Nigeria has embarked on one of its most significant fiscal overhauls since independence, with a comprehensive set of new tax laws taking effect from January 1, 2026. This reform aims to stabilise public finances, broaden the revenue base, and restore credibility to a system historically plagued by inefficiency. The transition is marked by the winding down of the Federal Inland Revenue Service (FIRS) and the birth of a new entity, the Nigeria Revenue Service (NRS), tasked with implementing this ambitious framework.
From Policy to Practice: The Implementation Challenge
While the legislative framework, captured in four cardinal acts, is widely acknowledged as progressive, attention has now shifted from intention to practical impact. The Centre for the Promotion of Private Enterprise (CPPE) has emphasised that good policy design does not guarantee good outcomes. The success of this fiscal restructuring, they argue, will depend far less on the laws themselves and more on how they are implemented across Nigeria's streets, markets, and businesses.
The reforms expand relief for low-income earners and small businesses, rationalise multiple taxes, and introduce incentives for priority sectors like agriculture and manufacturing. Government officials, including reform architects, insist the goal is not to squeeze a fragile economy but to fix leakages and reduce Nigeria's long-standing dependence on volatile oil revenue.
However, the CPPE warns that without careful sequencing, political sensitivity, and economic realism, even well-intentioned reforms can provoke resistance and weaken public confidence. "Tax reform is not an event; it is a process," the organisation noted, advocating for a phased and adaptable implementation strategy rather than a rigid, enforcement-heavy approach that could undermine credibility.
Navigating the Informal Sector and Building Trust
A major test lies in integrating Nigeria's vast informal sector, which includes an estimated 40 million micro, small, and nano enterprises. Most operators lack structured records and have limited understanding of tax concepts. The new framework's mandatory filing requirements and penalties risk criminalising informality rather than encouraging gradual formalisation.
At Kairo Market in Oshodi, trader Islamiyat Adewale voiced a common concern: "Many of us don't even understand these tax terms. If they start enforcing without teaching us, it will only cause more challenges." This sentiment underscores the critical need for sustained taxpayer education and simplified compliance tools.
Economists and the CPPE suggest a more strategic enforcement focus. Data indicates that roughly 20% of businesses generate nearly 90% of tax receipts. Therefore, prioritising compliance among large corporations, established SMEs, and high-net-worth individuals could yield significant revenue without destabilising vulnerable livelihoods. The informal sector, they argue, should be integrated gradually through incentives and support.
The Long Road to Fiscal Sustainability
The ultimate goal of the reform is to lay the foundation for long-term fiscal stability. With the government spending over 80% of revenue on debt service in the first half of last year, expanding non-oil revenues is critical. A more efficient tax system promises a steadier, more predictable income source, enabling better planning and reducing exposure to oil market shocks.
Joseph Tegbe, Chairman of the National Tax Policy Implementation Committee (NTPIC), echoed that strong tax systems are not built overnight. He stated the reforms are part of Nigeria's long-term economic strategy, designed to modernise tax administration in line with global standards. He reiterated President Nola Tinubu's assurance that the reforms would be implemented "with a human face."
By broadening the tax base, the reforms aim to correct an imbalance where a narrow segment bears a disproportionate burden. As argued by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, bringing more actors into the formal net improves equity and can increase overall revenue without stifling growth with excessive rate hikes. This, in turn, could strengthen the government's capacity to meet obligations and slow the rapid accumulation of public debt, which has exceeded N152 trillion.
The coming months will be a true test of enforcement readiness and the government's ability to translate a conceptually sound reform into tangible, trusted outcomes for Nigeria's economy and its citizens.
