For decades, Nigeria’s tax system has symbolised everything wrong with the country’s broader fiscal culture—narrow tax bases, overburdened workers, under-taxed elites, a thriving informal sector, and rampant corruption. With a tax-to-GDP ratio that has hovered between 6 per cent and 8 per cent, Nigeria remains one of the poorest tax performers in Africa. This has forced the country into the clutches of debt, aid dependence, and volatile oil markets.
In this context, the signing into law of four pivotal instruments in 2025—the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act—is a watershed moment. These laws are not merely administrative documents; they aim to redefine the very philosophy of taxation in Nigeria. But can they succeed where past reforms faltered?
One of the most commendable features of the new tax architecture is its deliberate tilt toward progressivity. For the first time in Nigeria’s history, low-income earners—those earning N800,000 or less annually—are legally exempt from personal income tax, as stipulated in Section 58 of the Nigeria Tax Act, 2025. This is a bold and compassionate gesture in a country where millions survive on less than a dollar a day. In parallel, small and medium enterprises (SMEs) with turnover not exceeding N100 million benefit from simplified compliance, and those earning below N25 million face a 0per cent Company Income Tax (Section 56). These measures, if diligently implemented, could lower the fiscal burden on the poor and catalyse business formalisation.
Digitisation is no longer aspirational. It is now statutory. The mandatory use of Tax Identification Numbers (TINs) by individuals, companies, and all government entities (Tax Admin Act, Sections 4–8) is reinforced by integration with national identity systems such as NIN and BVN. Taxpayer data will be linked, returns can be filed electronically, and VAT tracked in real time via fiscalisation systems (Section 23). Artificial intelligence, e-invoicing, and API-based validation are no longer futuristic buzzwords—they are legal obligations. If implemented with fidelity, these provisions could usher in an era of traceability, efficiency, and fraud minimisation.
Equally important is the move toward harmonisation. The Joint Revenue Board (Sections 3 and 5, JRBE Act) is empowered to align the operational frameworks of federal, state, and local tax bodies. States may now legally authorise the Nigeria Revenue Service to collect certain taxes on their behalf (NRS Act, Section 5), potentially ending the crisis of multiple taxation that has long strangled enterprises. The establishment of the Office of the Tax Ombud (Tax Admin Act, Section 141) finally provides taxpayers with a platform for grievance redress and rights protection—a crucial element in rebuilding trust.
Crucially, the laws shine new light on wealth taxation. Capital Gains Tax (CGT), long neglected, now extends to disposals of land, shares, digital assets, and intellectual property (Nigeria Tax Act, Sections 33–49). Exemptions exist for small gains (under N10 million), charitable donations, and reinvestments. Similarly, Withholding Tax (WHT) is clarified and strengthened. Payments for consultancy, rent, royalties, dividends, and digital services are now subject to source taxation (Tax Admin Act, Section 51), with stiff penalties for non-compliance, including a 10 per cent surcharge and joint liability provisions.
The reforms also address long-standing concerns about tax avoidance by multinational corporations. Sections 190–195 of the Nigeria Tax Act strengthen transfer pricing rules, mandate arm’s-length pricing for related-party transactions, and authorise audits of offshore arrangements. These tools are critical in curbing base erosion and profit shifting.
Yet, even the most promising reforms contain cracks. While thresholds for exemptions are clearly stated, there is no comprehensive rate schedule or simplified taxpayer handbook. For small businesses and informal traders, navigating this new terrain could feel like walking through a legal labyrinth. More worryingly, the laws fall short of being gender-responsive. Nigeria’s tax system continues to overlook the unique challenges faced by women-led businesses, particularly in the informal sector. There are no dedicated tax credits, waivers, or capacity-building provisions to support them.
For pro-poor taxation to be meaningful, exemptions alone are not enough. Nigeria must integrate tax reforms with its social protection architecture—linking tax IDs with the National Social Register, conditional cash transfers, and health insurance schemes. Tax justice must go hand in hand with social equity.
Also concerning is the treatment of tax refunds. Section 55 of the Tax Administration Act provides for a refund mechanism, but fails to specify mandatory timelines or automated triggers. In a system notorious for bureaucratic inertia, this ambiguity could discourage voluntary compliance and hurt legitimate businesses—particularly exporters and large buyers with input tax credits.
Another glaring omission is the lack of a statutory tax expenditure reporting framework. While the law mandates individual companies to file tax incentive returns (Section 27), Nigeria still lacks a comprehensive, government-wide tax expenditure reporting framework—one that discloses, aggregates, and evaluates the full cost of tax incentives across sectors annually. Nigeria still lacks a national annual tax expenditure statement—common in countries like South Africa, Kenya, and Canada. There is also no mandatory public disclosure of the total revenue forgone through waivers and exemptions, nor any process for conducting cost-benefit analyses of tax incentives. This leaves policymakers and citizens without a clear picture of the trade-offs inherent in Nigeria’s fiscal regime. Many countries now publish annual reports disclosing the fiscal cost of waivers and exemptions. This is crucial for transparency and accountability, especially as Nigeria foregoes significant revenue through corporate incentive
Implementation remains the elephant in the room. Despite the legal ambitions, many LGAs lack even the most basic infrastructure: no broadband, no trained personnel, no digital systems. The gap between high-performing states like Lagos and digitally barren regions could widen inequities. Furthermore, federal-state tensions over revenue collection—especially in politically charged environments—may undermine the harmonisation agenda of the Joint Revenue Board.
To be continued tomorrow.
Prof. Uba is a development economist, fiscal governance expert, and author of multiple policy papers on tax reform and public finance. He can be reached via:+234 803 309 5266; [email protected]
