By Chiwuike Uba
Nigeria’s tax system has long been a microcosm of the country’s wider governance dysfunction—characterised by a narrow tax base, over-taxed wage earners, chronically under-taxed elites, a vast informal sector, and public mistrust rooted in decades of poor service delivery and corruption. With a tax-to-GDP ratio of just 6–8%, Nigeria ranks among the lowest in Africa and the world.
Against this backdrop, the passage of four groundbreaking tax laws in 2025—the Nigeria Tax Act, the Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act—offers an unprecedented opportunity to shift from extractive taxation toward progressive, inclusive, and transparent fiscal governance.
1. A Bold Shift Toward Progressivity and Equity
For the first time in history, Nigerians earning ₦800,000 or less annually are exempt from personal income tax. Small and medium enterprises (SMEs) with a turnover below ₦25 million enjoy a 0% company income tax rate. These reforms reflect a long-awaited shift toward progressivity, compassion, and economic justice. However, their success depends on diligent implementation, digital onboarding, and fairness in enforcement.
2. Digital Intelligence and Modern Enforcement
Digitisation is now a statutory requirement. Mandatory Taxpayer Identification Numbers (TINs) are linked to national identity systems (NIN, BVN, CAC), enabling real-time filing, AI-powered audits, e-invoicing, and automated VAT tracking. These reforms have the potential to drastically improve tax efficiency, reduce fraud, and enable evidence-based revenue monitoring.
3. Harmonisation and Protection for Taxpayers
The Joint Revenue Board is empowered to unify federal, state, and local tax systems, while states can delegate collection to the Nigeria Revenue Service. The establishment of the Office of the Tax Ombud provides a new legal platform for dispute resolution and taxpayer protection. If implemented faithfully, these reforms can eliminate multiple taxation, foster accountability, and restore dignity to the taxpayer experience.
4. Taxing Wealth and Closing Long-Avoided Loopholes
The reforms boldly extend Capital Gains Tax to digital and intangible assets such as cryptocurrency, NFTs, and intellectual property. Withholding Tax compliance has been strengthened and expanded to cover digital transactions, consultancy, rents, and more. These measures mark a significant step toward taxing capital, not just consumption and labour.
5. Multinational Tax Avoidance and Transfer Pricing Reforms
Sections 190–195 of the Nigeria Tax Act fortify anti-avoidance rules and transfer pricing enforcement. They mandate arm’s-length pricing for related-party transactions and empower revenue authorities to audit offshore profit-shifting schemes. These provisions align Nigeria with global BEPS (Base Erosion and Profit Shifting) efforts and signal a shift toward corporate tax justice.
6. Equity and Social Inclusion Gaps Remain
Despite its ambitions, the reform package lacks gender-sensitive provisions. Women-led enterprises and informal traders remain exposed to regressive levies and face structural disadvantages. There are no targeted tax credits or reliefs for women, nor for Nigeria’s 30+ million persons with disabilities, senior citizens, or other vulnerable groups.
7. The Need for Social Protection Integration
Exemptions must be complemented with integration into broader social protection systems—linking tax IDs with the National Social Register, health insurance schemes, and cash transfers. Tax justice must be accompanied by social equity, especially in a country with deep spatial and gendered inequalities.
8. Tax Refund Delays and Transparency Weaknesses
The Tax Administration Act introduces refund provisions, but lacks specific timelines and automation protocols. In a context of low institutional trust, this may discourage compliance and penalise exporters and manufacturers. Furthermore, Nigeria still does not require the annual publication of a tax expenditure report—leaving the true cost of waivers and incentives hidden from public view.
9. Implementation Capacity and Subnational Disparities
Many local governments lack broadband, digital systems, and skilled tax personnel. Without digital readiness grants, the reforms risk deepening subnational inequality. States like Lagos and Kaduna may flourish, while others lag behind. Moreover, political interference in the appointment of tax agency leadership undermines institutional independence and policy continuity.
10. Linking Tax to Public Financial Management and Budgeting
To win public trust, tax must be visibly linked to service delivery. Citizens should be able to trace how their taxes fund public goods—roads, schools, healthcare. Nigeria must implement budget-tagging, digital transparency platforms, and participatory budgeting frameworks that allow citizens to track and influence how their taxes are spent.
11. Rebalancing Fiscal Federalism
While harmonisation is a goal, Nigeria’s unresolved fiscal federalism—particularly disputes over VAT and derivation—must be addressed to ensure cohesion and fairness. A formal Intergovernmental Fiscal Coordination Council is recommended to align national and subnational tax regimes and avoid future litigation or political fragmentation.
12. Global Alignment and Diaspora Inclusion
The reforms pave the way for Nigeria to adopt OECD tax standards, including digital services taxation and global minimum tax rules. However, more effort is needed to integrate the diaspora—through diaspora bonds, overseas investment-linked tax credits, and alignment with FATCA and the Common Reporting Standard (CRS).
13. Informal Sector and Youth Inclusion
With over 60% of economic activity in the informal sector, and youth dominating digital microenterprises, the article calls for a youth tax transition scheme. This would offer tax holidays in exchange for digital onboarding, as well as presumptive tax options and mobile-based registration.
14. Judiciary and Dispute Resolution Mechanisms
While the Tax Appeal Tribunal and Ombud exist, Nigeria’s judiciary is overburdened and under-resourced. To ensure fair and timely resolution of tax disputes, investment in judicial capacity—particularly at the state level—is imperative.
15. Green Taxation and Climate Finance
The introduction of a 5% fossil fuel surcharge is a step toward environmental accountability. Nigeria must expand this into a full green taxation framework, including carbon pricing, eco-levies on extractive industries, and a National Green Fund supported by environmental tax receipts.
16. Tax as a Tool for Anti-Corruption
By linking TINs to financial records, public procurement data, and AI-enabled audit systems, the reforms offer a new frontier in anti-corruption. Annual tax filings could be cross-referenced with asset declarations to identify illicit wealth. Transparency must extend to the top, not just the bottom.
17. Practical Tools for Vulnerable Groups
There is a need for simplified tax guides, visual rate charts, mobile apps, and physical support channels—especially for the elderly, persons with disabilities, and digitally excluded citizens. Without these, even well-meaning reforms could exclude the most vulnerable.
Conclusion: From Paper to Practice
“The 2025 tax reform laws represent not just new rules, but a new opportunity,” says Prof. Uba. “An opportunity to make taxation an instrument of justice and development. An opportunity to restore the dignity of the taxpayer. Nigeria has written the laws. Now it must write the legacy.”
ABOUT THE AUTHOR:
Prof. Chiwuike Uba is a development economist, fiscal governance expert, and author of multiple policy papers on taxation, transparency, and public financial management. He is also the Chairman of the Board, ACUF Initiative for Policy and Governance
