Federal Government Unveils Sweeping Tax Reforms for Nigeria's Informal Sector
In a significant move to overhaul Nigeria's revenue system, the federal government has introduced a comprehensive tax framework specifically targeting the country's vast informal sector. This includes artisans such as electricians, welders, vulcanizers, and other small-scale operators who have long operated outside formal tax structures.
Key Provisions of the New Tax Regulations
The newly signed presumptive tax regulations and implementation guidelines, unveiled in Abuja, bring several critical changes. Firstly, the collection of taxes in cash is now strictly prohibited, a practice historically associated with harassment and irregular collections. Additionally, tax officials are banned from mounting roadblocks to demand payments, aiming to eliminate coercive enforcement methods that have plagued the informal sector.
Olusegun Adesokan, executive secretary of the Joint Revenue Board (JRB), emphasized during the signing ceremony that this framework seeks to dismantle fragmented and informal tax practices. Instead, the system encourages the use of digital platforms for tax payments, ensuring traceability and accountability in revenue collection.
Exemptions and Tax Rates for Small Businesses
Under the new guidelines, nano and small enterprises with an annual turnover of N12 million or less are exempt from paying taxes under the presumptive tax regime. This exemption is designed to protect vulnerable businesses from undue financial burden. However, informal businesses earning above this threshold will be required to pay a modest one per cent tax on their turnover.
Officials state that this rate is deliberately set low to encourage compliance rather than discourage enterprise. The approach aims to simplify taxation for small operators while gradually integrating informal businesses into Nigeria's formal economic system, thereby broadening the tax base.
Government's Vision for Transparency and Fairness
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, highlighted that the signing of these regulations marks a critical shift from policy approval to actual implementation of tax reforms approved between 2025 and early 2026. He stressed that the reforms are built around three key principles: transparency, fairness, and economic inclusion.
Edun clarified that the government's goal is not to increase tax rates but to expand the number of people and businesses participating in the tax system. By doing so, more citizens can contribute fairly to national development without placing excessive burden on any single group, ensuring a more equitable revenue distribution.
Addressing the Informal Sector's Economic Power
Joseph Tegbe, chairman of the National Tax Policy Implementation Committee, described the new regulations as a decisive step toward transforming Nigeria's tax system. He noted that the informal sector accounts for over 80 per cent of the workforce, yet its contribution to structured government revenue has remained limited due to systemic weaknesses and inconsistent enforcement.
Tegbe explained that the framework seeks to replace arbitrary collections with clear rules, digital payments, and coordinated oversight across government agencies. An ombudsman mechanism will also be introduced to handle complaints and ensure fairness in the new tax system, providing a recourse for businesses facing issues.
Implementation and Future Outlook
The implementation committee will work closely with tax authorities nationwide to ensure the reforms are rolled out in a disciplined and transparent manner. This includes integrating businesses into a national tax identification system to improve coordination across all tiers of government, from federal to local levels.
With ambitious revenue targets set for 2026, taxpayers are under closer scrutiny than ever before. The government's focus on technology and digital platforms is expected to reduce leakages and enhance efficiency in tax collection, marking a pivotal moment in Nigeria's economic policy under President Bola Tinubu's administration.
