Nigerian Tax Acts 2025: Benefits Beyond The Rhetorics

By Joseph Tegbe

Nigeria’s ongoing tax reforms have been widely mischaracterised as revenue tricks, mostly through epistemic closure and motivated reasoning, solely focusing on revenue figures, tax rates, and who pays what. These debates often miss the larger and far more consequential point of the reforms which are primarily about fixing a broken fiscal architecture, and laying the foundations for a modern, well-oiled economy.

What is at stake transcends mere improvement of fiscal space. Rather, it is about whether Nigeria can finally operate like a serious state that is capable of planning, delivering public goods, enforcing rules fairly, and sustaining growth without perpetual crisis management.

As a former Senior Partner and Head of Advisory Services at KPMG in Africa who supported reforms across various levels of Government, both national and subnational levels across Africa, during my career and with benefit of hindsight,  I can boldly say that Nigeria’s fiscal failure has never been the absence of wealth. It has been the absence of structure.

For decades, the country ran a structurally weak fiscal system that was over-dependent on volatile oil rents, administratively anemic and fragmented, detached from the productive economy and largely disconnected from citizens. This produced a paradoxical state: rich in resources, poor in capacity.

Specifically, taxes were not embedded as a civic obligation or economic stabiliser. Rather, they were episodic, selectively enforced, and concentrated on a monolithic formal sector. The informal economy which forms the critical mass of economic activity remained largely outside the system, not by design but by institutional failure.

The result was predictable: weak fiscal planning, chronic deficits, poor service delivery, and a state forced to govern by borrowing rather than by policy. This is the structural dysfunction that the current reforms seek to correct. Thus, the efforts of President Bola Ahmed Tinubu, GCFR; Mr. Wale Edun, the Honorable Minister of Finance and the NRS Chairman, Dr. Zach Adedeji must be commended. They are placing Nigeria on a strong pedestal for growth and development.

At their core, the new tax laws are about rebuilding fiscal order.

Firstly, they seek to reconnect the economy to the state. No government can plan effectively when it has no reliable map of economic activity. Broadening the tax net is therefore less about extraction and more about visibility and coordination.

Secondly, the reforms aim to standardise and modernise fiscal administration. A system built on manual processes, weak data, and discretionary enforcement cannot support a 21st-century economy that Nigeria desires to attain. Digital compliance, harmonised frameworks, and clearer rules are structural upgrades.

Thirdly, they are about predictability. Investors, businesses, and households do not fear taxes as much as they fear uncertainty. A transparent, rules-based tax system reduces discretion, rent-seeking, and arbitrariness which are long-standing deterrents to investment in Nigeria.

Finally, the reforms are designed to rebalance the fiscal social contract, becoming a tool for accountability. When everyone participates, albeit modestly, the relationship between citizens and the government improves.

Previous fiscal regimes suffered from conceptual ineptitude. They treated taxation as an afterthought, subordinate to oil receipts. When oil prices were high, discipline evaporated. When prices fell, emergency measures replaced strategy.

Prosperous nations have walked this reform road before. These are nations often referenced by “Selectively Empirical Commentators” who want Nigeria to get to their levels but suffer deliberate amnesia when reforms are mentioned. In their numerous rhetorics, the methodologically dishonest analysts often cherry-pick statistics to sustain an oppositional narrative while bypassing deeper and analytical realities of the referenced nations.

South Korea, emerging from war and poverty, deliberately built a strong fiscal state by formalising its economy and enforcing compliance before growth accelerated.

Singapore anchored its development on disciplined taxation, institutional integrity, and strict enforcement, long before it became wealthy.

Even closer to home, Rwanda’s post-conflict recovery was driven not by aid alone, but by a deliberate decision to build a credible tax and public finance system as the backbone of state rebuilding.

In every case, tax reform was not popular but it was foundational. Consistent with the experiences of the nations mentioned above, modern tax policy reforms are no longer blunt instrument for raising funds. Across these nations, other advanced and emerging economies alike, tax reforms are increasingly used to promote economic sustainability and improve fiscal architecture.

The Nigerian Tax Acts 2025 follow this well-tested global direction. By simplifying rules, improving administration, and broadening participation in a measured way, the Tax Acts seek to create a more predictable fiscal environment. This predictability is essential for businesses making long-term investment decisions and for households planning their economic futures.

A defining feature of a credible tax reform is the protection of those least able to absorb economic shocks. In many jurisdictions, tax systems are deliberately structured to shield low-income earners and small businesses, recognizing their central role in employment, innovation, and social stability.

Globally, this is achieved through higher tax-free thresholds, simplified compliance regimes, and targeted reliefs for small enterprises. These measures ensure that taxation does not discourage entrepreneurship or push informal activity further into the shadows.

The Nigerian Tax Acts 2025 reflect these principles. By taking away the tax burden on small income earners and small businesses, the reforms aim to preserve livelihoods, encourage formal participation, and allow enterprises to grow organically. Economies grow when small businesses are given the space to survive, adapt, and scale. For example, those who earned N300,000 in 2024 paid taxes at 7% while the new Acts provide for 0% tax rate for those earning up to N800,000.

As the saying goes in tax policy, one does not tax the seed, one nurtures it to blossom. This maxim lies at the heart of the Tax Reform Acts.

Another clear signal of the intent behind the reforms is the deliberate protection of critical sectors such as healthcare, education, and agriculture through the expansion of zero rated VAT items.

Around the world, governments recognize that these sectors are foundational to long term development. Healthcare and education underpin human capital, while agriculture supports food security, rural employment, and price stability. As a result, many jurisdictions either exempt or zero-rate essential goods and services within these sectors to keep them affordable.

By extending the list of zero rated VAT items to include the critical sectors listed above, the Nigeria tax reforms aim to reduce cost pressures on businesses operating within these critical sectors as well as support access to essential materials needed for the wellbeing of Nigerians.

Perhaps, the most forward-looking aspect of the Tax Reform Acts is the emphasis on digitalization and technology driven tax administration. Across the globe, tax authorities are embracing digital tools to improve compliance, enhance transparency, and reduce administrative burdens for taxpayers.

Innovative solutions such as e invoicing have become standard features of efficient tax systems globally. E invoicing, has helped many countries improve VAT compliance, reduce fraud, and generate reliable, real time data for fiscal planning.

Nigeria’s move in this direction signals a commitment to modern governance. A digital tax system is not only more efficient; it is fairer and more transparent. It lowers the cost of compliance, improves accuracy, and builds trust between taxpayers and the government. Over time, it also strengthens the quality of economic data available to policymakers, supporting more effective fiscal and monetary decision making.

Conclusion: A Reform for the Long Term

The Tax Reform Acts are best understood as part of Nigeria’s long term economic strategy. They are designed to stabilize the fiscal environment, support production, protect critical sectors, and modernize 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 realized. This requirement sits at the core of the responsibilities of the National Tax Policy Implementation Committee (NTPIC). As earlier stated by President Nola Tinubu, these tax reforms will be implemented with human face and full consideration of the Nigerian citizenry.

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.

•Joseph Tegbe  is director-general and global liaison for the Nigeria-China strategic partnership