Nigeria’s new Tax Laws: Hype, hoax, and reality

THE purpose of this article is not merely to examine the hype, misconceptions, and realities surrounding Nigeria’s new tax reforms, but to situate them within the broader context of democratic governance. In doing so, it seeks to spotlight issues that have been overlooked and to bring greater clarity to grey areas that have received insufficient attention.

This approach is necessary because extensive commentary has already emerged from supporters, critics, and opponents of the new tax laws. However, one fundamental issue has largely been ignored: the deep-rooted corruption within the public sector, which remains a major deterrent—and often a justification—for widespread tax evasion among Nigerians.

Given this reality, there is little value in revisiting arguments that have already been exhaustively explored. Instead, this intervention aims to separate substance from noise by interrogating in a historical context not only the promises and pitfalls of the new tax regime, but also the governance challenges confronting President Bola Tinubu as he experiments and navigates the highly risky ecosystem of bold reforms.

Many of the tax laws now being replaced were inherited from Nigeria’s colonial past and were designed primarily to serve the interests of its former colonial ruler, the United Kingdom. Although Nigeria attained political independence in 1960, significant elements of Britain’s tax framework remained embedded in the country’s fiscal system until the latest reforms came into effect on January 1 of this year.

This persistence was not accidental. Despite independence, Nigeria remained economically dependent on the UK—though not to the extent seen in France’s continued influence over its former Francophone colonies. British policy, both then and now, has been driven largely by the extraction of economic value from Nigeria, a nation abundantly endowed with natural resources.

One of the mechanisms through which this objective was pursued was a tax system structured not to promote Nigeria’s development, but to advance colonial economic interests—designed, in essence, to enrich the colonial power rather than foster the growth and prosperity of its former outpost.

Several tax statutes inherited from the colonial era continued to operate in Nigeria long after independence but have now been overhauled under the new tax regime. These include the Personal Income Tax Act (PITA), which governs individual income taxation through a progressive structure with allowances for reliefs, dependents, pensions, and life insurance. Also included is the Companies Income Tax Act (CITA), which regulates the taxation of corporate profits for both local and foreign companies operating in Nigeria.

Other reformed statutes are the Capital Gains Tax Act (CGTA), which imposes a 10 per cent tax on gains from the disposal of chargeable assets, with exemptions for securities and certain reorganizations; the Stamp Duties Act, which applies to legal and commercial instruments; the Customs and Excise Management Act (CEMA), which governs import duties and excise taxes on products such as alcohol, tobacco, and petroleum; and the Education Tax Act, which mandates a 2 per cent levy on company profits to support tertiary education through the Tertiary Education Trust Fund (TETFund).

Although these laws were amended periodically after independence, they remained part of Nigeria’s legacy tax framework until President Bola Tinubu signed the new tax reform bills into law on June 26 last year. The reforms formally took effect at the beginning of the current year- last Thursday.

In practical terms, the Taiwo Oyedele–led Presidential Tax Reform Committee allowed a six-month window for public sensitization before implementation commenced on January 1. Despite this lead time, the reforms have generated intense debate and controversy.

It is therefore unsurprising that the rollout of the new tax regime has encountered resistance, particularly from opposition politicians who have predictably drawn attention to what they consider its shortcomings and potential risks. This pushback has filtered into public opinion, leaving many Nigerians uneasy and suggesting that the architects of the reforms have not sufficiently convinced citizens that the changes will serve their interests.

Concerns have been compounded by inadequate communication, partial information, and outright misinformation, all of which have contributed to the perception that the new tax system lacks transparency. Consequently, President Tinubu’s reform agenda is once again facing strong headwinds, with public skepticism casting a pall over the new laws.

But Tinubu being a veteran of many such battles is determined to proceed with its implementation against all odds and believing that at the end he will prove skeptics wrong as he has done with the removal of petrol subsidy and managed floatation of the naira which have improved Nigeria’s economic fundamentals.

Addressing the  trust deficit in the new tax laws is now an urgent task for the administration. It must deploy clear, sustained, and transparent communication to dispel the narrative that the reforms are anti-people and reposition them as a policy framework aimed at shared prosperity.

If Nigerians are to accept the reforms as beneficial and comply willingly with tax obligations, the government must more convincingly demonstrate how the new system will drive development and improve living standards for the majority. Without this reassurance, compliance risks being achieved only through coercive enforcement—an approach that echoes colonial-era practices, when tax collection was imposed with force and fear, prompting many men to flee into hiding at the sight of tax officials.

That atmosphere of dread was so pervasive that women eventually took to the streets in what became known as the Aba Women’s Riots.

The 1929 protests were a response to oppressive taxation by the British colonial administration, following provisions of the Native Revenue Amendment Ordinance of 1927 that sought to extend taxation to women. The policy was widely perceived as an assault on women’s economic autonomy and traditional authority. In response, thousands of Igbo women from southeastern Nigeria mobilized, employing traditional resistance methods such as “sitting on a man” to ridicule and shame officials accused of corruption and misappropriation. The protests escalated to attacks on European-owned businesses, banks, colonial courts, and the release of prisoners.

Ultimately, the British authorities withdrew the proposed tax and reviewed the Warrant Chiefs system, marking a historic victory for the women involved.

That uprising, led by women in Aba—present-day Abia State—occurred nearly a century ago. It was driven largely by a lack of public understanding of taxation and a deep-seated belief that tax revenues would be stolen by corrupt officials, a problem already entrenched in the colonial administrative system. Anti-colonial resentment also played a decisive role in fueling the protests.

Nigeria, however, is no longer under colonial rule. Since attaining self-governance in 1960, the country has operated as an independent state for over six decades. Unlike the colonial administration, which pursued extraction rather than development, Nigeria’s post-independence leaders are expected to design tax policies that promote national growth and improve citizens’ welfare. This is the rationale the government advances in defending the new tax reforms, insisting that they are intended to broaden the tax base rather than increase the burden on citizens already strained by previous reforms.

Nonetheless, a major obstacle remains: corruption. Many Nigerians argue that corruption has not only persisted since the era of the Aba Women’s Riots but has in fact worsened. This perception reinforces fears that tax revenues will once again be diverted through graft instead of being used for public benefit.

Given Nigeria’s history of resistance to new taxes, it is reasonable to hope that the government has undertaken adequate scenario planning, including security preparedness, in anticipation of possible unrest.

This concern is reinforced by recent security lapses. In my column last week, where I examined the United States’ Christmas Day airstrikes on suspected terrorist camps in Sokoto State, I warned that surviving militants could relocate to less secure areas and target vulnerable communities. Sadly,this last weekend which is barel one week after, reports soon emerged that about 40 Nigerians were killed and several others abducted in a market in Niger state during the militants’ retreat. This tragedy suggests that Nigerian security agencies may not have sufficiently planned for the aftermath of the joint US–Nigeria operation.

That failure raises legitimate worries that similar gaps in contingency planning could emerge if public protests erupt in response to the new tax regime, as occurred in Aba in 1929.

To me, one of the most effective ways to secure public acceptance of the tax reforms is to convince Nigerians that their contributions will be used responsibly. The strongest assurance would be tangible proof that past leakages in public finances have been blocked—not merely through official pronouncements, but through visible transparency and accountability in governance.

Unfortunately, this critical reassurance has not been emphasized enough. Instead, official messaging has focused largely on claims that individuals earning less than ₦800,000 annually will be exempt from taxation. The Nigeria Labour Congress (NLC), the umbrella body for public-sector workers, has challenged this assertion, arguing that the laws were enacted without adequate consultation and could adversely affect the majority. The NLC has also renewed its call for a minimum wage increase, even though the next review is not due until 2027, following President Tinubu’s decision to shorten the wage review cycle from five to three years during the last federal government versus labour unions negotiations followingthe last major dispute.

In a recent statement, the NLC declared:

“We enter this new year not with naïve hope, but with a fortified resolve, strengthened by struggle and clarity. The promise of more faithful and meaningful engagement from the federal government, as pledged by the President, His Excellency, Senator Bola Ahmed Tinubu—secured through our relentless pressure and collective voice—has opened a potential vista for dialogue. We acknowledge this platform and will engage deeply, consciously, and patriotically.”

Beyond the formal economy, a large proportion of Nigeria’s economic activity takes place in the informal sector. This reality makes it imperative for the architects of the new tax regime to deliberately embed incentives that would encourage operators in this largely unregulated space to comply voluntarily.

One of the most pressing challenges facing informal businesses is limited access to credit. Recent surveys show that although about 70 per cent of operators have accessed some form of credit, the bulk still comes from friends and family (70.7 per cent), followed by loan apps (15.1 per cent), with only 12.2 per cent sourced from traditional banks. This underscores the structural financing gap within an economy like Nigeria’s, which is poorer, more agrarian, and less industrialised.

Despite this reality, there is little evidence that the new tax framework adequately addresses access to affordable credit for micro, small, and medium enterprises (MSMEs). This is troubling, given that the Minister of Trade and Investment, Jumoke Oduwole, has identified MSMEs as contributing over 50 per cent of GDP and 84 per cent of employment—making them the backbone of the Nigerian economy.

Basic marketing principles suggest that persuasion requires more than awareness campaigns; incentives are essential. While the Nigerian Education Loan Fund (NELFUND) is a commendable example of how tax revenues can deliver tangible benefits—having disbursed ₦116 billion to students as of November, including ₦65 billion for tuition and ₦51 billion for upkeep—similar targeted incentives are conspicuously absent for informal sector operators.

Expanding access to affordable finance would be one of the most effective incentives. Numerous studies confirm that a lack of capital is a major constraint for businesses across the spectrum, from SMEs to those operating in the shadow economy. Yet such financial buffers appear largely unavailable. Multilateral institutions like the World Bank and IMF routinely channel funds through local banks to support SMEs, but domestic institutions such as the Bank of Industry (BoI) and the Development Bank of Nigeria (DBN) have struggled to fulfil this mandate, often due to bureaucratic bottlenecks and corruption that prevent funds from reaching genuine beneficiaries.

A credible reform agenda must ensure that informal sector operators can access financing transparently, without personal connections or illicit inducements. In this regard, the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, deserves commendation for asserting that manufacturers no longer need insider access to obtain foreign exchange. That standard of transparency should be replicated across all government agencies—from BoI and DBN to ports, airports, hospitals, passport offices, land registries, and even law enforcement bodies notorious for corruption.

In an era of digital governance, minimizing human discretion in financial transactions is both feasible and necessary. If Nigerians are to trust that their taxes will be used responsibly, transparency must be demonstrable, not merely proclaimed.

These measures are critical to securing public buy-in for the new tax regime. Their apparent absence raises questions about whether communication and crisis-management experts were involved in the Taiwo Oyedele-led Presidential Tax Reform Committee or within the rebranded Federal Inland Revenue Service, now the Nigerian Revenue Service (NRS). Such expertise is indispensable during periods of profound policy change.

To be fair, the broader reform agenda under President Bola Tinubu is beginning to yield positive macroeconomic signals. Exchange rate stability has improved, inflation has moderated from peaks above 34 per cent, foreign reserves have rebounded to over $40 billion, and crude oil production has risen to between 1.6 and 1.8 million barrels per day. These gains reflect the impact of bold early reforms, including fuel subsidy removal and the managed flotation of the naira.

However, these reforms initially imposed severe hardship on Nigerians, especially through rising fuel costs and inflation in an import-dependent economy. For tax reforms to succeed where past efforts failed, they must be accompanied by visible accountability, practical incentives, and sustained public engagement. Only then can taxation be reframed—not as an extractive burden—but as a shared investment in national progress.

It is remarkable that since taking over the reins of leadership in may of 2023 and based on his promise during his inaugural speech to reform the tax system by restructuring our country’s revenue generation system towards benefiting Nigerians more optimally via the facilitation of the provision of infrastructure such as good roads, affordable houses, well stocked hospitals with life saving facilities and personel as well as the establishment of educational instutions where Nigerians can receive qualitative education:  president tinubu has not relented in pursuit of his development agenda.

While the introduction of reforms via executive orders such as subsidy removal and managed naira floatation faced some storms, President Tinubu successfully navigated the socially and politically charged atmosphere that had enveloped Nigeria.

Known for his political sagacity and boldness in policy formulation, although the next phase of the reforms which Mr. President has chosen to execute through the Legislative Process has equally become as daunting and toxic as when he adopted the Executive Order methodology, President Tinubu who is not known to chicken out from seeing through a process he has set in motion,has vowed not to delay or suspend the policy.

This throws up the question of which process is best for governance in Nigeria?

Realistically, in political leadership, there are typically three (3) ways of governing a nation.

One (1) is the use of executive orders, the second (2nd) is reliance on the act of parliament and the third(3rd) is through the judicial process.

Each of the three (3)options has advantages and disadvantages.

President Tinubu has used all three governance tools. The removal of subsidies on petrol and naira via Executive Order and the new tax laws which are via the Legislative Process.

The Judiciary Process for making law was accomplished through the suit to the court of the 36 states in Nigeria by the federal government and the ruling of the Supreme Court affirming the autonomy of Local Government Areas, the third tier of public administration which should receive its funds directly from the Federation Account, the matter should have been settled. But that apex court ruling has yet to be implemented to date.

Given these realities, based on the success that his earlier reforms have achieved Executive Orders seem to be more efficacious than the Legislative and judiciary.

The controversy surrounding Nigeria’s new tax laws illustrates the challenges of using legislated laws.

Here are some drawbacks that have defined the Tinubu administration’s new tax laws passed through an act of parliament since 26 June last year.

1. Lengthy Process. Legislative processes can be slow, allowing controversies to arise.
2. Political Gridlock. Disagreements between stakeholders can hinder progress.
3. Contestation. Laws can be challenged, leading to uncertainty.

In contrast, Executive Orders offer:

1. Speed. Quicker implementation.
2. Flexibility. Easier to adapt or revoke.

However, as good as Executive Orders appear to be they also have limitations:

1. Limited Scope. Must align with existing laws.
2. Reversibility. Can be challenged or overturned.

That is perhaps the reason President Tinubu weighed his options before deciding on the best options to apply in his quest to reset Nigeria.

But it is the controversy surrounding Nigeria’s new tax laws that centers on alleged alterations to the gazetted version leveled by Hon. Dasuki, a House of Representatives member from Sokoto state, sparking concerns about legitimacy and potential constitutional breaches, and a shadow of doubt on the law. Considering the challenge of budget padding by the National Assembly or the operation of multiple budgets by the executive branch, which Nigerians have been regaled with, the palpable concern of some about the authenticity of the new tax laws is understandable.

The National Assembly has thus directed the re-gazetting of the Acts, while President Bola Tinubu has characteristically insisted on implementing the laws from January 1, 2026, asserting that there are no substantial issues warranting disruption.

The Nigerian Bar Association and other civil society groups have been advocating for transparency and accountability, emphasizing the need for a credible and trustworthy legislative process.

As the conventional wisdom goes: you can not throw away the baby and the bath water.

So the new tax reform can remain a work in progress meaning that amendments can be made based on experience derived from its implementation

This is where the role of the Office of the Tax Ombudsman can come into place in resolving tax disputes.

In development economics, there is the principle of “ taxation and accountability.  It is a theory that suggests when citizens contribute to the state’s revenue through taxes, they gain a sense of ownership and are more likely to demand accountability from their leaders. This is often referred to as the “fiscal contract” between citizens and the state.

In or words, the level of maturity of democracy in a society correlates with the level of tax compliance.

In that regard the following factors will have to be taken into consideration:

– Taxation as a bargaining chip. When citizens pay taxes, they may be more invested in holding leaders accountable for how their money is spent.

– Citizen engagement. Tax compliance can lead to increased civic participation and scrutiny of government actions.

– State responsiveness. Governments reliant on citizen taxes may be more responsive to their needs and demands.

However, owing to some factors such as the ones listed below, this correlation is not always straightforward.

Such factors are:

– Tax morale. Citizens’ willingness to pay taxes voluntarily

– Government transparency.

How clearly the government communicates its spending and policies

– Institutional strength. Effectiveness of checks and balances in the system.

Apart from the issue of duplicity surrounding the new tax laws, there is the issue of Company Gains Tax, (CGT)  which has been raised from 10% to 30% has also raised eyebrows of leaders in the corporate world.

In the United States, it is from 15%, or 20% depending on income level, plus a 3.8% Net Investment Income Tax (NIIT) for high-income earners.

The United Kingdom has a system whereby 18% (basic rate) or 24% (higher rate) for individuals applies, while companies pay normal corporation tax rates.

As for Germany, 25% plus 5.5% solidarity surcharge (total 26.375%) plus church tax if applicable is what obtains.

In China, 20% of individuals and

Japan charges 20.315% for national tax and 5% local tax on stock gains; up to 39.63% (30.63% national tax and 9% local tax) for real estate property gains.

Coming down to our continent, South Africa demands 18% from individuals while companies pay 21.6%

Egypt also demands, 10%, or 22.5% for individuals; 10%, or 22.5% for companies.

Kenya’s rate is 15% for individuals and companies.

While Ghana’s rate is (25%) or the individual marginal tax rate (up to 35%).

Ethiopia’s is 15% for immovable assets (Class A); 30% for shares and bonds (Class B).

And Saudi Arabia in the Gulf region attracts 20% for non-resident capital gains.

Why is Nigeria’s CGT the highest amongst the vast number of nations evaluated except Germany and Japan and Ghana.

The consequence of very high CGT that readily comes to mind is that high it might discourage Foreign Direct Investments, (FDI) which our current robust pricing of treasury bills is attracting, particularly portfolio investments.

Commendably, the NRS under the chairmanship of Zacheus Adedeji is said to be reviewing that significantly high CGat aspect and may reduce the rate after consultations with private sector players

In the final analysis, if and when the current tax reforms yield the desired outcome, it would not only generate more revenue for the national treasury but it would also help citizens hold the feet of the leaders of this country to the fire, metaphorically.

They may be of the APC, PDP, Labor, APGA, or NNPP, stock. But  as long as they are in charge of governance at the national or subnational level they will be held accountable for how the taxpayers’ money is appropriated or misappropriated.

That should ultimately gladden the hearts of the teeming number of advocates of good governance in Nigeria as a positive fallout of the comprehensive tax reforms.

• Magnus Onyibe, an entrepreneur, public policy analyst, author, democracy advocate, development strategist, an alumnus of the Fletcher School of Law and Diplomacy, Tufts University, Massachusetts, USA, a Commonwealth Institute scholar, and a former commissioner in the Delta State government, sent this piece from Lagos.

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