Nigeria’s fiscal framework entered a new phase on June 26, 2025, when President Bola Tinubu assented to four sweeping tax reform laws: the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act. From January 1, 2026, the legislation collapses more than 70 disparate taxes into a streamlined, progressive regime overseen largely by the reconstituted Nigeria Revenue Service, formerly the Federal Inland Revenue Service.
The reforms are designed to simplify compliance, expand the tax net, reduce evasion and raise sustainable revenue for development, while shielding low-income earners. However, widespread misinformation on social media—claims that all bank transfers will be taxed or that accounts will be seized—has triggered unnecessary anxiety, with some Nigerians reportedly withdrawing funds from banks. This intervention seeks to clarify the new framework, its implications for individuals and businesses, filing obligations, penalties, and the broader importance of taxation.
At the heart of the reforms is the need to rebalance Nigeria’s revenue structure. Oil still provides about 70 per cent of government income despite volatile prices, leaving public finances exposed. By harmonising taxes, removing duplications—such as folding the Tertiary Education Tax and IT Levy into a single 4.0 per cent Development Levy—and extending taxation to digital assets, the government aims to significantly boost non-oil revenue over the medium term. Globally, taxes are the backbone of public finance; Nigeria’s historic dependence on oil rents has limited its ability to fund infrastructure and social services. With a relatively low tax-to-GDP ratio and rising borrowing needs, effective taxation is increasingly unavoidable if roads, schools and hospitals are to be built and maintained.
For individuals, the Personal Income Tax system is now clearly progressive. Those earning N800,000 or less annually—about N66,000 per month—are fully exempt. Income above this threshold is taxed on a graduated scale, rising from 15 per cent to a top rate of 25 per cent for very high earners. Minimum-wage workers therefore pay tax only on the portion of income above the exemption, while high-income individuals contribute proportionately more. Taxable income has been broadened to include salaries, rent, interest, foreign exchange gains and profits from digital assets such as cryptocurrency trading.
The former Consolidated Relief Allowance has been removed, but specific deductions remain. Taxpayers may now claim a portion of annual rent paid, subject to a cap and proof, alongside exemptions for pensions, life insurance and capital allowances. Contrary to rumours, bank transfers are not automatically taxed. Only unexplained inflows may be treated as income after applicable exemptions. Properly labelling inflows such as gifts or loans and reporting them during filing helps avoid disputes.
A Tax Identification Number is mandatory from 2026 for opening new bank accounts, purchasing insurance or trading securities. This requirement links financial activity to tax compliance but does not grant authorities the power to arbitrarily confiscate accounts.
Businesses are subject to a tiered Companies Income Tax regime. Small enterprises below specified turnover and asset thresholds are exempt. Medium-sized firms face reduced rates, while large companies continue to pay the standard rate. Agricultural start-ups benefit from a five-year tax holiday. Capital gains for individuals, including those from digital assets, are now aggregated with total income and taxed at applicable personal income tax rates, though exemptions remain for modest share disposals or where proceeds are reinvested locally.
The new 4.0 per cent Development Levy applies to the assessable profits of medium and large companies, replacing several overlapping federal levies to ease compliance. Value Added Tax remains at 7.5 per cent, with essential goods and services zero-rated. Importantly, businesses can now reclaim input VAT on services and fixed assets, improving cash flow and reducing costs.
Stamp duty provisions have also been clarified. The electronic money transfer charge has been formally classified as stamp duty, payable by the sender on qualifying transactions, while salaries and transfers between accounts held by the same individual are exempt. Unstamped documents remain inadmissible in civil proceedings, underscoring the need for compliance in property and commercial transactions.
All taxpayers, including those exempt from payment, must file annual returns. Companies have a March 31 deadline, while individuals must file by June 30 through NRS portals. The system allows self-assessment, with zero returns serving as proof of compliance where no tax is due. Although the NRS has visibility over banking transactions, it cannot impose blanket taxes or seize accounts without due process. Recovery actions are permitted only after notices, objections and appeals.
The laws introduce tougher penalties for default, including fines for late filing, penalties and interest for non-payment, and criminal sanctions for deliberate evasion following audit. While cryptocurrency profits are taxable, further guidance is expected on valuation given price volatility.
Despite the transition period between passage and implementation, confusion persists, driven by fearmongering and limited public sensitisation. Greater outreach by relevant ministries and agencies is needed to build understanding and trust. Public education through town halls, local-language media campaigns, digital tools and partnerships with unions, market groups and faith organisations would support voluntary compliance.
Ultimately, the reforms are structured to ease the burden on low-income earners and small businesses while ensuring that wealthier individuals and larger firms contribute fairly. Beyond being a civic obligation, tax payment strengthens citizens’ stake in governance and reinforces demands for accountability and better public service delivery.
