Dealing With Nigeria’s Tax Fears

Omolabake Fasogbon

Although the federal government has repeatedly reiterated the relief embedded in the Nigerian Tax Reform Acts of 2025 for Small and Medium Enterprises, many operators remain unconvinced, opting instead for defensive measures to shield themselves from perceived effects.

Findings across a cross-section of small business owners show that, despite official assurances, some operators now insist on cash payments, wary that bank inflows could expose them to taxes.

Addressing SME exemptions, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, said the framework was designed to ease the burden on small businesses while introducing structure as they grow.

According to him, small businesses and informal operators would face significantly lower tax pressure with the provision.

He said, “The reforms raise the small-company exemption threshold to N100 million in annual turnover, exempt qualifying firms from VAT collection, capital gains tax and withholding tax, and introduce safeguards against harassment through tax harmonization.

“Under the new framework, companies with annual turnover of N100 million or less and fixed assets not exceeding N250 million will be classified as small companies, effectively removing over 90 per cent of Nigeria’s micro and small businesses from the major tax net, including Companies Income Tax, VAT and development levies, and significantly easing compliance obligations”.

The new law, as recently gazetted, positions banks and fintechs as not only as tax-recovery channels but as data custodians and payment facilitators, a move which unsettled the public, especially SMEs who are now more cautious about inflows and outflows through their accounts.

In Osogbo, Osun State, THISDAY reporter sampled the opinion of some small business owners, including a frozen food retailer (name undisclosed) whom she approached for patronage, their mindsets were similar.

The frozen food retailer had asked upfront whether payment would be in cash or by transfer before releasing the product.

Told transfer, she declined, saying, ‘We’ve been asked not to accept transfer again.’

Her stance was obviously connected to rumors and beliefs that taxes would be automatically deducted from inflows into bank accounts, despite the government’s having debunked this narrative.

Asked what she would do with the day’s cash, she replied, ‘I won’t take it to the bank. I will keep it and use it to pay wholesalers to restock. That is my way out to escape their tax wahala.’

In the end, she still accepted cash despite efforts to disabuse her of the notion.

She is not alone. Several operators now shun electronic payments in a bid to evade tax, a trend analysts say could stifle SME growth, while reversing gains in cashless policy and financial inclusion.

Speaking on the implications, President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, warned that rejecting electronic payments exposes SMEs to loss of records, weak credibility and limited access to loans.

He said reliance on cash undermines financial planning and shuts businesses out of growth opportunities that require formal documentation.

“Cash transactions increase the risk of theft and poor accountability, while limiting access to banking services and government support programmes”, he warned.

From the consumer side, resistance is also growing, especially where merchants add charges between N50 to N 100 to accept transfers, a move seen as shifting tax burden to buyers.

One consumer, Mr. Yemi Kolawole, said he now prefers cash for petty transactions to avoid repeated charges, reserving transfers for bulk purchases.

A POS operator in Lagos, Mrs. Ify confirmed the surge in cash withdrawal in recent times, a trend which may not be unconnected to merchants and consumers’ preference fo cash transactions, amid tax concern.

Egbesola said much of the panic was driven by poor understanding of the law, stressing that most SMEs remain exempt from key taxes.

He said the onus lies on government and tax administrators to clearly explain that bank transfers are not automatically taxed and that exemptions are real and enforceable to dispel the panic.

Noting that operators’ fears are understandable, he said more state efforts should be deployed to simplify communication.

“These include engaging SMEs directly in markets and clusters, publishing clear exemption guidelines, and curb harassment by illegal tax agents. Trust grows when rules are simple and enforcement is fair”, he remarked.

The SME advocate also advised operators to adopt lawful ways of minimising tax exposure through proper registration, basic record keeping and staying within exemption thresholds.

“Rather than trying to evade the system, individuals and SMEs should seek straightforward tax advice. Sound tax planning, not tax avoidance, remains the safest and cheapest way to stay compliant and financially secure,” he advised.