July 03, (THEWILL) — For decades, Nigeria’s tax system has symbolised everything wrong with the country’s broader fiscal culture—narrow tax bases, overburdened workers, under-taxed elites, a thriving informal sector, and rampant corruption. With a tax-to-GDP ratio that has hovered between 6% and 8%, Nigeria remains one of the poorest tax performers in Africa. This has forced the country into the clutches of debt, aid dependence, and volatile oil markets.
In this context, the signing into law of four pivotal instruments in 2025—the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act—is a watershed moment. These laws are not merely administrative documents; they aim to redefine the very philosophy of taxation in Nigeria. But can they succeed where past reforms have failed?
One of the most commendable features of the new tax framework is its clear move towards progressivity. For the first time in the country’s history, individuals earning ₦800,000 or less annually are exempt from personal income tax under Section 58 of the Nigeria Tax Act, 2025. This is a bold and compassionate gesture in a country where millions survive on less than a dollar a day. Small and medium enterprises with turnover not exceeding ₦100 million benefit from simplified compliance procedures, and businesses earning below ₦25 million now face a 0% Company Income Tax as provided in Section 56. These measures, if implemented with diligence and integrity, could significantly ease the fiscal burden on low-income earners and help formalise Nigeria’s largely informal economy.
Digitisation has also moved from vision to law. The mandatory use of Tax Identification Numbers by individuals, companies, and all government entities—outlined in Sections 4 to 8 of the Tax Administration Act—is to be reinforced through integration with existing national identity databases such as the NIN and BVN. Taxpayer data will be interlinked, returns can be filed electronically, and VAT can be tracked in real time through fiscalisation systems under Section 23. What were once futuristic buzzwords—AI audits, e-invoicing, API-based validation—are now legal obligations. If enforced faithfully, these digital provisions could dramatically improve traceability, efficiency, and curb fraud across the system.
Another major pillar of the reforms is harmonisation. The Joint Revenue Board, established under the JRBE Act, is now empowered to align the operational frameworks of federal, state, and local tax bodies. In a move that could reduce the long-standing challenge of multiple taxation, states may now authorise the Nigeria Revenue Service to collect certain taxes on their behalf, as allowed under Section 5 of the NIRS Act. The establishment of the Office of the Tax Ombud, as laid out in Section 141 of the Tax Administration Act, provides taxpayers with a much-needed platform for redress and the protection of their rights—an essential step in rebuilding trust between the government and its citizens.
The new tax laws also target wealth more assertively. Capital Gains Tax, which had long been neglected, now covers disposals of land, shares, digital assets, and intellectual property. Exemptions apply for gains below ₦10 million, charitable donations, and reinvestments. Withholding Tax is also reinforced, applying to payments for consultancy, rent, royalties, dividends, and digital services, with penalties including a 10% surcharge and joint liability for non-compliance. These measures represent significant efforts to increase fairness and close long-standing loopholes.
Sections 190 to 195 of the Nigeria Tax Act directly address tax avoidance by multinational corporations. The reforms strengthen transfer pricing rules, mandate arm’s-length pricing in related-party transactions, and allow for audits of offshore arrangements. These tools are essential to curbing base erosion and profit shifting, aligning Nigeria with the OECD’s BEPS action plan.
Still, despite their promise, the laws are not without their flaws. While thresholds for exemptions are clearly defined, there is no comprehensive rate schedule or taxpayer handbook. For small businesses and informal traders, the lack of user-friendly guidance could render the legal landscape inaccessible. The laws are also silent on gender. They fail to address the specific challenges of women-led businesses, particularly in the informal sector, and contain no tax credits, waivers, or capacity-building support targeted at this group. Pro-poor taxation must extend beyond exemptions—it must be paired with deliberate social protection efforts. Linking tax IDs with the National Social Register, conditional cash transfer programmes, and health insurance systems is crucial to making tax justice more meaningful.
Another area of concern is the treatment of tax refunds. Section 55 of the Tax Administration Act provides a refund mechanism but fails to define mandatory timelines or automated processes for disbursing refunds. In Nigeria’s notoriously bureaucratic environment, such ambiguity could frustrate legitimate businesses, particularly exporters and large buyers with significant input tax credits. Also missing is a statutory framework for tax expenditure reporting. Although companies are required to submit incentive returns, the country lacks a government-wide reporting system that discloses, aggregates, and evaluates the total cost of tax incentives. Without a national tax expenditure statement or a cost-benefit evaluation process, citizens and policymakers remain blind to the trade-offs embedded in fiscal policy. Many countries, including South Africa, Kenya, and Canada, have already institutionalised these practices, enhancing transparency and accountability.
Perhaps the biggest challenge of all lies in implementation. Many local government areas still lack the most basic infrastructure—no broadband, no trained personnel, no digital systems. This disparity could widen the gap between digitally advanced states like Lagos and under-resourced rural regions. Federal-state tensions over revenue collection, particularly in politically sensitive contexts, may undermine the harmonisation agenda. There is also the risk of politicisation. Without institutional independence, tax enforcement could be wielded as a political weapon. The appointment processes for key tax leadership positions remain exposed to political influence, and without strong institutions to match strong laws, these reforms may falter.
Nevertheless, the 2025 reforms hold transformative potential. Legal recognition of digital transactions, virtual assets, and non-resident service providers positions Nigeria to align with global taxation trends. The 5% fossil fuel surcharge outlined in Section 159 of the Nigeria Tax Act introduces an environmental lens to fiscal policy, opening the door to climate finance through green taxation. Yet, the true potential of these tools lies in their use. Without a broader policy framework for carbon pricing, environmental levies on extractive industries, and incentives for climate-smart agriculture, Nigeria risks missing an opportunity to integrate taxation with climate resilience. A national green fund capitalised by eco-taxes could help finance the country’s low-carbon transition.
Beyond legal reform, what citizens need are practical tools. The elderly, persons with disabilities, and other vulnerable groups remain largely invisible in the new laws. There are no tax reliefs or exemptions specifically designed for them. Aligning the tax code with principles of equity would require targeted policies—such as exemptions for retirees with limited pensions or VAT waivers for assistive devices. Tax support programmes like community tax advisors, simplified tax calculators, and mobile filing assistance could make compliance less daunting for these groups.
Nigeria must also look outward. The country has much to learn from peers like Rwanda, Ghana, South Africa, and Kenya, which have made significant strides in tax system innovation. But effective taxation goes beyond collection—it must influence budgeting, planning, and service delivery. Nigeria should link tax revenue directly to national and state budgets. Citizens should be able to trace how their taxes fund public goods—schools, roads, hospitals. Participatory budgeting, tax-tagged project monitoring, and community scorecards can help close the trust gap between citizens and government.
A critical issue yet to be resolved is Nigeria’s broader fiscal federalism. Beyond administrative harmonisation, the fundamental tension between centralised tax administration and state autonomy—particularly regarding VAT and mineral revenues—requires constitutional clarity. Without settling these deep-rooted conflicts, the Joint Revenue Board may find it difficult to foster consensus among federating units. Meanwhile, Nigeria’s thriving fintech ecosystem presents a promising avenue for collaboration. The government could partner with startups to co-create low-code APIs, automate VAT tracking, onboard informal traders, and simplify tax reporting for gig workers.
Finally, while the Tax Appeal Tribunal and Tax Ombudsman provide mechanisms for redress, the judicial arm remains under-resourced and overburdened. Timely, consistent, and fair resolution of tax disputes is essential, and this demands significant capacity building within the judiciary—particularly at the state level.
The consolidation of tax powers under the NRS may streamline administration, but it also raises concerns of recentralisation. A careful balance must be struck between national uniformity and state-level innovation, especially in states with unique economic profiles or reform momentum. The integration of tax and financial data, combined with AI audit tools, also offers Nigeria an opportunity to strike at the root of corruption. Tax transparency should extend to public officeholders, who must be required to file annual asset declarations aligned with their tax records. This is how taxation can be linked with governance integrity.
The 2025 tax reform laws represent not just new rules, but a new opportunity. An opportunity to make taxation an instrument of justice and development. An opportunity to wean Nigeria off its chronic dependence on oil. An opportunity to restore the dignity of the taxpayer. Whether these laws fulfil their promise will depend not just on what is written in the statutes, but on the courage of leaders, the strength of institutions, and the commitment of citizens. Nigeria has written the laws. Now it must write the legacy.
***Written by Prof. Chiwuike Uba.
Prof. Chiwuike Uba is a development economist, fiscal governance expert, tax expert, and author of multiple policy papers on tax reform and public finance. He serves as the Chairman of the Board, ACUF Initiative for Policy and Governance.
