The transition of Tertiary Education Trust Fund (TETFund) from Education Tax regime to the newly introduced Development Levy, has generated cautious optimism across Nigeria’s education sector. While stakeholders remained divided over the implications of the broader tax reforms, the Executive Secretary of TETFund, Sonny Echono, has expressed confidence that the new funding framework will strengthen the Fund’s capacity to support tertiary education.

Echono’s optimism is coming against the backdrop of sweeping fiscal reforms introduced by the federal government, which replaced several sector-specific taxes with a consolidated Development Levy in the Nigeria Tax Act, 2025.

Under the new legislation, which took effect from January 1, 2026, TETFund is allocated 50 per cent of the proceeds from the Development Levy, effectively altering a funding model that has defined the country’s tertiary education financing for over three decades.

The Education Tax was established in 1993 through the Education Tax Act, mandating companies operating in Nigeria to pay a percentage of their assessable profits to support education development. Initially set at two per cent, the tax was later reviewed upward to 2.5 per cent by the Muhammadu Buhari administration and three per cent by President Bola Ahmed Tinubu – a move that endeared him to the hearts of stakeholders in the education sector.

Recall that in 2011, the Education Tax Act was repealed and replaced with the Tertiary Education Trust Fund (Establishment) Act, which formally created TETFund as the agency responsible for managing and disbursing the funds. Since then, the agency has become the single most important intervention mechanism for public universities, polytechnics and colleges of education, funding infrastructure development, academic staff training, research grants, library resources and special interventions.

Over the years, the Fund’s interventions have filled gaps left by inadequate federal and state budgetary allocations. In many institutions, lecture theatres, laboratories, hostels and even staff offices were built almost entirely through TETFund support. The Fund also played a crucial role in sponsoring thousands of lecturers for post-graduate studies locally and abroad, helping to stabilise academic staffing in public institutions.

The recent tax reform laws replaced the Education Tax with a broader Development Levy aimed at streamlining tax system and expanding the revenue base. Rather than earmarking taxes for specific sectors, the new framework pools resources to fund national development priorities, including education, infrastructure and human capital development.

For TETFund, the change implies that it no longer directly collects a dedicated Education Tax, rather, it currently receives half of the Development Levy, reducing its statutory share from the previous three per cent Education Tax to two per cent.

This shift initially triggered anxiety among education stakeholders, including academic unions and student bodies, who warned that reduced and uncertain funding could weaken TETFund’s ability to sustain its interventions. There were also concerns about a proposed “sunset clause” in the draft legislation, which would have set a terminal date for TETFund’s funding. Following strong opposition from stakeholders, the clause was eventually removed.

Despite these concerns, Echono has welcomed the transition, describing it as an opportunity rather than a setback. According to him, the Development Levy could potentially widen the revenue pool beyond the narrow corporate profit base that defined the Education Tax, especially if compliance improves and leakages are reduced.

Echono argued that what matters most is not just the percentage allocation but the efficiency of collection and the overall growth of the economy. If the Development Levy succeeds in boosting total revenue, TETFund’s share could remain stable or even increase in real terms. He also expressed confidence that government’s decision to retain TETFund as a beneficiary reflects continued recognition of education as a national priority.

The Executive Secretary praised President Tinubu for increasing the Development Levy from the initial two per cent proposed in the Nigeria Tax Bill to four per cent. He noted that the upward review reflected the President’s recognition of the country’s growing development needs and his commitment to providing a more robust and sustainable funding framework. According to him, the decision not only enhances the revenue base available for critical national interventions but equally signaled a clear policy direction aimed at accelerating infrastructural growth and supporting key sectors of the economy.

Responding to The Guardian inquiry at a recent event, the TETFund boss said that unlike Education Tax, Development Levy will expand the tax base.

“In our engagements with the promoters of the tax law, we were told that in terms of volume, the Development Levy will be more than the Education Tax. The reason is that Education Tax was predicated on profits by the companies. So, if the company says ‘we didn’t make profits’, they do not contribute to Education Tax but levy is imposed at an earlier stage than your profit. So, more people will now pay than they were paying before and that will translate to a bigger volume.”

As Nigeria navigates the early months of the new tax regime, analysts said the real test will lie in implementation. The transition from Education Tax to Development Levy marks a significant policy shift, one that could modernise education financing. Echono’s optimism reflects a belief that with the right governance structures, the Development Levy can strengthen TETFund’s role in transforming higher education.