Tax Reform: Economists Highlight Risks, Opportunities In New Fiscal Era

Nigeria’s new fiscal era under the Tax Reform Act 2025 is opening up fresh opportunities to simplify taxation, widen compliance and ease pressure on businesses, but economists warn that deep structural risks, weak coordination and public mistrust could still derail the reform if left unaddressed.
That message dominated discussions on Friday at the 14th Anniversary Lecture of the January 9 Collective (J9C) in Ikeja, Lagos, where economic experts, industry leaders and policymakers examined the early realities, emerging challenges and future direction of the landmark tax legislation.
Speakers at the event agreed that the Act represents one of Nigeria’s most ambitious tax overhauls in decades, consolidating dozens of fragmented laws into a single framework aimed at modernising administration, improving efficiency and strengthening fiscal resilience. However, they stressed that legislation alone would not deliver results without clear communication, sustained public enlightenment and credible implementation across all tiers of government.
Chief Economist at SPM Professionals, Dr Paul Alaje, described the law as “landmark legislation” but cautioned that its real test lies in execution. He questioned whether the reform genuinely shifts Nigeria toward progressive taxation, noting that indirect taxes such as Value Added Tax (VAT) remain inherently regressive and place a heavier burden on low-income earners.
“The success of these reforms depends on effective implementation, public trust and political stability,” Alaje said, warning that insecurity, weak fiscal social contracts and poor coordination between federal, state and local governments could undermine confidence and suppress business activity.
He advocated a phased, technology-driven rollout of the Act, stronger and more autonomous state tax authorities, and sustained protection of exempt and zero-rated goods to cushion vulnerable households from inflationary pressures. Alaje also called for a formal review of the law within three to five years to address emerging gaps and unintended consequences.
Beyond design and implementation, Alaje stressed the importance of transparency in the use of tax revenues, robust taxpayer education and a clearer distinction between legitimate tax planning and tax evasion. He criticised the persistence of illegal levies, particularly at the local government level, describing them as entrenched distortions that raise the cost of doing business and erode trust in the tax system.
From the industrial sector, director-general of the Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi Kadir, said the reform offers meaningful relief to manufacturers who previously faced as many as 63 different taxes across multiple jurisdictions. “Compliant manufacturers have nothing to fear,” Kadir said, adding that MAN would continue to engage government to refine the law and improve clarity for producers.
Chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, emphasised the need for continuous public education, warning that misunderstanding and resistance could weaken compliance. “No reform is perfect at inception,” Yusuf said, stressing that feedback and periodic adjustment are essential.
Yusuf also highlighted the informal sector, which employs about 90 per cent of Nigerians, noting that it remains largely outside the tax net. He said simplified processes, targeted incentives and trust-building measures are critical to bringing informal operators into the reformed tax system.
Providing technical insight, KPMG Partner, Mrs Elizabeth Olaghere, said the Act raised exemption thresholds, consolidated VAT provisions and introduced simplified tax returns for informal sector operators, measures she said could reduce compliance costs and improve voluntary participation if fairly enforced.
Chairman of the event and chief executive of Stanbic IBTC Bank Plc, Mr Wole Adeniyi, described the Act as “a decisive turning point” in Nigeria’s fiscal evolution. Represented by Mr Abayomi Makinde, a senior executive of the bank, Adeniyi said the reform consolidated more than 50 fragmented and overlapping tax laws into a unified framework designed to reduce ambiguity and modernise tax administration.
He urged stakeholders to discount misinformation surrounding the reforms and focus on the opportunities they present for sustainable national development, especially at a time of declining oil revenues and rising public debt.
Captain of the January 9 Collective, Mr Kingsley James, said the organisation has remained a non-partisan platform for thought leadership for 14 years, using dialogue to interrogate governance, security, economic policy and citizens’ obligations to the state.