Onome Amuge
The Presidential Fiscal Policy and Tax Reforms Committee, headed by veteran economist, Taiwo Oyedele, has unveiled one of its boldest tax reform efforts in decades, aiming to overhaul a system long criticised for inefficiency, inequity, and dependence on oil revenues.
Speaking at a stakeholder session in Lagos, the committee chairman outlined an agenda that aims to harmonise more than 60 different taxes into fewer than 10, ease compliance for small businesses, and expand the net to capture millions of Nigerians and informal enterprises that have historically operated outside the system.
“This is a pivotal moment for Nigeria’s economy. By streamlining tax laws and reducing the burden on small businesses, we can drive greater compliance, increase revenue, and strengthen our economic stability,” said Oyedele.
Yet the bigger question looming over the reforms is not whether they are technically sound, but whether they can overcome decades of distrust between citizens, businesses and the state.
Nigeria’s tax-to-GDP ratio, at just under 10 per cent, remains one of the lowest in Africa. By comparison, South Africa generates nearly 25 per cent, while Ghana and Kenya stand at around 13–15 per cent. Economists argue that Nigeria’s low compliance is not simply due to complexity but stems from a widespread perception that taxes do not translate into tangible public goods.
The government’s pledge to eliminate nuisance taxes and double taxation, alongside a promise of faster refunds and greater transparency, is designed to build that credibility. But analysts caution that reforms will falter without parallel improvements in governance and service delivery.
A central plank of the new framework is the introduction of a presumptive tax system for individuals and microbusinesses with turnover below N50 million, part of an effort to formalise the informal economy. The sector accounts for more than half of GDP and employs the majority of Nigerians, yet contributes little in formal tax revenue.
Rather than levying punitive rates, the government has opted for charges paired with simplified compliance, including digital platforms for registration and filing. Small businesses below N25 million in annual turnover will continue to be exempted from VAT obligations, though they must file quarterly nil returns.
The reforms also aim to recalibrate personal income taxation. Nigeria’s current top marginal rate stands at 24 per cent, slightly above the continental average but lower than Ghana (35 per cent) and Kenya (30 per cent). The changes seek to reduce the burden on low- and middle-income earners, aligning thresholds with the new national minimum wage.
For corporations, VAT will remain at 7.5 per cent (among the lowest in Africa), but with broader eligibility for input credits. A major administrative change is the CBN’s decision to mandate tax identification numbers for all business accounts from 2026, closing a loophole that has long allowed companies to operate outside the formal financial system.
One of the most striking aspects of the reform is the commitment to shrink Nigeria’s patchwork of over 60 levies into fewer than ten. Multiple tiers of government have historically imposed duplicative or overlapping charges, creating an environment described by business associations as “hostile to investment.”
The committee has already recommended repealing or revising certain levies introduced under previous administrations. The aim is to replace complexity with predictability.
Nigeria’s fiscal crisis underpins the urgency of reform. Oil receipts, once the backbone of government revenue, have become volatile due to production challenges and global energy shifts. With debt service consuming more than half of federal revenues, broadening the non-oil tax base is no longer optional, according to the government.
But the political economy of tax reform is notoriously fraught. There are fears that states and local governments, many of which depend on nuisance levies for survival, may resist harmonisation. Likewise, elites with vested interests in loopholes and exemptions may prove difficult to dislodge.
Oyedele acknowledged the challenge, emphasising that continuous engagement with stakeholders will be key to smoothing the transition.
The committee is currently banking on communication, transparency, and gradual implementation to win over sceptics. “We must avoid misinformation and position ourselves for the better days ahead,” Oyedele urged.
The reforms may indeed be pivotal, as he suggested. But their success will not only be measured by the tax-to-GDP ratio; it will be judged by whether Nigerians, for the first time in decades, feel that paying tax is no longer an act of futility.
