Taiwo Oyedele: New Law Eases Tax Pressure for Small Businesses, Informal Sector Operators

As Nigeria prepares to implement its landmark tax reforms starting January 1, 2026, the message from the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele is that the new law was designed to ease the financial pressure on ordinary citizens and businesses alike. Speaking on the anticipated impact, Oyedele emphasises that small businesses and operators in the informal sector, often the backbone of the economy, stand to benefit the most from a system that reduces unnecessary taxation while promoting fairness and growth. For workers, he said the reform brings a progressive structure aimed at ensuring that low- and middle-income earners pay less, while high-income earners contribute a fairer share. Sunday Ehigiator brings the excerpts

What is the core objective of Nigeria’s new tax laws, and why was this reform considered necessary?

The core objective is to make the Nigerian tax system fairer, simpler, and more growth-friendly. Revenue generation by the government should not result in hardship for the citizens or come in the way of long term development.  This reform became necessary because the nation’s tax laws and administration had become fragmented, outdated, and highly inefficient, resulting in sub-optimal revenue generation and an unconducive fiscal environment for growth.

Many Nigerians are anxious about the word “tax.” What assurances can you give citizens that these reforms will not worsen their cost of living?

Most people understandably associate “tax reform” with paying more because of the word “tax”. However, this reform is actually designed to reduce the current tax burden of workers, small and large businesses. VAT is removed from essential consumptions such as food, healthcare and education to shield low-income households. The VAT rate remains at 7.5 percent, and the reforms now allow businesses to claim input VAT more broadly on assets and overheads, which is expected to reduce the “hidden VAT” that was previously embedded in final consumer prices.

Who stands to benefit the most from the new tax laws – ordinary citizens, small businesses, or government?

The biggest win is for the economy as a whole. While ordinary citizens benefit from fairness and less pass-through costs, workers benefit from higher disposable income, and small businesses gain from higher exemption thresholds and simpler compliance, the overarching result is more trust, fewer leakages, and less friction to do business.

You have said the new laws will end the collection of taxes from the poor. How exactly will this work in practice?

It works by raising the income tax band taxable at zero percent with automatic exemption for national minimum wage earners, shifting the focus of income tax to high-income earners, not survival income or poverty. For individuals, gross salaries of about N100,000 per month will now be tax-exempt, that is N800,000 taxable incomes per annum at zero percent plus statutory deductions and rent relief allowance.

What changes should small businesses and informal operators expect from January 1, 2026?

Small businesses and informal operators should expect less tax pressure while they are small and more structure as they grow. Key changes include expansion of small-company exemptions threshold to N100 million annual turnover, exemption from VAT collection obligations, capital gains tax and withholding tax in addition to protection from harassment and exploitation through harmonisation of taxes and the introduction of the Office of Tax Ombud.

Can you explain the N100 million turnover threshold and what it means for over 90 percent of Nigerian businesses?

If a company’s annual turnover is N100 million or below (and meets the fixed-asset condition of not more than N250 million), the law treats it as a small company, granting major reliefs. This means over 90 percent of micro and small businesses will be out of the “tax-paying” bracket for major taxes – Companies Income Tax (CIT), Capital Gains Tax (CGT), Withholding Tax, VAT and Development Levy, leading to lighter compliance expectations.

What reliefs or incentives are built into the new tax laws to encourage business growth and job creation?

The reform’s pro-growth design focuses on wider exemptions for small companies to free up capital for reinvestment and hiring, modern input VAT credit rules that reduce production and service costs by allowing recovery, thereby encouraging formal supply chains, and a coordinated administration architecture to reduce duplication and disputes, enabling businesses to focus more on production. Businesses that hired more people in the past two years will enjoy extra tax deductions for the salaries paid.

For the first time, Nigerians can claim input VAT on many purchases. How will this system work, and what records will citizens need to keep?

Input VAT will be claimed by VAT-registered taxpayers (businesses) translating to lower prices for consumers. Nigeria now adopts a more globally acceptable standard VAT credit rules, allowing businesses to recover input VAT on many purchases (including services and fixed assets) when linked to taxable supplies. Records typically required include VAT invoices or receipts and evidence that the purchase relates to a taxable business activity.

What does the new tax law mean for employees and individuals earning regular salaries?

The Pay As You Earn (PAYE) system becomes more clearly progressive. Lower-income earners are exempted, middle-income earners pay less while higher earners will see graduated rates up to a 25% top marginal rate for high networth individuals. Therefore, the structure ensures that about 98% of workers pay either no tax or less tax.

There are concerns that banks will freeze accounts without TINs. Can you clarify who actually needs a Tax Identification Number under the new law?

Banks are only required to request a Tax ID from “taxable persons,” not from everyone. No authority will take money from anyone’s bank account or arbitrarily order a freeze. The law requires a taxable person to make self-declaration. If you earn taxable income (salary, business, trade, investment income etc.), you should have a Tax ID. Students, dependents, and individuals with no income can operate their bank accounts without a Tax ID.

How does the new tax framework address the long-standing problem of multiple and double taxation across federal and state levels?

The reforms establish and strengthen institutional coordination across tiers of government, especially with the establishment of Joint Revenue Board (JRB) and harmonised tax laws by states. This is aimed at harmonising administration, reducing overlap, improving dispute resolution, and protecting taxpayer rights against double taxation.

Some nuisance taxes are entrenched in the constitution. What steps is government taking to remove or neutralise these burdens on citizens?

Where a tax or levy is constitutionally anchored, it requires a constitutional amendment to remove. A harmonised model tax law for states is progressing, and proposals to address nuisance taxes are part of an ongoing constitutional amendment process.

How will technology be used to improve transparency, reduce harassment, and make tax compliance easier?

Technology is central to shifting from “roadside enforcement” to systems-based compliance. This involves better taxpayer identification, e-filing, e-payment, data matching, and risk-based enforcement. The direction is also toward reporting for high-value flows (e.g., banks reporting accounts above specific turnover thresholds) so enforcement targets real taxable capacity rather than hustling or petty trade.

What protections are in place to prevent tax officials or state agents from extorting small businesses that are legally exempt?

The practical protections are clear statutory exemptions, backed by formal dispute resolution and taxpayer-rights safeguards. Institutions such as the Office of the Tax Ombud have been created to protect taxpayer rights, facilitate dispute resolution, giving a business the legal shield and a formal place to report and appeal rather than unethical negotiation with an official.

There has been misinformation about higher tax rates for everyone. Who actually pays more under this new law?

Generally, only high-income earners and large businesses that previously evaded taxes will feel like they are paying more. While some higher-income individuals would pay more in personal income tax, most of such individuals will earn more than corresponding increases in their business incomes through tax cuts including the planned reduction of the corporate tax rate from 30 percent to 25 percent or higher executive bonus as a result of increased profitability for their businesses.

How does Nigeria’s new tax regime compare with those of peer African countries like Ghana, Kenya, and South Africa?

Nigeria’s tax rates for major taxes will be more competitive than most peer African countries. For instance, Nigeria’s VAT rate remains 7.5 percent compared to 15 percent in Ghana, 16 percent in Kenya and 15 percent in South Africa. The planned cut in corporate income tax rate to 25 percent compares favourably to 30 percent in Kenya, 27 percent in South Africa, and 25 percent in Ghana. The five percent excise tax on airtime in Nigeria has been reversed compared to 15 percent in Kenya, and five percent in Ghana. The top marginal tax rate for high income earners is 25 percent in Nigeria, much lower than the 35 percent in Ghana and Kenya or 45 percent in South Africa. A small company in Nigeria pays zero percent corporate tax rate compared to about three percent of turnover in Kenya and Ghana.  Nigeria’s VAT design is now similar to Kenya and South Africa by widening input VAT recovery to assets and overhead while tax administration and compliance will become more digital compliance relying more on tax intelligence and adopting risk-based audit.

What should investors and participants in the capital market understand about capital gains tax under the new law?

All investors in the capital market are eligible for capital gains tax exemption with over 99 percent exempted unconditionally based on a threshold of N150 million proceeds and N10 million gains in any 12 months’ period. Pension funds, small companies and real estate investment trusts are also unconditionally exempt. The remaining less than one percent of investors are eligible for exemption by way of reinvestment relief, which is designed to protect genuine long-term investment and support market depth. In addition, other reforms to make investment in shares more attractive include exemption of withholding tax on bonus shares and stamp duties waiver on documents for the transfer of shares.

How will the new tax laws improve government revenue without hurting productivity and economic growth?

The growth-friendly path is to widen the net at the top while reducing friction at the bottom. Revenue improves through better compliance, fewer leakages, and smarter, data-driven enforcement. Productivity improves when small businesses face fewer taxes and less duplication, and when the VAT system stops unnecessarily adding to cost structures. Also, by rationalising wasteful incentives, the government earns more revenue while addressing the distortionary effect of highly discretionary waivers.

What role will public education and stakeholder engagement play between now and January 2026 to ensure smooth implementation?

Public education is critical. Implementation will only succeed if Nigerians clearly understand who is exempt, what records to keep, how VAT credits work, and what banks or tax authorities can and cannot do. Continuous, structured education through social and traditional media, trade associations, organised private sector, and engagements in local languages will be crucial to counter the high volume of misinformation which may derail a smooth transition.

Finally, what would you say to Nigerians who remain skeptical that tax reforms can truly work in their interest?

Trust is earned, but unfortunately, there is a huge deficit due to a history of unfriendly tax systems, poor accountability, and low benefits for taxes paid. The true test of these reforms will be whether the poor are allowed to breathe, small businesses stop being harassed, and all taxpayers get clear rules and quick dispute resolution.  The government must be more transparent about what it collects and how it is used. The new tax laws create stronger mechanisms for accountability, and citizens must hold the government to measurable outcomes going forward.