Nigeria’s tax reform marks one of the most consequential shifts in the country’s fiscal architecture since independence, driven by the urgent need to stabilise public finances, broaden the revenue base and restore credibility to a system historically weakened by inefficiency. With the Federal Inland Revenue Service (FIRS) transitioning into the Nigeria Revenue Service (NRS) to signal its implementation, ISAAC CHIBUIFE writes that the new template will test how Nigeria can build a transparent and efficient tax system capable of funding its ambitious developmental agenda and supporting less volatile revenue.
When the Federal Government announced that Nigeria’s new tax laws would take effect from January 1, 2026, it signalled one of the most ambitious fiscal rejigs since the country’s independence. Captured in four cardinal acts, the reforms were framed as an uncommon attempt to simplify a rigid and fragmented tax system, broaden the revenue base and put the economy on a more sustainable growth path.
Weeks after the heated pre-implementation debates and, most recently, the controversy over the discrepancy between the legislated and gazette acts, attention is shifting from intention to practical impact as the laws test the enforcement and compliance readiness of the government and citizens.
Economists, business leaders and ordinary Nigerians are now interrogating what the reforms truly mean — not just in theory, but in daily economic lives as implementation evolves. To start the process, the Federal Inland Revenue Service (FIRS), on December 31, wound down its operations to make way for a new tax behemoth – the Nigeria Revenue Service (NRS).
As the ambitious tax reform laws took effect on January 1, the Centre for the Promotion of Private Enterprise (CPPE) has noted that the country must now move beyond mere good policy design, finding how it could make the best of it. It noted that good policy design does not guarantee good outcomes. The success or failure of the fiscal restructuring, CPPE insisted, will depend far less on legislative provisions and more on how those laws are implemented on Nigerian streets, markets and businesses.
On paper, the framework is widely acknowledged as progressive. It expands relief for low-income earners and small businesses, rationalises multiple taxes, removes obsolete laws and introduces incentives for priority sectors such as agriculture and manufacturing.
Government officials and reform architects insist that the objective is not to squeeze a fragile economy, but to fix leakages, widen the tax base and reduce Nigeria’s long-standing dependence on oil revenue, the advocacy group said.
The CPPE said the fate of the reforms, ultimately, will depend more on strategy, timing and trust. According to CPPE, Nigeria’s tax reform is conceptually sound, but history offers a sobering lesson – “good policy design does not automatically translate into good outcomes”.
Without careful sequencing, political sensitivity and economic realism, even well-intentioned reforms can provoke resistance, disrupt livelihoods and further weaken public confidence in government, it noted, drawing attention to the need for a well-structured implementation programme.
CPPE argues that rolling out a comprehensive tax overhaul in such an environment requires exceptional care. “Tax reform is not an event; it is a process,” the organisation noted, stressing that implementation must evolve with economic conditions, feedback from taxpayers and social realities.
Expecting full and simultaneous compliance across all sectors, it said, is unrealistic, suggesting a phased implementation as recommended by other experts.
It noted that a rigid, enforcement-heavy approach could undermine the credibility of the reforms before their benefits are felt. Ultimately, strong tax systems are not built overnight, nor are their benefits immediately visible. But over time, they form the backbone of stable economies, credible institutions, and shared prosperity.
For the Chairman of the National Tax Policy Implementation Committee (NTPIC), Joseph Tegbe, “strong tax systems are not built overnight nor are their benefits immediately visible”. But over time, he said, they form the backbone of stable economies, credible institutions and shared prosperity.
In an article shared yesterday, he wrote: “The tax reform acts are best understood as part of Nigeria’s long-term economic strategy. They are designed to stabilise the fiscal environment, support production, protect critical sectors and modernise tax administration in line with global standards. As with all meaningful reforms, their success will depend on careful, transparent, consultative and collaborative implementation. Government remains committed to ongoing engagement with stakeholders to ensure that the transition is orderly and that the objectives of the reforms are fully realised. This requirement sits at the core of the responsibilities of the NTPIC. As earlier stated by President Nola Tinubu, these tax reforms will be implemented with a human face and full consideration of the Nigerian citizenry.”
These perspectives resonate on the streets. Nigerians are gradually adapting to the necessity of the reform. But many – from religious centres to markets – are asking for better education on how it affects them individually and the collective destiny of the country.
In Lagos’ bustling Computer Village, Ikeja, Ekata Martins, who runs a small phone accessories shop, welcomes the expanded exemptions for small companies. But they remain wary of enforcement practices even as they call on the government to ensure the enforcement is executed with a human face.
With an estimated 40 million micro, small and nano enterprises — more than 80 per cent operating informally — the informal sector is not peripheral to the economy. It is central to employment, income generation and social stability.
Most informal operators lack structured record-keeping systems and have a limited understanding of tax concepts such as company income tax (CIT), value-added tax (VAT), personal income tax (PIT) or withholding tax. Businesses are largely cash-based, operate on razor-thin margins and often lack the literacy and digital capacity required for formal compliance.
Yet the new framework introduces mandatory filing requirements, defined record-keeping standards, penalties for non-compliance and presumptive taxation where records are inadequate. Without careful sequencing, CPPE said these provisions risk criminalising informality rather than encouraging gradual and voluntary formalisation.
At Kairo Market in Oshodi, petty trader Islamiyat Adewale echoes this concern. “Many of us don’t even understand these tax terms,” she said. “If they start enforcing without teaching us, it will only cause more challenges for us. We agree that people must pay taxes so that the government will have adequate resources to build infrastructure. But the government needs to bring people like us to speed patiently.”
Rather than blanket enforcement, CPPE advocated an implementation strategy anchored on revenue efficiency. Empirical evidence, it argued, showed that a relatively small proportion of taxpayers account for the bulk of revenue. Roughly 20 per cent of businesses generate close to 90 per cent of tax receipts, while about 20 per cent of taxpayers contribute over 80 per cent of personal income tax, data suggest.
Focusing enforcement on large corporations, established SMEs and high-net-worth individuals would deliver significant revenue gains without destabilising livelihoods or deepening social resistance, the centre said. This aligns with the views of several economists, who argued that Nigeria’s revenue problem is less about the number of taxpayers and more about compliance at the top end of the income scale, a problem the reform seeks to address frontally.
In the short to medium term, CPPE recommends prioritising the formal sector, where compliance capacity already exists. The informal sector, it said, should be integrated gradually through incentives, sustained tax education, simplified compliance tools and digital onboarding support.
Shifting the emphasis from punishment to compliance-building could produce more durable outcomes. The goal should be to grow the tax net organically. Encouragingly, some elements of the reform point in this direction, including the establishment of a Tax Ombuds office to resolve disputes and the prohibition of roadblocks as well as touting in the name of revenue collection. These are measures that could help to rebuild taxpayer confidence and strengthen the fiscal framework.
With the government spending over 80 per cent of revenue financing debt service in the first half of last year, the reform offers a critical pathway to stabilising the country’s fragile fiscal condition by expanding non-oil revenues and reducing the historic overreliance on crude oil proceeds. The rising tension and the United States’ intervention in Venezuela raise another concern about the future of the oil market. As oil earnings remain volatile and structurally insufficient, a more efficient tax system provides the government with a steadier, more predictable source of income, enabling better fiscal planning and reducing exposure to shocks.
Ordinary citizens admit Nigeria needs more stable revenue to fix infrastructure and address other needs of common interest. But fiscal exchange, as admitted by Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, is a major concern. While some argued that no amount of reform could address the moral deficit that leads to theft and resource misappropriation, another school of thought suggested that a more efficient tax system would embolden citizens to hold political officeholders accountable.
Whereas a more taxed society may not be correlated with more accountable leadership, economies that rely more on commodity revenue are known to be prone to corruption than others that are driven by tax income, literature has suggested, drawing from African experience.
Indeed, by broadening the tax base, the reforms help correct a long-standing imbalance in which a narrow segment of individuals and businesses bears a disproportionate share of the tax burden. Bringing more economic actors into the formal tax net improves equity, distributes responsibility more fairly and increases overall revenue without excessive rate hikes that could stifle growth, Oyedele argued.
In turn, improved revenue mobilisation strengthens the government’s capacity to meet essential obligations, including salaries, pensions and debt servicing. And with stronger revenue, fiscal pressure eases, reducing the need for borrowing and helping to slow the rapid accumulation of public debt, which has increased to over N152 trillion. Ultimately, the tax reform, when enforced, may be laying the foundation for long-awaited fiscal sustainability.
