For decades, the relationship between the Nigerian state and its taxpayers has been defined by mutual, weary suspicion. For the small business owner in Kano, the tax system was a labyrinth of multiple levies and arbitrary enforcement. For the teacher in Lagos, it was a monthly deduction that seemed to vanish into a black hole of bureaucracy without improving the road home. The system was marked by complexity, leakage, and an over-reliance on a narrow base—leaving the government cash-strapped and citizens overburdened.
But as the sun sets on 2025, a profound shift is underway. With the stroke of a pen on June 26, President Bola Ahmed Tinubu signed into law a package of reforms that effectively shreds the old, archaic rulebook and replaces it with a modern, progressive framework. The new laws—the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Act, and Joint Revenue Board Act—represent the most significant fiscal intervention in the nation’s democratic history.
This is not merely a tweaking of rates; it is a fundamental philosophical pivot. The objective is no longer to squeeze water from a stone but to irrigate the economy so it can grow. As the new regime prepares to take full effect in January 2026, data reveals a startling, almost revolutionary promise: nearly 98 percent of Nigerian workers will effectively be exempted from paying personal income tax, and the heavy hand of the state is finally being lifted from the neck of the small business owner.
The face of this reform is Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. Speaking recently at a webinar organized by First Bank, Oyedele laid out the human impact of the legislation with compelling clarity. The reforms have a singular moral imperative: to ease the burden on low-income earners while ensuring equity in the system.
Under the new regime, any Nigerian earning the national minimum wage of N70,000 is completely exempt from tax. But the relief extends further. Even those earning slightly more—up to N80,000 or N90,000 monthly—fall under the exemption threshold. In a country grappling with a rising cost of living, this is more than fiscal policy; it is a lifeline.
“The reforms are designed to ease the burden on low-income earners while ensuring equity,” Oyedele explained. “Only individuals earning above N2 million per month would experience an upward review in personal income tax.”
This progressive structure redefines the social contract. It asks those with the broadest shoulders to carry the heaviest load while granting breathing room to the millions of Nigerians who drive the informal and semi-formal economy.
But perhaps the greatest winner in this “Great Reset” is the Nigerian entrepreneur. For years, Small and Medium Enterprises (SMEs) have died a death by a thousand cuts, strangled by withholding taxes, VAT compliance costs, and aggressive revenue drives. The new laws offer a radical departure.
The definition of a “small company” has been expanded significantly. Businesses with an annual gross turnover of N100 million or below are now exempt from Companies Income Tax (CIT) and the newly introduced Development Levy—an enormous leap from the previous N25 million threshold. It means the bakery, the tech startup, and the mid-sized logistics firm can reinvest their profits into growth rather than handing them over to the state.
The reforms eliminate the burden of withholding tax on services rendered by small businesses, freeing up vital cash flow. For sectors that form the bedrock of national development—agriculture, healthcare, and education—a zero-rated VAT system applies. Operators can reclaim input VAT on purchases while charging no VAT on services, a move designed to lower costs for the end consumer.
To ensure these promises are not merely paper tigers, the government has established the Office of the Tax Ombudsman—an independent body that serves as the entrepreneur’s shield. “This new office has been set up particularly to protect small businesses,” Oyedele assured. “Nobody would just come and seal up your premises or harass you and take your items.”
While the benefits are clear, experts warn that the transition will require a massive intellectual overhaul. The new laws are dense, introducing nearly 200 new definitions and terms. At a recent symposium organized by the Chartered Institute of Directors (CIoD) in Lagos, the mood was one of cautious optimism tempered by the realities of the work ahead.
Prof. Olateju Somorin, a doyenne of Nigerian taxation and Dean at Caleb University, emphasized that the scale of change requires significant learning across the system. “People must read these laws,” she urged. “If you are entitled to a deduction, you need to know about it. Staying informed is no longer optional.”
The reforms correct years of fiscal misalignment during which Nigeria focused on spending without securing adequate revenue sources. By harmonizing taxes and aiming for a higher tax-to-GDP ratio, the country is positioning itself for stronger economic growth. However, ignorance of the law will be no excuse. Mrs. Ifueko Okauru, former Executive Chair of the Federal Inland Revenue Service, issued a stark reminder to the business community: “From a legal standpoint, I advise you to read those laws carefully. If you are currently breaching any provision, please be aware that it is now legally enforceable.”
Professionals broadly agree that human capacity is now the most critical infrastructure. The government is undertaking large-scale training for revenue staff, but the private sector must match this pace. Otunba Adetunji Oyebanji, President of the CIoD, noted that for these reforms to translate from legislative intent to real economic impact, issues of technology infrastructure and data utilization must be addressed.
The reforms also tackle the complexity of corporate taxation by consolidating various levies into a single “Development Levy” of 4 percent on assessable profits. This replaces the Tertiary Education Tax, IT Levy, NASENI Levy, and Police Trust Fund Levy. While the rate is specific, the simplification is invaluable, reducing the administrative burden of filing multiple returns.
The archaic “pioneer status” tax holiday—long criticized for its opacity—has been replaced with an “Economic Development Incentive” (EDI). This performance-based model offers a tax credit of 5 percent per annum for five years on qualifying capital expenditure. It shifts the incentive from “who you know” to “what you invest,” rewarding companies that put money into the ground.
The success of this revolution hinges on trust. As Otunba Oyebanji noted, “Tax is fundamentally a social contract.” Citizens and businesses must be confident that the taxes they pay are managed transparently. The promise of reform must be matched by an ironclad commitment to accountability. Taxpayer morale is directly proportional to trust in the utilization of their contributions.
For the banking sector, the reforms provide clarity on issues that have caused public anxiety. Oyedele dispelled myths about the requirement for Tax Identification Numbers (TINs) for bank accounts, clarifying that this rule—applicable since 2020—applies strictly to business accounts, not personal savings. This reassurance helps maintain confidence in the financial system, supported by banks like First Bank, which disbursed over N200 billion to SMEs in the past year alone.
As Nigeria marches toward January 1, 2026, when the full weight of these reforms takes effect, the message to the corporate world is one of preparation. Organizations must reframe their tax strategies to align with commercial goals, set up tax risk registers, and update compliance processes. The era of manual workarounds is over; Nigeria has codified VAT fiscalization rules and mandatory e-invoicing, setting itself apart as an early adopter in Africa.
The “Great Reset” is here. It offers a path to a more intelligent, transparent, and inclusive tax system. It removes the shackles from the poor and small business owners, asking the wealthy and multinationals to pay their fair share through mechanisms like the 15 percent minimum effective tax rate. It is a bold, ambitious attempt to rewrite the nation’s economic destiny. The laws are signed. The framework is set. Now, the collective task of building a nation that works for everyone begins.
Chukwu writes from Imo State, Nigeria.
