Faith & Finance: Inside Nigeria’s new tax deal with churches, mosques

…faith groups face new compliance era as Nigeria centralises tax collection

Nigeria’s sweeping 2025 Tax Act is redefining the relationship between faith and the State, ushering churches and mosques into a new era of fiscal transparency as the government centralises tax collection and tightens oversight of religious finances, according to a new report by the Alliance for Economic Research and Ethics (AREET) LTD/GTE.

The report, which examines the implications of the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), describes the reforms as a “fundamental reimagining of the social contract” between the Nigerian state and faith-based institutions that have historically operated within broad tax exemptions.

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At the heart of the reform are the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), which consolidate previously fragmented tax laws into a unified, digital framework overseen by the Nigeria Revenue Service (NRS).

At the heart of the reform is also the consolidation of Nigeria’s fragmented tax laws into a unified, digital framework overseen by the Nigeria Revenue Service (NRS). While the changes apply across the economy, AREET notes that their impact on religious institutions is particularly profound, as the new regime closes long-standing loopholes and informal practices.

“The 2025 Tax Act represents a transformative shift in Nigeria’s fiscal landscape, moving from a fragmented and often opaque system to one characterized by centralisation, data integration, and accountability. For the religious community, this transition is both a challenge and an opportunity.

“While the new requirements for transparency and documentation may initially seem like an encroachment on religious autonomy, they also provide a platform for faith-based institutions to formalize their immense contributions to national development,” the report noted

Under the 2025 tax framework, religious organisations retain protection for core worship activities, but income generated from commercial ventures, such as schools, hospitals, publishing houses and retail outlets, now falls squarely within the tax net. The report stresses that the legal separation between the “sanctuary” and the “shop” is no longer optional.

According to AREET, religious bodies have for decades benefited from weak coordination between tax authorities, allowing exemptions to coexist with large-scale commercial activity. The 2025 reforms address this by mandating centralised filing, unified collection and a digital audit trail for all transactions forming the basis of tax exemptions or deductions.

Every transaction that forms the basis for a tax exemption or deduction must now be traceable through the government’s Cloud Unified Tax Portal, which integrates Tax Identification Numbers (TINs) with national identifiers such as the National Identification Number (NIN) and Bank Verification Number (BVN).

Zakat, Tithes and the Taxman

AREET’s analysis shows that Islamic institutions face new compliance obligations around Zakat and Waqf. While documented Zakat payments may qualify as deductible expenses when made to registered charitable entities, the requirement for digital receipts creates tension with traditions of anonymous giving.

Properly registered Waqf assets, however, are positioned as tax-exempt trusts under the new regime.

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Christian organisations face similar scrutiny. Although tithes and offerings remain voluntary gifts and are not directly taxed, the report notes that the use of these funds is now closely examined. Income from church-owned commercial enterprises is taxable, while personal gifts to clergy may be assessed as income or benefits-in-kind if not clearly separated from institutional assets.

The reforms are driving what

AREET describes as the rise of the “faith-accountant,” as churches and mosques increasingly rely on professional bursars, auditors and compliance officers to meet new reporting standards.

The report argues that the reforms will force religious organisations to demonstrate measurable public benefit to justify tax exemptions, particularly for charity-led schools, hospitals and social welfare programmes.

“Harmonising Zakat, Waqf, and Christian stewardship with the state’s fiscal code requires more than just legal compliance; it requires a theological and institutional evolution.

“Religious organizations must embrace the “Faith-Accountant” model, ensuring that every naira given in the name of God is accounted for with the same rigor expected by the state. Simultaneously, the state must recognize that religious giving is a vital component of the social safety net, deserving of fiscal recognition and support”, the Report noted.

It also highlighted that this professionalisation will strengthen, not weaken, faith-based institutions by protecting them from allegations of misuse and enhancing donor confidence.

While acknowledging the risk of friction between religious obligations and civic taxation, the report calls for policy mechanisms that recognise documented religious giving as a form of social contribution. It proposes structured deductions and closer consultation between tax authorities and faith bodies to prevent alienation and encourage voluntary compliance.

“A proposed solution is the introduction of a “Religious Social Responsibility” (RSR) credit. Under this guideline, documented religious giving to registered charities could be deducted from a taxpayer’s taxable income up to a certain percentage. This would recognize the “civic value” of religious giving, as these funds often go toward education and healthcare, areas where the state is also an actor.

“Such a policy would harmonize the “Covenant” with the “Code,” ensuring that the citizen is not penalized for their faith while the state ensures its revenue targets are met. Without such harmonization, the state risks alienating the religious community, leading to lower compliance rates and a sense of fiscal injustice,”

The AREET report also recommends a structured framework for engagement between government and faith-based bodies to ease implementation of the reforms. It proposes a “Faith–State Compact”, anchored by a joint consultative committee comprising the Nigeria Revenue Service (NRS), the Christian Association of Nigeria (CAN) and the Nigerian Supreme Council for Islamic Affairs (NSCIA).

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According to the report, the committee would help develop faith-sensitive guidelines under the 2025 Tax Act, including the formal recognition of Waqf assets as tax-exempt charitable trusts to protect long-term communal investments.

AREET further urges the government to provide technical assistance to churches and mosques to upgrade their accounting and reporting systems, arguing that collaboration rather than enforcement alone will improve compliance and safeguard religious institutions from regulatory and legal risks.

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