Tribune Online
In a sweeping move to redefine Nigeria’s fiscal landscape, the Federal Government has launched a bold tax revolution. CHIMA NWOKOJI examines the core principles of the reform and how the new tax law aims to simplify taxes, boost revenue, and empower citizens; it’s far-reaching implications for the country’s economic growth and development.
When 36-year-old Ngozi Eze, a small fashion entrepreneur in Aba, clicked “submit” on her online tax filing in June 2025, she felt a mixture of disbelief and relief. For the first time in years, she didn’t have to shuttle between the local revenue office, the Federal Inland Revenue Service (FIRS), and the State Board of Internal Revenue—each demanding the same levies in different forms.
“They said this new tax portal will end double taxation,” she said, smiling as her phone beeped with an automated acknowledgment. “I prayed it was not one of those government promises. But it worked. Maybe something has truly changed.”
Her quiet victory captures the spirit of Nigeria’s sweeping new tax reform—an ambitious policy overhaul aimed at simplifying the country’s tangled fiscal system, boosting non-oil revenue, and restoring public trust.
Dubbed by analysts as “a stone that kills several birds,” the reform—spearheaded by the Presidential Committee on Fiscal Policy and Tax Reforms led by Taiwo Oyedele—is arguably Nigeria’s boldest economic restructuring since the return of democracy in 1999. Yet, beyond figures and policy papers, it represents a deeper struggle with fairness, governance, and the quest for national renewal.
The old versus the new order
For decades, Nigeria’s tax system resembled a labyrinth—complex, fragmented, and frustrating. More than 60 different taxes and levies existed across federal, state, and local governments, yet fewer than 10 per cent of registered businesses paid regularly. To many citizens, taxation felt less like civic duty and more like extortion.
Meanwhile, oil—the country’s fiscal lifeblood—was drying up. Between 2012 and 2022, Nigeria’s tax-to-GDP ratio averaged just 6 per cent, far below the African average of 18 per cent. As oil prices plunged and debt servicing swallowed most federal revenue, reform became not just necessary but inevitable.
“The old system was collapsing under its own weight,” said Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE). “Multiple taxation, poor coordination among tiers of government, and corruption were killing businesses. We needed a new architecture that promotes compliance, not punishment.”
That architecture began to emerge in August 2023, when President Bola Ahmed Tinubu inaugurated the fiscal reform committee, appointing Taiwo Oyedele, former PwC Africa Fiscal Policy Leader, to design a fairer, more transparent framework within a year.
The new Nigeria Revenue Service stands as a symbol of unity and efficiency. It replaces the old Federal Inland Revenue Service and consolidates all tax collections under one roof, including federal, state, and local taxes. This single agency approach makes compliance simpler for taxpayers and strengthens our tax system.
The introduction of the 4 per cent National Development Levy replaces many smaller levies, making payments clearer and easier. Plus, businesses can now claim VAT credits on capital equipment, lowering the cost of setting up and expanding in Nigeria by nearly 8 per cent. This enhancement puts Nigeria in a stronger position to attract both local and international investors.
Blueprint for a fairer, smarter system
By mid-2025, the committee unveiled a comprehensive reform blueprint touching nearly every aspect of Nigeria’s revenue system—from personal income tax and VAT to intergovernmental coordination and digital transparency.
At its core were three guiding principles: Simplify the tax structure — cutting over 60 taxes down to fewer than 10 by harmonising levies and eliminating duplication; leverage technology — introducing a Unified Tax Administration Portal and Digital Invoicing (e-Invoicing) to plug leakages and Promote fairness and equity — protecting low-income earners while ensuring wealthy individuals and corporations pay their fair share.
This philosophy around wealthy individuals mirrors ideas long shared by global thought leaders. As Bill Gates once wrote: “I’m for a tax system in which, if you have more money, you pay a higher percentage in taxes.” Similarly, Warren Buffett noted: “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
Even Adam Smith, the father of modern economics, set these foundations centuries ago in The Wealth of Nations (1776), arguing that good taxation rests on four principles—fairness, certainty, convenience, and efficiency.
Oyedele’s team drew directly from these timeless principles. “The reform is not about raising taxes but raising revenue fairly,” he explained. “Nigeria doesn’t need more taxes—she needs better taxpayers. The system should make compliance easy, transparent, and rewarding.”
Under the new regime, individuals and businesses can file all taxes through a single online portal, accessible anywhere. Payments are automatically routed to the appropriate tier of government, eliminating duplication and delays.
A Tax Amnesty and Transition Window, launched in early 2025, allows individuals and businesses with unpaid liabilities to regularize their status without penalties—a move expected to unlock trillions of naira while rebuilding trust.
Balancing reform with reality
Optimism runs high, but experts warn that success will depend on discipline, coordination, and political will.
“The challenge is not designing good reforms—it’s sustaining them,” said Dr. Ayo Teriba, CEO of Economic Associates. “Nigeria’s fiscal problem is not just about collecting more money but using it wisely. Without transparency and visible results, even the best tax systems lose credibility.”
Yusuf echoed that concern: “The business community needs predictability. Tax policy must not change like the weather. Investors are watching to see if this reform stabilizes Nigeria’s fiscal environment or becomes another cycle of promises.”
For Oyedele, criticism is a sign of engagement, not opposition. “We are moving from a culture of suspicion to one of partnership,” he said at a Lagos media roundtable. “We have met with labour unions, manufacturers, tech entrepreneurs, and state officials to ensure no one is left behind.”
One major innovation is the Joint Tax Board Coordination Council, which unites FIRS, state revenue services, and the Joint Tax Board (JTB) under one data-sharing framework to prevent overlapping assessments and standardize practices.
From markets to ministries
At Onitsha Main Market, electronics trader Chinedu Okoro voiced cautious hope: “Before now, we paid all kinds of taxes—market levy, environmental fee, development levy—and still the roads were bad. Now they say everything is online. We will see if it brings real change.”
His skepticism reflects a wider national mood: Nigerians are not opposed to paying taxes—they just want value for their money. Years of corruption and broken promises have eroded trust.
That’s why the reform includes a Fiscal Transparency Dashboard, allowing citizens to track how revenues are allocated and spent across ministries and states. “If people can see that their taxes build schools, roads, and hospitals, compliance will rise naturally,” Oyedele said.
Small and medium enterprises (SMEs) also get relief: businesses earning below N25 million annually are now exempt from company income tax, giving them room to grow.
“One of our goals is equity,” Oyedele said. “If I am a low-income earner struggling to survive, I shouldn’t be paying income tax. Someday, government should support such citizens before asking them to give back.”
The committee has severally explained that Nigeria, being a country with a huge population of poor people, does not intend to extract from the poor citizens through taxation in order to become a rich country. No.
The digital revolution
Perhaps the most transformative element of the reform is its digital core. The Unified Tax Portal, co-developed by FIRS and state authorities, uses blockchain validation and AI-driven analytics to detect evasion, cross-check bank data, and eliminate ghost taxpayers. Every invoice now carries a unique e-invoice ID logged in real time.
According to data from the Central Bank of Nigeria, the digital integration has already improved foreign exchange transparency, pushing Nigeria’s average monthly FX turnover to $8.6 billion in 2025—a sign of growing investor confidence.
“This is how modern economies operate,” said Yusuf. “Digital transparency removes human discretion—the root of corruption—and enhances efficiency.”
FIRS projects that full digital compliance could N20 trillion annually—enough to fund education, healthcare, and infrastructure without new borrowing.
Federal collaboration, not competition
Unlike earlier tax drives that sparked turf wars, the 2025 reform embraces cooperative federalism. States still control personal income and property taxes, while the federal government focuses on corporate tax, VAT, and customs duties.
“We are not taking powers away from the states,” Oyedele clarified in Abuja. “We are giving everyone better tools to collect what is legitimately theirs.”
The new revenue sharing formula under Nigeria’s new tax laws allocates Value Added Tax (VAT) revenue as follows: Federal Government 10 per cent; State Governments and Federal Capital Territory 55%; Local Governments 35 per cent.
Similarly, the allocation to states will be based on: Equality 50 per cent; Population 20 per cent Consumption (place of consumption) 30 per cent and for local governments, the allocation will be distributed using: Equality 30 per cent; Population 70 per cent.
This new formula aims to increase revenue for states, promoting fiscal federalism and enhancing their capacity to deliver public services.
Governor Dapo Abiodun of Ogun State agrees: “If implemented faithfully, this could boost our internally generated revenue by 30–40 per cent. But states must remain equal partners in this journey.”
Shift in capital gains tax
When will the Eldorado come? Some may have asked. But The taxman cometh. Nigeria’s new tax law, the Nigeria Tax Act 2025, is set to take effect on January 1, 2026. The implementation delay allows for planning, sensitization, and alignment with the fiscal calendar.
Therefore, starting January 1, 2026, Nigeria’s Capital Gains Tax (CGT) regime will change fundamentally. The flat 10 per cent rate gives way to a progressive structure tied to income levels—from 0 per cent to 30 per cent.
The goal is fairness: low-income earners pay less or nothing, while wealthier investors contribute proportionally more.
Individuals with annual sales below N150 million and gains under N10 million are exempt, covering about 99 per cent of retail investors. Those who reinvest profits in Nigerian businesses or startups also qualify for exemptions. Pension funds and companies merging or restructuring retain existing reliefs.
Although CGT contributed only N52 billion in 2024—less than 2 per cent of total tax revenue—the reform aims to enhance equity and efficiency, not simply raise rates. Businesses will benefit from reduced corporate taxes and expanded VAT credits worth N4.5 trillion.
“This keeps Nigeria competitive globally,” Teriba said. “It balances fairness with investment incentives.”
Nigerians in the Diaspora
The reform also clarifies tax obligations for Nigerians abroad, a long-standing grey area.
Onome Jennifer, a nurse in Dublin, worried her $100 monthly remittance to her mother might be taxed. The answer is no: personal transfers, gifts, and community contributions remain tax-free.
“Only income earned or deemed to be income—like wages or investment returns—is taxable,” Oyedele explained.
Non-residents are taxed only on Nigeria-sourced income such as rent or dividends. Money earned abroad and sent home is exempt, even if untaxed elsewhere. Nigeria’s Double Taxation Agreements (DTAs) ensure income isn’t taxed twice.
Residency is determined by the 183-day rule within 12 months, while dual citizenship has no effect on tax status.
For investors, income from government bonds (including Sukuk) is tax-exempt, while dividends, rent, and private bond interest attract a 10% final withholding tax, reduced to 7.5 per cent for countries with DTAs such as the UK, South Africa, and China.
One of the smartest moves about the reform is how it focuses on taxing success rather than the struggle. The government will now tax the profits businesses make, not the investments they pour in. This means entrepreneurs can nurture their ideas and build their businesses without early tax pressure. It’s a system that supports growth and rewards hard work.
Diaspora Nigerians need a Tax Identification Number (TIN) only if they earn income sourced from Nigeria. NGOs remain exempt once registered, while diaspora-owned SMEs are taxed like local firms but enjoy similar incentives.
Rebuilding trust and the social contract
Back in Aba, Ngozi Eze has begun to notice small changes. Her local health centre has been renovated under a state-funded program supported by tax allocations. “It’s small,” she smiled, “but it gives me hope that maybe government is beginning to listen.”
Hope—however fragile—may be the reform’s greatest achievement. Economists agree that fiscal transformation is as much about trust as it is about numbers.
“If citizens see results, they will pay willingly,” Oyedele said. “That’s how nations grow—from trust, not coercion.”
Dr. Zacch Adedeji, Executive Chairman, Federal Inland Revenue Service (FIRS), at the Domestic Investors Summit, reminded participants that tax reform is no longer sitting in a cabinet file. It is here to stay.
He explains further that the role of the taxman has changed. The job now is to empower growth, not frustrate it, stressing that the days of taxing confusion and chaos are over.
The goal, according to him, is to “remove the fear and replace it with trust.”
“This tax reform is not just about documents and bills. It is about the kind of country we are building. Everyone must play their part. The government must not go back to old habits. But we, the people, must also not go back to distrust. If we stay the course, we all can build Nigeria through tax reform, “ Adedeji stated.
To preserve progress, the federal government plans to establish a permanent Fiscal Policy and Tax Reform Commission, insulated from political interference. President Tinubu has pledged to sign it into law before the end of 2025.
Fiscal accountability and the Tax Ombudsman
To protect taxpayers, the reform introduces Nigeria’s first-ever Tax Ombudsman.
“Tax is a special area of life,” Oyedele said. “Government wields enormous power, and small businesses often lack the means to challenge wrongful assessments. The ombudsman protects such taxpayers at no cost.”
The office investigates complaints in plain English, Pidgin, or local languages and can compel compliance from tax officials. “If the law grants 30 days to pay, no officer can demand payment in 48 hours,” Oyedele stressed. That is the job of the Tax Ombudsman.
Beyond redress, the ombudsman will track recurring complaints to identify legal loopholes and recommend amendments. “Over time,” Oyedele added, “it will ensure fairness, moderation, and affordable justice.”
Transparency is no longer optional—agencies must publish collections and spending reports quarterly on their websites and file them with the National Assembly. “We’re moving toward transparency by design, not discretion,” Oyedele said.
The broader National Fiscal Policy Framework, awaiting final approval, also compels governments to link projects to community needs. “Don’t build flyovers when people lack clean water,” he quipped. “Development must reflect citizens’ priorities.”
From streets to screens
From Lagos to Kano, tax reform has become a national conversation. Radio and TV stations host “Tax Clinics” where experts explain new laws; social media influencers simplify fiscal jargon through relatable skits.
The Committee’s #TaxReformForAll campaign uses storytelling and town halls to connect with everyday Nigerians. “Reform is not just technical—it’s emotional,” Oyedele said. “People must understand why it matters to them personally.”
For instance, the taxman said value-added tax (VAT) will no longer apply to food, medical services, education, and accommodation under the new tax regime, “easing the cost of living for many Nigerians”.
Even Albert Einstein once joked, “The hardest thing to understand in the world is the income tax.” But Oyedele’s team is proving that clarity is possible.
Still, challenges remain. Some states fear losing fiscal autonomy, much of the informal sector—responsible for 60% of GDP—remains outside the net, and digital illiteracy may slow rural adoption.
“There will be resistance,” Yusuf warned. “Some officials benefited from the old opaque system. But if leadership stays consistent, this reform can outlive political cycles.”
Conclusion: A cultural, moral reset
When analysts call the reform “a stone that kills several birds,” they were not exaggerating. It cuts across several sectors of the Nigerian economy and targets growth, equity, transparency, digital modernization, and federal harmony—all at once.
“If Nigeria had implemented these reforms ten years ago, we would already be a trillion-dollar economy, “ Oyedele assured at a PWC roundtable.
By simplifying taxes, the reform helps businesses breathe. By automating processes, it curbs corruption. By harmonizing revenue, it strengthens the federation. And by promoting fairness, it restores faith in governance.
Ultimately, this is more than fiscal engineering—it is a moral and cultural reset for Africa’s largest democracy.
As night falls over Lagos and the hum of commerce echoes through its streets, the question lingers: Will this stone truly kill all its birds—or join the pile of reforms forgotten in Nigeria’s long economic journey?
The answer, perhaps, lies not in policy memos or presidential speeches—but in citizens like Ngozi, who still choose to believe again.