One of the most pressing challenges facing informal businesses is limited access to credit. Recent surveys show that although about 70 per cent of operators have accessed some form of credit, the bulk still comes from friends and family (70.7 per cent), followed by loan apps (15.1 per cent), with only 12.2 per cent sourced from traditional banks. This underscores the structural financing gap within an economy like Nigeria’s, which is poorer, more agrarian, and less industrialised.
Despite this reality, there is little evidence that the new tax framework adequately addresses access to affordable credit for micro, small, and medium enterprises (MSMEs). This is troubling, given that the Minister of Trade and Investment, Jumoke Oduwole, has identified MSMEs as contributing over 50 per cent of GDP and 84 per cent of employment—making them the backbone of the Nigerian economy.
Basic marketing principles suggest that persuasion requires more than awareness campaigns; incentives are essential. While the Nigerian Education Loan Fund (NELFUND) is a commendable example of how tax revenues can deliver tangible benefits—having disbursed N116 billion to students as of November, including N65 billion for tuition and N51 billion for upkeep—similar targeted incentives are conspicuously absent for informal sector operators.
Expanding access to affordable finance would be one of the most effective incentives. Numerous studies confirm that a lack of capital is a major constraint for businesses across the spectrum, from SMEs to those operating in the shadow economy. Yet such financial buffers appear largely unavailable. Multilateral institutions like the World Bank and IMF routinely channel funds through local banks to support SMEs, but domestic institutions such as the Bank of Industry (BoI) and the Development Bank of Nigeria (DBN) have struggled to fulfil this mandate, often due to bureaucratic bottlenecks and corruption that prevent funds from reaching genuine beneficiaries.
A credible reform agenda must ensure that informal sector operators can access financing transparently, without personal connections or illicit inducements. In this regard, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, deserves commendation for asserting that manufacturers no longer need insider access to obtain foreign exchange. That standard of transparency should be replicated across all government agencies—from BoI and DBN to ports, airports, hospitals, passport offices, land registries, and even law enforcement bodies notorious for corruption.
In an era of digital governance, minimising human discretion in financial transactions is both feasible and necessary. If Nigerians are to trust that their taxes will be used responsibly, transparency must be demonstrable, not merely proclaimed.
These measures are critical to securing public buy-in for the new tax regime. Their apparent absence raises questions about whether communication and crisis-management experts were involved in the Taiwo Oyedele-led Presidential Tax Reform Committee or within the rebranded Federal Inland Revenue Service, now the Nigerian Revenue Service (NRS). Such expertise is indispensable during periods of profound policy change.
To be fair, the broader reform agenda under President Bola Tinubu is beginning to yield positive macroeconomic signals. Exchange rate stability has improved, inflation has moderated from peaks above 34 per cent, foreign reserves have rebounded to over $40 billion, and crude oil production has risen to between 1.6 and 1.8 million barrels per day. These gains reflect the impact of bold early reforms, including fuel subsidy removal and the managed flotation of the naira.
However, these reforms initially imposed severe hardship on Nigerians, especially through rising fuel costs and inflation in an import-dependent economy. For tax reforms to succeed where past efforts failed, they must be accompanied by visible accountability, practical incentives, and sustained public engagement. Only then can taxation be reframed—not as an extractive burden—but as a shared investment in national progress.
It is remarkable that since taking over the reins of leadership in may of 2023 and based on his promise during his inaugural speech to reform the tax system by restructuring our country’s revenue generation system towards benefiting Nigerians more optimally via the facilitation of the provision of infrastructure such as good roads, affordable houses, well stocked hospitals with life saving facilities and personnel as well as the establishment of educational institutions where Nigerians can receive qualitative education: President Tinubu has not relented in pursuit of his development agenda.
While the introduction of reforms via executive orders such as subsidy removal and managed naira floatation faced some storms, President Tinubu successfully navigated the socially and politically charged atmosphere that had enveloped Nigeria.
Known for his political sagacity and boldness in policy formulation, although the next phase of the reforms which Mr. President has chosen to execute through the Legislative process has equally become as daunting and toxic as when he adopted the Executive Order methodology. President Tinubu, who is not known to chicken out from seeing through a process he has set in motion, has vowed not to delay or suspend the policy. This throws up the question of which process is best for governance in Nigeria?
Realistically, in political leadership, there are typically three ways of governing a nation. One is the use of executive orders, the second is reliance on the act of parliament and the third is through the judicial process.
Each of the three options has advantages and disadvantages.
President Tinubu has used all three governance tools. The removal of subsidies on petrol and naira via Executive Order and the new tax laws which are via the Legislative Process.
The Judiciary Process for making law was accomplished through the suit to the court of the 36 states in Nigeria by the federal government and the ruling of the Supreme Court affirming the autonomy of Local Government Areas, the third tier of public administration which should receive its funds directly from the Federation Account, the matter should have been settled. But that apex court ruling has yet to be implemented to date.
Given these realities, based on the success that his earlier reforms have achieved Executive Orders seem to be more efficacious than the legislative and judiciary.
To be continued tomorrow.
Onyibe, an entrepreneur, public policy analyst, and a former commissioner in Delta State government, sent this piece from Lagos.
