Introduction to Nigeria’s Tax Reform

Nigeria’s tax reform in 2025 represents a comprehensive overhaul of the country’s fiscal framework, aimed at boosting revenue generation, simplifying tax administration, promoting economic growth, and aligning with global standards. Initiated under President Bola Ahmed Tinubu’s administration, the reforms were driven by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele. The reforms culminated in four key bills signed into law on June 26, 2025, with an effective date of January 1, 2026. These laws consolidate and repeal several outdated tax statutes, introducing unified rules for residents and non-residents while addressing issues like low tax compliance, multiple taxation, and inefficiencies in revenue collection.

The reforms seek to broaden the tax base without unduly burdening low-income earners, enhance transparency, and support sectors like agriculture, renewables, and small businesses. However, they have sparked debates over equity, potential economic impacts, and allegations of post-passage alterations.

Background and History

Nigeria’s tax system has long been criticized for fragmentation, with over 60 different taxes administered by federal, state, and local agencies, leading to inefficiencies and low revenue (Nigeria’s tax-to-GDP ratio is around 10%, below the African average). The Tinubu administration launched the reforms in 2023 to address these gaps, forming the Oyedele Committee to propose changes.

After public consultations and legislative debates, the National Assembly passed the bills in June 2025. President Tinubu signed them into law amid promises of increased revenue for infrastructure and social services. The reforms draw from global best practices, such as OECD guidelines on minimum effective tax rates, while tailoring to Nigeria’s context.

The Four Key Tax Reform Acts

The reforms are enshrined in four interconnected laws, each addressing specific aspects of taxation:

1. Nigeria Tax Act (NTA): This is the core legislation that consolidates and repeals major tax laws, including the Companies Income Tax Act, Personal Income Tax Act, Petroleum Profits Tax Act, Value Added Tax Act, Capital Gains Tax Act, and Stamp Duties Act. It introduces unified tax rules, expands exemptions for small businesses and essentials, and aligns with international standards like controlled foreign company rules and minimum effective tax rates.
2. Nigeria Tax Administration Act (NTAA): Focuses on improving tax collection efficiency, introducing measures like e-invoicing, fiscalization, and a Tax Ombuds office for dispute resolution. It aims to reduce compliance burdens and enhance transparency across federal, state, and local levels.
3. Joint Revenue Board Establishment Act (JRBA): Establishes a Joint Revenue Board to coordinate tax administration among federal and sub-national entities, reducing overlaps and ensuring equitable revenue sharing.
4. Nigeria Revenue Service Establishment Act (NRSA): Creates the Nigeria Revenue Service (NRS) as a unified agency replacing the Federal Inland Revenue Service (FIRS), responsible for assessing, collecting, and accounting for all federal taxes. It centralizes operations to streamline processes.

All acts were signed on June 26, 2025, and take effect from January 1, 2026, with transitional provisions for ongoing matters.

Key Provisions and Changes

The reforms introduce sweeping changes across various taxes:

• Value Added Tax (VAT): Retained at 7.5%. Introduces mandatory e-invoicing and real-time validation. Expands zero-rated supplies to essentials like basic foods, medical products, educational materials, and exports (excluding oil/gas). Allows full input VAT recovery for zero-rated items. Exempts humanitarian goods and assistive devices. Adds a 5% fossil fuel surcharge on chargeable fossil fuels, with exemptions for renewables.
• Corporate Income Tax (CIT): Rate remains 30% for large companies; 0% for small companies (turnover ≤ NGN50m, fixed assets ≤ NGN250m, excluding professionals). Introduces 15% minimum effective tax rate for multinationals (aligned with OECD Pillar 2). Implements CFC rules taxing undistributed foreign profits. Development Levy of 4% on assessable profits consolidates several levies. Expands deductions for R&D (capped at 5% of turnover) and donations (up to 10% of profit).
• Personal Income Tax (PIT): Progressive rates from 0% (≤ NGN800,000 annually) to 25%. Worldwide income for residents; Nigeria-sourced for non-residents. Expands taxable income to digital assets and prizes. Increases exemption for loss-of-office compensation to NGN50m.
• Capital Gains Tax (CGT): Rate aligned with CIT (30% for companies) or PIT (up to 25% for individuals). Applies to indirect transfers. Exemption threshold for share sales increased to NGN150m (gains ≤ NGN10m).
• Excise Duties and Others: No major rate changes, but fossil fuel surcharge added. Stamp duties clarified with exemptions for low-rent leases (<NGN10m). Economic Development Tax Incentive (EDTI) replaces Pioneer Status, offering performance-based credits for priority sectors.
• Sector-Specific: Petroleum: CIT applies to all operations; mining: deductions for remediation funds; free zones: phased exemptions for customs sales by 2028.

Controversies and Pushback

The reforms have faced significant opposition, particularly from northern states and stakeholders concerned about equity and transparency. Critics argue the laws disproportionately benefit southern regions and could exacerbate economic disparities. In December 2025, the Nigerian Bar Association (NBA) called for suspension of the acts amid allegations of post-passage alterations, urging an investigation into discrepancies between passed and signed versions.

Taiwo Oyedele dismissed these claims, asserting the laws were unchanged and urging focus on their benefits. Pushback includes legislative resistance and public concerns over rushed implementation, with calls for more consultations before the January 1, 2026, rollout.

Potential Impacts and Benefits

Benefits: Expected to raise tax-to-GDP ratio, simplify compliance (e.g., e-invoicing), support small businesses through exemptions, and attract investment via incentives like EDTI. Zero-rating essentials could reduce inflation on basics, while unified administration minimizes multiple taxation.

Impacts: Businesses must update systems for fiscalization and e-invoicing by 2026. Higher CGT and minimum ETR may affect multinationals. Petroleum/mining sectors face new deductions and royalties. Potential economic growth through better revenue, but risks of short-term disruptions if implementation falters.

Current Status

As of December 23, 2025, the laws remain set for January 1, 2026, implementation despite calls for suspension. The government continues defending them, with Oyedele addressing misconceptions. Companies are advised to review structures for compliance, with transitional rules allowing ongoing matters under old laws.