By Aisha Muhammad Magaji
Nigeria’s tax landscape is undergoing a significant transformation as the Federal Inland Revenue Service (FIRS) unveils sweeping reforms aimed at easing the financial burden on citizens and businesses. Under the new tax code, essential sectors such as food, education, agriculture, and shared transportation will be exempt from Value Added Tax (VAT), marking a historic shift in the nation’s fiscal policy.
The reforms, which consolidate multiple tax laws into a single code, are set to take effect in January 2026. The new code introduces several notable changes:
VAT Exemptions: Basic food items, educational services, agricultural products, and shared transportation services will no longer attract VAT, reducing costs for consumers and businesses in these sectors.
Simplified Tax Structure: The number of tax types has been reduced to single digits, streamlining the tax system and making compliance more straightforward for taxpayers.
Tax Relief for Small Businesses: Enterprises with an annual turnover below ₦50 million will be exempt from paying taxes, providing relief to small and micro businesses.
Adjusted Personal Income Tax Thresholds: The reforms include adjustments to personal income tax thresholds, ensuring that low-income earners are protected and not overburdened by taxes.
These changes are part of a broader effort to modernize Nigeria’s tax system, enhance revenue generation, and improve fiscal transparency.
President Bola Tinubu signed four major bills into law on June 26, 2025 the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. Collectively known as the “Tax Acts quartet,” these laws aim to broaden the tax base, improve compliance, and enhance transparency across all tiers of government.
The Executive Chairman of FIRS, Zacch Adedeji, emphasized that these reforms fulfill the president’s campaign promise to simplify tax compliance and remove barriers faced by taxpayers. He described the reforms as the most significant fiscal transformation since Nigeria’s independence, aiming to make businesses flourish by removing all burdens and hurdles.
There has been public concern regarding a proposed fuel surcharge under the new tax laws. Adedeji clarified that this surcharge will not take effect automatically. It will only be activated through a ministerial order and published in the official gazette, ensuring that it is subject to due process and public awareness.
The tax reforms are expected to have a profound impact on various sectors:
Consumers: With the removal of VAT on essential items, households can anticipate reduced costs for food, education, and transportation, leading to increased disposable income.
Businesses: Small and micro enterprises will benefit from tax exemptions, allowing them to reinvest savings into growth and development.
Government: The consolidation of tax laws and improved compliance mechanisms are projected to enhance revenue collection, supporting national development initiatives.
Nigeria’s tax reforms represent a bold step towards a more equitable and efficient fiscal system. By exempting essential sectors from VAT and simplifying the tax structure, the government aims to alleviate financial pressures on citizens and foster a conducive environment for business growth. As the reforms take effect in January 2026, stakeholders across the nation will be closely monitoring their implementation and impact.
