Nigeria’s recently enacted tax reform law, part of the broader fiscal policy and revenue mobilisation agenda of the Tinubu administration, marks a pivotal shift in the country’s economic governance. The law, which amends several tax statutes and introduces new compliance frameworks, is aimed at boosting non-oil revenues, improving tax equity, and reducing the country’s budget deficit. While the intent is laudable, the implications are mixed, offering both promise and peril for taxpayers, investors, and small businesses.
One of the major strengths of the new tax law is its alignment with Nigeria’s long-standing need to diversify revenue sources beyond oil. With global oil prices volatile and production levels inconsistent, overdependence on crude exports has repeatedly exposed the economy to external shocks. The new law seeks to correct this by expanding the tax net, modernising tax administration, and enhancing digital compliance.
The reform also aims to improve fiscal transparency and accountability. Measures like mandatory registration for digital businesses and streamlined processes for value-added tax (VAT) filing reflect an effort to formalise large segments of the economy previously outside the tax system. By leveraging technology and data integration, the Federal Inland Revenue Service (FIRS) is now better positioned to identify non-compliant entities and increase tax collection efficiency.
Additionally, the law includes progressive tax elements designed to reduce the burden on lower-income earners and small businesses. Certain income thresholds are exempted, and provisions have been made to ensure multinational corporations pay their fair share of taxes, particularly in the digital and extractive sectors. This has the potential to improve tax equity and close the loopholes often exploited by large corporations.
Despite its strengths, the law raises valid concerns. Chief among them is the risk of overburdening an already strained private sector. Nigerian businesses, especially in the informal and MSME segments, are grappling with inflation, forex instability, and rising energy costs. An aggressive expansion of the tax base, without accompanying incentives or ease-of-doing-business reforms, may discourage entrepreneurship and investment.
Moreover, the new tax compliance requirements, including real-time digital reporting and stricter penalties for non-compliance, could impose disproportionate costs on small firms lacking the infrastructure or technical expertise to meet them. Without adequate sensitisation and support, the law may deepen the divide between compliant and excluded businesses.
Another critical issue is the potential for multiple taxation, especially at the sub-national level. While the federal law aims to harmonise and simplify taxation, state and local governments continue to impose levies and charges that often duplicate federal taxes. Without a unified tax framework or fiscal coordination among tiers of government, businesses remain vulnerable to arbitrary assessments and harassment.
While the law intends to increase tax revenue, it must not be seen as a standalone solution to Nigeria’s fiscal woes. Broader structural reforms such as expenditure rationalisation, public service efficiency, and tackling corruption are equally essential. A more aggressive tax regime, absent visible improvements in public services and governance, may erode public trust and compliance.
Nigeria’s new tax law represents a step forward in fiscal policy reform, but it must be implemented with caution, flexibility, and fairness. Tax expansion must be matched with transparency, taxpayer education, and institutional reform to avoid stifling the productive base it seeks to empower.
Ultimately, the success of the law will depend not only on how much it collects, but on how equitably and wisely those revenues are used to build a more resilient and inclusive economy.
