Nigeria’s Landmark Tax Reforms: Ushering in a Fairer, More Efficient Fiscal Era from January 5, 2026.

Nigeria’s Landmark Tax Reforms: Ushering in a Fairer, More Efficient Fiscal Era from January 5, 2026.

*~Dr. Olukayode Ajulo, OON, SAN.*

The First Day of January, Two Thousand and Twenty Six, marks the dawn of a transformative chapter in Nigeria’s economic history as the core provisions of the four Tax Reform Acts take full effect. 

Signed into law by President Bola Ahmed Tinubu on June 26, 2025, these landmark legislations, the Nigeria Tax Act (NTA) 2025, Nigeria Tax Administration Act (NTAA) 2025, Nigeria Revenue Service (Establishment) Act (NRSA) 2025, and Joint Revenue Board (Establishment) Act (JRBA) 2025, represent the most comprehensive overhaul of our tax system in decades.

Born from the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Prof. Taiwo Oyedele, these Acts consolidate over a dozen fragmented and outdated statutes, eliminate redundancies, and introduce a unified, modern framework designed to promote equity, efficiency, and sustainable revenue generation.

Nigeria’s pre-reform tax landscape was marred by complexities: multiple overlapping levies, a low tax-to-GDP ratio (below 10%, compared to the African average), widespread evasion, and undue burdens on low-income earners and small enterprises. The new regime addresses these head-on, shifting the fiscal load towards higher earners, large corporations, and luxury consumption while providing substantial relief to the vulnerable.

Key Provisions of the Reforms:

The NTA consolidates major taxes—including Companies Income Tax (CIT), Personal Income Tax (PIT), Value Added Tax (VAT), Capital Gains Tax (CGT), and others, into a single statute. Highlights include:

•  Exemptions for the Vulnerable: Individuals earning ₦800,000 or less annually are fully exempt from PIT. As Taiwo Oyedele noted, “About 98% of workers will either pay no PAYE or pay less.” Small companies (turnover below ₦100 million and fixed assets not exceeding ₦250 million) are exempt from CIT, VAT, withholding tax, and the new Development Levy.

•  Progressive Taxation: PIT rates are structured progressively, capping at 25% for incomes above ₦50 million. CIT for large companies drops from 30% to 27.5% in 2025 and 25% thereafter.

•  VAT Reforms: The rate remains 7.5%, with expanded exemptions and zero-rating for essentials—basic food items, medical supplies, educational materials, tuition fees, electricity transmission, and non-oil exports. Businesses can now fully recover input VAT on assets and overheads, unlocking an estimated ₦3.4 trillion in credits, as highlighted by Oyedele. This eliminates “hidden VAT” costs previously passed to consumers.

•  Development Levy: A unified 4% levy (progressively declining to 2% by 2030) replaces overlapping sector-specific charges like Tertiary Education Tax, NASENI Levy, and Police Trust Fund contributions.

•  Sector-Specific Changes: Enhanced incentives for petroleum and mining; rules for digital assets and services; alignment with global standards like Pillar 2 minimum tax; and CGT on indirect offshore share transfers deriving value from Nigerian assets.

Administration is revolutionised through the NRSA, establishing the autonomous Nigeria Revenue Service (replacing FIRS) with a digital focus, and the JRBA for inter-governmental coordination, including a Tax Ombudsman for fair dispute resolution.

Expectations for the Federal Government

At the federal level, these reforms promise a surge in non-oil revenues through broader compliance, reduced evasion, and economic stimulation. By aligning with international best practices, Nigeria becomes more attractive to investors. “These reforms position Nigeria as a prime destination for investors,” observes a KPMG analysis. 

The centralised yet collaborative structure under NRS and JRBA ensures efficient collection of federal revenues while supporting diversification from oil dependency.

Expectations for State Governments and Citizens

States stand to gain significantly from enhanced fiscal autonomy. The revised VAT distribution, 10% federal, 55% states, 35% local governments, with sub-allocations based on equality (50%), population (20%), and derivation/consumption (30%), rewards productive economies.

Ondo State exemplifies proactive alignment: On December 31, 2025, Governor Lucky Aiyedatiwa approved and forwarded a harmonised tax bill to the State House of Assembly. "This ensures our tax framework operates in tandem with national standards," I stated post-Executive Council meeting, “promoting efficiency, transparency, and sustainable revenue for infrastructure, education, health, and agriculture.”

For citizens, the reforms are unequivocally pro-people. Over 97% of small businesses, the backbone of our economy, face minimal or zero obligations, freeing resources for growth and job creation. Low- and middle-income households benefit from exemptions on essentials, lower PIT, and reduced living costs as businesses recover input VAT.

As Prof. Oyedele emphasises, “The reforms are designed to provide direct relief, shifting the burden to those who can afford it.” Enhanced revenues should fund better public services, rebuilding trust and fostering accountability.

Challenges and the Path Forward

Transition may present initial hurdles; adapting to e-invoicing, digital compliance, and clarified rules for informal sectors. However, gradual integration, public sensitisation, and the Tax Ombudsman mitigate risks. Governments must prioritise capacity building, technology adoption, and stakeholder engagement.

In Ondo State, under Governor Lucky Orimisan Aiyedatiwa, FCA, we are committed to seamless implementation, eliminating multiple taxation, curbing illegal collections, and leveraging derivation benefits from our agricultural and resource base.

A Vision for Renewed Prosperity

These reforms embody President Tinubu’s vision of a “fair, transparent, and modern” fiscal system. As EY notes, “It’s not just about collecting more; it’s about collecting fairly.” By broadening the base without overburdening the masses, we pave the way for inclusive growth, reduced inequality, and shared prosperity.

Conclusion: Embracing a Bold Vision for Nigeria’s Prosperity

As we commence this new fiscal era on January 1, 2026, the tax reform laws stand as one of the most courageous and innovative achievements of President Bola Ahmed Tinubu’s administration. These reforms are not mere legislative adjustments; they are a profound re-engineering of Nigeria’s economic foundation, designed to end the era of oppressive multiple taxation, unlock trapped business capital, protect the poor, and ensure that those who have benefited most from our nation’s opportunities contribute fairly to its progress. 

By exempting millions of low-income earners and small businesses, expanding relief on essentials, and modernising administration through digital tools and institutional autonomy, President Tinubu has demonstrated visionary leadership that places the welfare of ordinary Nigerians at the heart of fiscal policy.

This is governance with empathy and foresight, a deliberate shift from extraction to empowerment, from complexity to clarity, and from oil dependency to broad-based, sustainable revenue. The President’s bold decision to champion these reforms, despite initial scepticism, reflects his unwavering commitment to building a Nigeria where prosperity is inclusive and opportunity is widespread.

I, therefore, earnestly call on all Nigerians, citizens, business owners, professionals, and community leaders, to embrace these reforms with understanding, cooperation, and patriotism. Let us register promptly where required, comply willingly with simplified obligations, and support the institutions tasked with implementation. 

Change of this magnitude may bring temporary adjustments, but the long-term rewards, lower living costs, more jobs, better infrastructure, quality education, and improved healthcare, are within reach if we stand together.

Under President Tinubu’s leadership, renewed hope is no longer a slogan, it is a tangible reality unfolding before us. Let us seize it with both hands.

Dr. Ajulo is the Attorney General and Commissioner for Justice, Ondo State.