
The four bills – the Nigeria Tax Reform Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill and the Joint Revenue Board (Establishment) Bill – were signed into law by Tinubu after a long controversy, extensive consultations and legislative fireworks.
Despite optimism, there are questions about how the authorities would secure nationwide compliance in the face of entrenched informality in the tax collection.
Many states outsource tax and levy collection to party loyalists, who, in turn, hand off the operations to touts who secure compliance through intimidation and harassment of citizens.
Adedeji announced that the implementation of the new tax laws would commence on January 1, 2026, giving stakeholders a six-month transition period to prepare.
“The effective date for implementation has been set for January 1, 2026, as announced by the relevant ministry. This gives us a full six-month window for robust sensitisation, thorough planning, and alignment with the government’s fiscal calendar. A reform of this magnitude cannot be rushed,” he added.
He also revealed that the Federal Inland Revenue Service would now transition into the Nigeria Revenue Service (NRS) with an expanded mandate covering both tax and non-tax revenue, even as he promised greater efficiency and transparency.
On his part, Oyedele stressed that the reforms are essentially pro-growth and pro-poor, aimed at improving equity, reducing burdens on vulnerable Nigerians and stimulating economic development.
“Over one-third of workers in both public and private sectors will now be completely exempt from Personal Income Tax. More than 90 per cent of micro, small and nano enterprises are also exempt from Corporate Income Tax, VAT and PAYE obligations,” he noted.
Most significantly, Oyedele disclosed that essential goods and services, including food, healthcare, education, transportation, and accommodation, are now exempted from VAT, a move expected to lower the cost of living for millions of Nigerians.
The new tax deals will likely lead to a reduction in the prices of food and drugs as they will be exempted from value-added tax (VAT).
“These essential categories account for over 80% of average household spending in Nigeria. By removing VAT, we’re putting money back in the hands of ordinary people,” he added.
Oyedele was clear that the tax reforms are not about increasing tax rates, but about closing loopholes, simplifying processes, and expanding the tax base through digitalisation.
He noted: “The new laws are designed to end discretionary waivers and ensure that tax incentives are accessible to all qualifying businesses, not just the well-connected.”
Both Adedeji and Oyedele acknowledged that the implementation stage will be challenging.
Oyedele cautioned against unchecked optimism, saying: “No matter how beautiful the law, it is meaningless without proper execution. Now is the time to move from legislation to action. And that will require a united effort from both public and private sectors.”
Perhaps, the effectiveness of the legislation will also depend on the political will of the sub-nationals to concede to efforts made at the centre to sanitise the system. Many states collect dozens of levies and changes that the reform seeks to streamline.
Part of the provisions of the new legislation is the exemption of individuals earning less than N800,000 yearly from income tax and small businesses with turnovers below N50 million from corporate tax.
The private sector had sought an upward review of this benchmark, saying naira depreciation has made N50 million turnover extremely small to be used to classify small businesses.
The provisions are meant to strengthen economic activity by reducing the financial burden on vulnerable groups, easing the living status of working-class citizens and enabling small enterprises to reinvest in growth.
The Nigeria Revenue Service (Establishment) Bill 2025, which harmonises revenue collection and creates a single revenue collection agency, Nigeria Revenue Service (NRS), is another significant step at improving revenue collection and increasing accruals to the federation.
Currently, there is a multiplicity of revenue-collecting agencies leading to revenue leakages and inefficiencies in collection.
More importantly, it will also reduce the cost of revenue collection. Under the current system, the Nigeria Customs Service (NCS) retains seven per cent of the revenue collected, the Federal Inland Revenue Service (FIRS) retains four per cent of the revenue it collects, while the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) retains four per cent of the revenue it collects.
With the new arrangement, NRS will only keep two per cent of collected taxes instead of four per cent.
Congratulating the president for the bold initiative, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said reform is a journey and not a destination.
According to him, there are high expectations in terms of the good things the laws promise to make the business environment friendlier.
“We watch to see how they come to light,” he said, adding, “No reform is perfect. It is in the implementation that we will know which areas need to be retouched. In all, it is a good way to start.”
Also speaking on the new tax laws, which he described as historic and audacious, Prof. Godwin Oyedokun of Lead City University said the new tax reform laws will address various economic challenges, especially improving the business environment and enhancing revenue generation.
“The new tax laws present opportunities for enhancing Nigeria’s economic landscape.
Also speaking on how the new tax laws will be beneficial to the economy and the citizens, Lead Director of the Centre for Social Justice (CSJ), Eze Onyekpere, expressed the hope that the new laws will enhance transparency and accountability in tax collection and remittance to the treasury.
Lami Adekola of EnterpriseNGR, an advocacy body, said the new tax regime would help make sure there is enough money for the government to provide for the citizens from improved collections.
