As Nigeria grapples with diversifying its economy and reducing reliance on oil revenues, tax reform has emerged as a major tool for fiscal sustainability. Over the decades, Nigeria’s tax system has been characterized by multiplicity of levies and poor compliance rates. These factors have constrained revenue generation and discouraged investment. Historically, Nigeria has struggled with a low tax-to-GDP ratio, which stood at 7.4 percent in 2021, compared to the African average of 16 percent and the global average of 33 percent. Despite various reform efforts, such as the introduction of the National Tax Policy in 2012 and amendments through the Finance Acts of 2019–2023, the impact has remained limited due to implementation gaps, institutional weaknesses, and poor coordination among revenue authorities. Abuja Formula 1 Grand Prix tickets Nigerian cuisine recipes
Recognizing the urgency of fiscal reform, the present administration set up a Presidential Committee on Fiscal Policy and Tax Reforms led by Taiwo Oyedele. The committee’s work culminated in a comprehensive package of tax reform bills, signed into law on June 26, 2025, designed to simplify the system, expand the tax base, and promote economic growth. The legislative package comprises four interlocking bills:
Nigeria Tax Bill (Ease of Doing Business Act) which consolidates and harmonizes multiple tax laws into a single unified statute; Nigeria Tax Administration Bill which standardizes the legal framework for revenue collection across all government tiers; Nigeria Revenue Service (Establishment) Bill which replaces the Federal Inland Revenue Service with the new Nigeria Revenue Service (NRS) and the Joint Revenue Board Establishment Bill which establishes a Tax Appeal Tribunal and Tax Ombudsman to protect taxpayer rights. These reforms aim to address long-standing issues in Nigeria’s tax landscape and set the country on a path toward sustainable development.
The World Bank reports that in 2024, the economy expanded by 4.6 percent of the year in Q4, marking the strongest growth in a decade, as revenues rose by 4.5 percent of GDP following reforms and subsidy removals. Despite high inflation, estimated at 24 percent in mid-2025, Nigeria’s fiscal deficit narrowed to around 3 percent of GDP in 2024, down from 5.4 percent in 2023, due in large part to improved revenue mobilization. Nigerian cuisine recipes
Speaking on the reform, Rukayat Akingbade, a tax specialist at Deloitte, described it as a significant move in Nigeria’s fiscal history.
“These laws will offer relief from the constant anxiety of multiple levies, unclear charges, and unpredictable policies.”
Highlighting key advantages including exemption from personal income tax for individuals earning up to ₦800,000 annually, full relief for small businesses with turnovers below ₦50 million, and digital platforms to ease compliance and transparency Akingbade said
“The evolving tax framework is a strategic step towards fostering financial inclusion and supporting the growth of small businesses across the country. By offering targeted exemptions and reliefs, the system is creating a more equitable environment for low-income earners and entrepreneurs. More importantly, the integration of digital platforms is revolutionising tax administration, simplifying compliance, enhancing transparency, and encouraging voluntary participation,” Nigerian cuisine recipes
The recent tax reform plays a significant role in shaping the economy through several key areas of impact. By repealing outdated tax statutes and harmonizing major laws, including the Value Added Tax Act and the Companies Income Tax Act, the reform simplifies the tax structure. This reduction in complexity and duplication makes it easier for both individuals and firms to comply with tax obligations, improving efficiency across the system.
Additionally, the reform expands the tax base by bringing digital transactions and other modern sources of income into the tax net. With the support of stronger enforcement mechanisms through the National Revenue Service (NRS), these measures are expected to boost credible revenue collection.
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This helps reduce the country’s dependence on oil and borrowing, creating a more sustainable fiscal environment.
An important aspect of the reform is its approach to equitable revenue sharing. The new VAT revenue-sharing formula allocates 30 percent of the revenue to the states where the VAT is generated, 50 percent to all states equally, and 20 percent according to population. This arrangement is designed to reward efficiency and incentivize states to encourage broader economic activity.
The reform introduces institutional structures such as a tax ombudsman and a tax tribunal. These bodies provide avenues for redress and fairness, enhancing public confidence in the tax system by ensuring that taxpayers are protected and disputes are resolved transparently. Collectively, these reforms aim to strengthen compliance, raise revenue, and foster a fair and growth-oriented economic environment.
Additionally, Akingbade stated that the government must invest in tax education, ensure the technology infrastructure works, and build trust through fairness and transparency. The informal sector still the backbone of Nigeria’s economy must be gradually onboarded, not coerced. With these, tax reform is not being approached as a hammer but as a bridge that connects government responsibility with citizen contribution in a transparent and equitable manner. Nigerian cuisine recipes
“These laws speak the language people understand offering relief from multiple levies, unclear charges, and unpredictable policies.” Her comment reflects what many Nigerians have long felt, that taxation should be a service.
The reform also extends the tax net to cover digital transactions and high-growth service sectors that had previously gone untapped. If well implemented, this could drive Nigeria’s tax-to-GDP ratio up to 18 percent by 2026, unlocking over ₦7 trillion in additional public revenue.
The new VAT revenue-sharing formula of 30% to generating states, 50% shared equally, 20% by population, is a much-needed incentive for states to drive internal growth. It promotes competition, efficiency, and economic inclusiveness while preserving equity among regions.
However, implementation must be backed with data-driven transparency and ongoing dialogue, particularly with states expressing concern about uneven economic bases. Fiscal federalism must not widen inequality but rather become a tool for balanced development.
For all its promises, this reform will only succeed if political will is matched with operational integrity. Tax education campaigns must accompany the rollout. Revenue authorities must be retrained to serve, not intimidate. The technology infrastructure behind the digital system must be resilient and citizen friendly. It is also critical that the gains from increased tax revenue are felt directly by Nigerians. When people see roads repaired, hospitals improve, and schools funded with tax money, trust grows, and so does compliance.
Guardian News
