Nigeria’s tax system has long represented all that is wrong with the nation’s overall fiscal culture: low tax bases, overworked employees, undertaxed elites, a flourishing black market, and widespread corruption.
Nigeria continues to be one of the worst tax performers in Africa, with a tax-to-GDP ratio that has remained in the range of 6% to 8%.
This has pushed the nation into the grip of unstable oil markets, debt, and reliance on help.
A turning point in this regard was reached in 2025 with the ratification of four important pieces of legislation: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act.
These laws seek to rethink Nigeria’s taxation philosophy; they are not just administrative documents. Can they, however, succeed where previous reforms failed?
The new tax architecture’s intentional shift toward progressivity is among its most admirable aspects.
According to Section 58 of the Nigeria Tax Act, 2025, low-income earners—those making ₦800,000 or less per year—are now legally exempt from personal income tax for the first time in Nigerian history.
In a nation where millions of people live on less than $1 a day, this is a brave and kind act.
Simultaneously, SMEs that generate less than N25 million are subject to 0% Company Income Tax (Section 56), while those with a turnover of less than ₦100 million enjoy streamlined compliance. If carefully carried out, these policies could reduce the financial burden on the impoverished and encourage the formalization of businesses.
It is no longer aspirational to digitize. Now, it is a statutory requirement.
Integration with national identity systems like NIN and BVN strengthens the requirement that all government agencies, businesses, and individuals utilize Tax Identification Numbers (TINs) (Tax Administration Act, Sections 4–8).
Fiscalization systems will be used to integrate taxpayer data, electronically file returns, and track VAT in real time (Section 23). E-invoicing, API-based validation, and artificial intelligence are no just futuristic catchphrases; they are now required by law.
These principles might bring in an era of traceability, efficiency, and fraud minimization if faithfully followed.
Harmonization efforts are equally vital.
Federal, state, and local tax bodies’ operational frameworks can be aligned by the Joint Revenue Board (Sections 3 and 5 of the JRBE Act). The Nigeria Revenue Service may now be legally authorized by states to collect certain taxes on their behalf (NRS Act, Section 5), which could put an end to the multiple taxation issue that has long stifled businesses. A key component of restoring confidence is giving taxpayers a forum for grievance redress and rights protection, which is finally possible with the creation of the Office of the Tax Ombud (Tax Admin Act, Section 141).
Importantly, the laws provide fresh insight into wealth taxes. Long disregarded, capital gains tax (CGT) now applies to the sale of shares, land, digital assets, and intellectual property under Sections 33–49 of the Nigeria Tax Act. There are exemptions for reinvestments, charitable contributions, and minor earnings (less than ₦10 million). In a similar vein, WHT (withholding tax) has been tightened and explained.
According to Section 51 of the Tax Administration Act, payments for consulting, rent, royalties, dividends, and digital services are now subject to source taxes. Noncompliance carries severe penalties, such as a 10% penalty and joint liability clauses.
Long-standing worries about multinational firms evading taxes are also addressed by the amendments. The Nigeria Tax Act’s Sections 190–195 authorize audits of offshore agreements, enforce arm’s-length pricing for related-party transactions, and reinforce transfer pricing regulations. These instruments are essential for preventing profit shifting and base erosion.
However, there are flaws in even the most hopeful initiatives. Although the exemption criteria are well-defined, there isn’t a streamlined taxpayer handbook or a detailed rate schedule. negotiating this new terrain could be like negotiating a legal maze for small firms and informal traders. Even more concerning is the fact that the laws are not gender-responsive. The tax code in Nigeria still ignores the particular difficulties faced by women-owned enterprises, especially those operating in the unorganized sector. They are not supported by any specific tax credits, waivers, or capacity-building clauses.
Exemptions by themselves are insufficient for pro-poor taxation to have any real impact. Nigeria must include tax reforms into its social protection framework, which includes conditional cash transfers, health insurance programs, and tax IDs linked to the National Social Register. Social equity and tax justice must coexist.
The handling of tax refunds is also troubling. The Tax Administration Act’s Section 55 offers a refund system, however it makes no mention of required deadlines or automated triggers. This ambiguity might harm lawful enterprises, especially exporters and large buyers with input tax credits, and discourage voluntary compliance in a system known for its bureaucratic lethargy.
The absence of a statutory structure for reporting tax expenditures is another obvious omission. Nigeria still lacks a thorough, government-wide tax spending reporting mechanism that reveals, aggregates, and assesses the entire cost of tax incentives across sectors on an annual basis, despite the law’s requirement that individual businesses file tax incentive returns (Section 27). A national annual tax expenditure statement, which is typical in nations like South Africa, Kenya, and Canada, is still absent from Nigeria. Additionally, there is no procedure for performing cost-benefit assessments of tax incentives, nor is there a need that the entire amount of money lost due to waivers and exclusions be made publicly available. This makes it difficult for individuals and officials to understand the trade-offs that Nigeria’s fiscal system entails. Nowadays, a lot of nations release yearly reports outlining the financial burden of exemptions and waivers. This is essential for accountability and transparency, particularly when Nigeria forgoes large sums of money in business incentives.
The elephant in the room is still implementation. Many LGAs lack even the most basic infrastructure—broadband, skilled staff, and digital systems—despite the legal aspirations. Inequities may worsen as a result of the disparity between technologically illiterate areas and high-performing states like Lagos.
Furthermore, the Joint Revenue Board’s harmonisation aim may be jeopardised by federal-state conflicts over revenue collection, particularly in politically charged settings.
If revenue officials are not given institutional independence, there is also a chance that tax enforcement would become politicized. There is no safeguard against political meddling in the selection of NRS and State IRS leaders. For transformation to be sustained, strong institutions—not simply strong laws—are required.
However, the reforms have the potential to be revolutionary.
Nigeria is now in pace with worldwide changes thanks to the legal foundation for taxation digital transactions, virtual assets, and non-resident service providers. Green taxation and climate finance are made possible by environmental levies and the 5% fossil fuel surcharge (Tax Act, Section 159). Section 27 of the Tax Administration Act, which requires businesses to file tax incentive filings, may reveal exploitation and increase transparency.
However, it’s still unclear how effective incentives are. The government is not required to publicly reveal the cost-benefit analysis of these waivers, even though businesses are now required to file tax incentive filings. Incentives might continue to be opaque rent-seeking instruments rather than growth-promoting agents in the absence of impact assessment.
Around the world, nations including Ghana, South Africa, Kenya, and Rwanda have achieved impressive progress in intelligent taxation. Effective taxes, however, must influence planning, budgeting, and delivery in addition to collection. Therefore, tax revenue and the national and subnational budget cycles must be directly linked in any reforms to public financial management. Citizens should be able to trace how their taxes pay public goods—schools, hospitals, roads.
The lack of trust between taxpayers and governments can be addressed by the use of community scorecards, tax-tagged project monitoring, and budget transparency websites. Nigeria ought to establish participatory budgeting procedures so that local people can see and influence the distribution of local tax income.
Nigeria needs to advance, not just catch up. By incorporating blockchain, AI, and geospatial analytics into compliance systems, we can lead the way in tax innovation with the correct leadership.
Important concerns regarding fiscal federalism are also brought up by the measures. The larger problem is Nigeria’s unsettled fiscal arrangements, which go beyond structural harmonization.
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It takes constitutional clarity rather than merely administrative alignment to resolve the conflict between state-level autonomy and centralized tax administration, particularly with regard to VAT and mineral revenue. The Joint Revenue Board might find it difficult to foster agreement among Nigeria’s federating units if these fundamental conflicts are not resolved.
The 2025 legislation also puts Nigeria in a better position to comply with the Base Erosion and Profit Shifting (BEPS) action plans of the OECD. Nigeria must actively engage in multilateral fora as global minimum tax regulations and digital taxes develop to guarantee that African interests are taken into account when creating more equitable international tax laws.
Reforms must be combined with specific tools, such as streamlined presumptive tax systems, mobile-based registration, and incentives for digital bookkeeping, in order to unlock Nigeria’s sizable informal and youth-led economy. Offering tax breaks in return for digital onboarding as part of a young tax transition program would be revolutionary.
Timely settlement of tax issues is nevertheless hampered by a congested and underpaid judiciary, even if the Tax Appeal Tribunal and Ombudsman provide structured remedy. Therefore, in order to provide uniform, prompt, and equitable rulings, tax changes must be followed by judicial capacity-building, particularly at the state level.
Although effective on paper, the NRS’s consolidation of taxation authorities runs the risk of recentralizing fiscal authority in a way that deprives states of their sovereignty. Particularly in states with distinct economic profiles or reform momentum, a delicate balance between local innovation and national uniformity needs to be found.
There is unrealized potential as a compliance partner in Nigeria’s flourishing fintech industry. To integrate informal traders, manage VAT in retail, and streamline tax reporting for gig workers, the government can collaborate with startups to develop low-code solutions and APIs.
It is admirable that Nigeria implemented a surcharge for fossil fuels. Leveraging tax reforms as an anti-corruption strategy is equally important. A new avenue for identifying procurement fraud, illegal enrichment, and off-budget expenditure is provided by the combination of taxpayer identity with financial data and AI-enabled audit tools. Public officeholders should likewise be subject to tax openness, with yearly asset disclosures that match tax records being required. Nigeria can combat corruption by tying taxes to the integrity of governance. However, a more comprehensive set of policies—carbon pricing, environmental taxes on extractive industries, and incentives for climate-smart agriculture—will be necessary for true green taxation. Climate resilience and the low-carbon transition could be accelerated by a national green fund financed by eco-taxes.
Citizens require useful tools in addition to legal reform. Nigeria’s elderly population, people with disabilities (PWDs), and other disadvantaged groups are among the categories most impacted by taxes. However, there are no special tax breaks, exemptions, or incentives for these organizations in the current legislation.
Age, ability, and marginalization must all be considered in tax justice. The tax law can be made more socially equitable by providing PIT exemptions to seniors with small pensions or VAT exemptions for assistive technology and services connected to disabilities. The government should also take into account tax assistance initiatives for the elderly and PWD, such as community tax consultants or mobile filing assistance. Compliance will be made easier with the use of a national tax calculator app, streamlined rate tables, and community-based tax education. Even well-intentioned policies run the danger of offending the same people they are meant to help if they lack clarity.
The tax reform laws of 2025 offer a fresh opportunity in addition to new regulations. an opportunity to use taxes as a tool for development and justice. A chance to wean Nigeria off of its reliance on oil. an opportunity to restore the taxpayer’s dignity. The bravery of leaders, the honesty of institutions, and the dedication of citizens will determine whether these laws live up to their promises. The laws were written in Nigeria. It has to write the legacy now.
• Prof. Chiwuike Uba* is a fiscal governance specialist and development economist who has written several policy papers on public finance and tax reform. He is the ACUF Initiative for Policy and Governance’s Chairman of the Board.
