A new era in Nigeria’s tax administration is on the horizon as President Bola Tinubu prepares to sign four landmark tax reform bills into law. These bills, recently passed by the National Assembly, aim to overhaul the nation’s inefficient, inequitable, and fragmented tax system, setting the stage for improved revenue collection, reduced burden on vulnerable populations, and a more business-friendly environment.
The reform package includes the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill. Together, these legislative instruments will lay the foundation for a streamlined, inclusive, and transparent tax regime expected to boost Nigeria’s tax-to-GDP ratio from its current 10% — one of the world’s lowest — to 18% within three years.
Nigeria’s tax system has long been riddled with problems such as the multiplicity of taxes, poor administration, lack of data, tax touting, and tax avoidance. With over 60 official taxes — and an estimated 200 unofficial levies across federal, state, and local levels — businesses and individuals have faced excessive burdens, contributing to widespread evasion and poor compliance.
The result has been chronic underperformance in revenue generation, forcing the country into unsustainable borrowing. In January 2025, Nigeria’s debt service-to-revenue ratio spiked to 144%, meaning the country spent more on debt servicing than it earned, according to the Central Bank of Nigeria (CBN). From 2019 to 2024, debt servicing cost the nation $15.55 billion.
In a bid to reverse this trajectory, President Tinubu inaugurated the Presidential Fiscal Policy and Tax Reforms Committee in August 2023. Headed by fiscal expert Mr. Taiwo Oyedele, the committee was tasked with reforming the fiscal framework and repositioning Nigeria’s economy through tax policy innovation.
A major outcome of the committee’s work is the restructuring of Nigeria’s tax collection architecture. The Nigeria Revenue Service (NRS) — to be established under the new law — will unify tax administration by replacing multiple agencies currently handling revenue collection. This will help curb revenue leakages and drastically reduce collection costs, with the NRS retaining only 2% of collected revenues, down from the existing 4–7% across agencies like the FIRS, Customs, and NUPRC.
One of the most contentious elements of the bills was the proposed overhaul of the Value-Added Tax (VAT) revenue-sharing formula, which initially sparked fierce resistance, especially from northern state governors.
The new model allocates 10% to the Federal Government, 55% to states, and 35% to local governments, with further weighting based on consumption and population. This contrasts with the previous formula, which many criticized for ignoring the principle of derivation. Eventually, all regions reached a consensus in favour of the new distribution model.
A critical feature of the tax reform is the exemption of individuals earning less than ₦800,000 annually from income tax. Likewise, small businesses with turnover below ₦50 million will be exempt from corporate tax. These measures are expected to stimulate economic activity by reducing the tax burden on low-income earners and promoting growth among small and medium enterprises (SMEs).
Experts believe this will strengthen household purchasing power, increase investment capacity among startups, and lead to job creation.
According to Barrister Eze Onyekpere, Lead Director at the Centre for Social Justice, the reforms present an opportunity to increase tax transparency and accountability. He emphasized the need for the new laws to incentivize investments, enhance progressive taxation, and grow Nigeria’s economy.
Professor Godwin Oyedokun of Lead City University noted that the laws will improve revenue generation and reduce loopholes. However, he cautioned that successful implementation would require institutional capacity and sustained political will.
Mr. Bismarck Rewane, CEO of Financial Derivatives Company, added that while the reforms have the potential to increase the tax-to-GDP ratio, they must be backed by wider institutional reforms and curbs on government wastefulness.
Chairman of the tax reform committee, Taiwo Oyedele, also pointed out that the journey is far from over. He advocated for a downward review of corporate tax rates to make Nigeria more attractive to investors, especially during this inflationary period.
The passage and expected signing of these tax reform bills mark a pivotal moment in Nigeria’s economic restructuring journey. By eliminating inefficiencies, embracing digital innovation, and incentivizing compliance, the reforms promise to reshape Nigeria’s tax culture, boost revenue, and foster inclusive economic growth.
But success will depend heavily on execution, transparency, and accountability — areas where Nigeria’s public institutions must now rise to the challenge.