The practical impact analysis of President Tinubu’s new tax policy / Tax Reform Acts and what it means for government, states, businesses and households in Nigeria. the likely macro & distributional effects, sectoral winners/losers, risks, and a short action checklist for companies and policymakers.
- On 26 June 2025 President Bola Ahmed Tinubu signed four tax reform bills into law — the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board Act — a package that overhauls tax law and administration.
- The new laws are expected to take effect from 1 January 2026
- Major overhaul of tax administration and consolidation of tax laws into a new Nigeria Tax Act. Expect stronger centralised administration and new compliance regimes.
- Proposed/earlier-discussed changes to VAT (value-added tax) — including expanding the base and altering revenue-sharing between federal/state levels — sparked debate. There were public reports about raising headline VAT rates in proposals, but the Federal Ministry has publicly refuted some speculative claims about an immediate VAT hike. Expect VAT rules and exemptions to change even if headline rates are clarified.
- New/stricter rules for non-resident taxation, changes to personal income tax structure (more progressive rates and replacement of CRA with capped deductions), and clearer rules on permanent establishments for multinationals.
- Revenue mobilisation (positive, medium-term).
Better administration + broader base should increase tax collections and fiscal space — supporting debt reduction and public investment — once compliance improves. (Already visible in rising VAT receipts even before implementation.)
- Short-term inflation/consumption risk (mixed).
Expanding VAT base or higher effective VAT on some goods/services can raise consumer prices and hit household purchasing power, especially for vulnerable groups, unless exemptions/targeted transfers offset this. Some official arguments claim tax reform can help lower inflation by reducing fiscal imbalances, but the short-run effect is typically higher consumer prices.
- State vs federal politics & inequality risk.
Changing the VAT revenue-sharing formula (shift toward contribution-based sharing) risks worsening north–south fiscal divides; several northern governors pushed back, and the politics may force adjustments. Redistribution outcomes will matter for political stability and regional development.
- Business compliance costs (higher) and formalisation (likely).
Firms should expect increased compliance, documentation, and possibly higher effective tax rates in some sectors — but also clearer rules that reduce ambiguity for long-term planning. Multinationals face tighter permanent-establishment rules and stricter withholding/source rules.
- Investment & competitiveness (ambiguous).
If reforms are implemented transparently and predictably, they can improve investor confidence (better rule of law, fewer carve-outs). But sudden or poorly-communicated tax increases could deter short-term investment and consumer demand.
Sectoral winners & losers (quick sketch)
- Winners: Tax and compliance service providers, fintech/payments (digital receipts, e-invoicing), large exporters (if removal of ambiguous levies happens), sectors benefiting from clarified exemptions (health, some agri inputs).
- Losers (vulnerable): Low-margin consumer-facing SMEs (higher compliance burden), households facing broader VAT base without compensating subsidies, and states/regions that may lose share under a contribution-weighted revenue formula.
Top risks to watch
- Policy reversals / political bargaining: revenue-sharing and VAT details may be changed through political pressure — creates uncertainty.
- Implementation capacity: Nigeria Revenue Service and state tax authorities must scale up systems (digitalization, audits). Weak implementation means either revenue loss or excessive burden on taxpayers.
- Inflationary feedback: poorly-targeted tax expansion could feed price rises and erode political support.
