Nigeria’s fiscal framework changed significantly on June 26, 2025, when President Bola Tinubu signed four major tax reform bills into law: the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act.
Effective January 1, 2026, the new laws collapse more than 70 fragmented taxes into a unified, progressive system overseen mainly by the rebranded Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service.
The reforms are designed to simplify tax compliance, widen the tax base, reduce evasion, and boost government revenue without placing undue burden on low-income earners.
However, misinformation on social media has fuelled panic, with claims that all bank transfers will be taxed or that government will seize bank accounts. These claims are false.
Nigeria’s dependence on oil revenue, which accounts for about 70 per cent of government earnings, has proven unsustainable. With a tax-to-GDP ratio of just 13.5 per cent, Nigeria borrowed over ₦11 trillion in 2025 and still struggled to fund capital projects. Effective taxation, therefore, remains essential for financing infrastructure, healthcare and education.
Under the new Personal Income Tax structure, individuals earning ₦800,000 or less annually are fully exempt. Tax rates rise progressively from 15 per cent to 25 per cent for higher earners, ensuring that the wealthy bear a larger share of the burden. Minimum wage earners will pay minimal tax, while very high-income earners will contribute substantially more.
Taxable income now includes salaries, rents, interest, and gains from digital assets such as cryptocurrencies. While the Consolidated Relief Allowance has been abolished, taxpayers may claim specific deductions, including pension contributions, life insurance, and a portion of rent paid, subject to limits.
Contrary to widespread claims, bank transfers are not automatically taxed. Only unexplained inflows may be assessed as income, and taxpayers are expected to properly declare gifts, loans and other exempt funds. While a Tax Identification Number is now mandatory for certain financial transactions, this does not amount to account confiscation.
For businesses, Companies Income Tax is now tiered. Small businesses are fully exempt, medium-sized firms face reduced rates, and only large companies pay the full 30 per cent rate. Agricultural startups enjoy a five-year tax holiday.
The reforms also introduce a 4 per cent Development Levy for medium and large firms, replacing multiple existing levies, while VAT remains at 7.5 per cent, with essential goods and services zero-rated.
Businesses can now recover input VAT on services and fixed assets, easing operational costs.
Stamp duty provisions have been clarified, with the ₦50 electronic transfer charge formally classified as stamp duty and borne by the sender. Salary payments and transfers between accounts owned by the same individual are exempt.
All taxpayers, including those exempt from payment, must file annual returns. Non-compliance attracts stiffer penalties, including fines, interest charges and possible criminal prosecution after due process.
While confusion persists due to inadequate public sensitisation, the reforms largely protect low-income earners and small businesses while ensuring that wealthier individuals and corporations contribute fairly.
Ultimately, taxation is not merely a civic obligation; it strengthens citizens’ stake in governance and enhances accountability. For these reforms to succeed, government agencies must intensify public education to promote understanding, trust and voluntary compliance.
