December 14, (THEWILL) — Nigeria’s new tax laws that would take effect from January 1, 2026, showcase a lot of financial reliefs for small businesses. However, it incubates inherent fiscal pains that will manifest in the course of the implementations. The ultimate effect will be increased cost of business, curtailed patronage and decline in profitability.
The new tax laws include an exemption for qualifying small companies from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy. A “small company” is defined as one with an annual gross turnover of N100 million or less and total fixed assets not exceeding N250 million. This exemption aims to reduce the tax burden on most micro and small enterprises. The negative impacts discussed primarily affect SMEs that do not meet this definition or struggle with the administrative requirements of the new system.
While the new tax law reforms exempt small businesses from certain profit-based taxes, they still present “pains” through increased compliance burdens, new levies on capital expenditures, and potential indirect cost increases.
Despite exemptions from some taxes, small companies are still required to register for tax, obtain a Tax Identification Number (TIN), and file their tax returns on time. Failure to comply can result in significant penalties, which adds an administrative burden and cost, especially for businesses with limited resources. This means that every small business must engage a tax consultant to assess its operations, prepare and file returns to enjoy the benefits of tax exempt.
There are indirect cost increases: While small businesses are exempt from some direct taxes (like CIT and some development levies), they may face indirect cost increases. For example, larger suppliers who bear new or increased tax burdens (e.g., new excise duties on certain products, or potentially the operational costs of new digital compliance systems) might pass these costs onto small businesses and consumers in the supply chain. This will lead to increased prices and reduction in profit as patronage wanes.
Companies providing professional or consultancy services are excluded from the “small company” classification, regardless of their turnover, and are subject to CIT. This means some small businesses in the service sector do not benefit from the main tax exemptions.
The push for digital compliance, such as the e-invoicing and Electronic Fiscal System (EFS) for VAT, requires an initial investment in technology and training, which can be a challenge for small businesses with limited technological infrastructure.
This tax changes occur within a challenging economic environment characterised by inflation and high operating costs. Even without new direct taxes, businesses struggle with the overall economic climate, and any added regulatory “pain” exacerbates existing challenges. In essence, while the reforms offer significant relief from direct profit tax, the accompanying administrative demands and structural adjustments create new challenges for small businesses.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reform Committee said that Nigerians will start enjoying the benefits of the new tax laws beginning from January 2026. According to him, about 98 percent of Nigeria’s population will no longer pay the Pay As You Earn (PAYE) tax. A large number of small businesses will also be exempted from specific categories of taxes as the new tax laws are not targeted at the low-income earners or those at the poverty line.
The reverse in states
Despite the highly celebrated tax reform laws, the state and local governments are not likely to enjoy the benefits the new system is said to offer. The residents who do not fall into the categories of citizens whom the new tax laws are meant to benefit, have a worrying experience.
Small businesses are still writhing on the throes of multiple taxes, excess levies and over-reaching arms of the law created by authorities of these tiers of government. The laws are enforced in the most brutal manner that has been the culture over the years. On a daily basis, these people are confronted with the realities of an abnormal system that is raised to state priority and executed willfully by government agencies without restraint.
The case of Niger
Outrage recently erupted in the state as the government reportedly demanded over N100,000 from individual shop owners under what it described as an ‘Environmental Protection Agency Levy.’
The most recent circular, issued by the Niger State Environmental Protection Agency (NISEPA), was titled “2025 Harmonised Levies,” and directed traders to make payments as part of the state’s new revenue drive.
“The officials came and despite seeing an almost empty shop, they asked that I pay over N100,000 as environmental levy. Even if I sell everything in this shop, I cannot afford to pay the money,” an affected trader lamented.
Another business owner said government officials had presented the same environmental levy document to traders just five months ago, in May, and forcibly collected money from shop owners at that time.
“Earlier, before now, they brought a bill of N24,000 under the guise of the same harmonised environmental protection fee. When we asked them if we would pay another environmental levy, we were told that we would not pay again till 2026. Despite this, they brought a fresh N100,800 levy,” the business owner lamented.
“The government is making doing business very difficult; we have paid not less than five different taxes in four to five months. The painful thing is that they would come and give you a few days’ ultimatum to raise the money and pay, if you do not pay, it is one embarrassment upon the other. We were told that some businesses were even asked to pay N200,000 tax, milking people dry ” another trader said.
Other states
Enugu State Governor, Peter Mbah, this year signed into law a bill establishing a one-stop shop for tax collection and administration, towards ending the challenge of multiple taxation in the state.
The new legislation, titled Enugu State Internal Revenue Service (Establishment and Consolidation of Revenue Administration) Law, 2025, also grants autonomy to the state’s revenue agency, enabling it to operate independently without bureaucratic limitations.
“I have had engagements with the business community, organized private sector, and market women who consistently expressed concerns about multiple taxation. With this law, we now have one revenue collection point for all taxpayers in the state. This eliminates the confusion and harassment associated with multiple tax collectors,” Mbah said.
However, Gov. Mbah raised the amount paid by shop owners from N5,500 in the previous administration to N35,000 each – an increase of 536.3 percent.
In Anambra State, the residents, particularly Onitsha, the commercial city, cry daily over the embarrassing number of taxes and levies, legal and illegal, imposed on them. They are worried over the violent manner they go about their activities of revenue collection.
In Lagos, Chidi Anyanegbu, the chairman of Chisco Transport Ltd, said that multiple taxation is killing Nigeria’s transport sector. In an interview with the News Agency of Nigeria (NAN), Anyanegbu complained that multiple taxation was hitting transporters hard and killing the transport sector.
“Commercial transport operators are finding it difficult to break even, as they have to pay interest on loans borrowed from banks. We pay over 23 different taxes and it is affecting our businesses. The transport business is a business that touches the masses and most of the beneficiaries are the less-privileged and civil servants who earn meagre incomes. This is responsible for the frequent hike in transport fares.”
In Kano, despite the State and Local Government Revenue Administration (Consolidation & Codification Law, 2021) which was meant to unify revenue laws, multiple taxation persists in the markets and other business areas.
In Kaduna, while it operates under a decentralized tax system meant to eliminate multiple taxation and illegal levies introduced by the Kaduna State Internal Revenue Service, residents complain against multiple taxation imposed by the government.
Taraba state, like other Nigerian states, imposes various taxes, but it faces a significant problem with multiple taxation, where individuals and businesses are subject to overlapping and often illegal taxes from multiple government bodies, including the state and local governments.
Helpless situation
Some stakeholders allege that the illegal revenue collectors are working for some senior government officials. That is the reason, in some states, touts openly operate freely. Even petty traders who display their wares on tables are not left out.
Shop owners in the markets complain too. Tricycle operators had on occasions embarked on protests in some states, against this. Commercial drivers daily lament that they are at the mercy of the revenue collectors on their various routes.
Oyedele explained that the constitution empowers the states and local governments to enact revenue laws in their territories and that until a constitutional amendment is effected, the residents will continue to witness the challenge of multiple and illegal taxation.
“These are what we were taught while in school, we are still speaking about it today. The taxes have increased even more. But we must find the will, and we must find the commitment as a people to solve that problem once and for all. But bear this in mind. Do not think that by the 1st of January 2026, you will see some of those taxes disappear from the roads. No; because the process involved in eradicating them goes beyond enacting a new tax law.
“A constitutional amendment is required to deal with the challenge of multiple taxation at the subnational, and until that is done, there is nothing we can do at this stage,” Oyedele explained at an interactive session with Journalists and Influencers in Lagos last October, organized by the Presidential Committee on Fiscal Policy and Tax Reform to explain the implementation of the new tax law.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
