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The President of Nigeria Bola Tinubu, has signed four pivotal tax bills into law, launching the most significant overhaul of Nigeria’s tax system in decades. The reforms, aimed at harmonizing the country’s fragmented tax regime, are designed to improve revenue generation, ease the burden on low-income earners, and enhance fiscal federalism without deepening Nigeria’s persistent north-south political divide.
The Reform Package: Four Pillars
The reform consists of the following laws:
- Nigeria Tax Law
- Nigeria Tax Administration Law
- Nigeria Revenue Service (Establishment) Law
- Joint Revenue Board (Establishment) Law
Together, these laws consolidate a previously “patchwork” tax landscape, aiming to streamline tax administration, reduce compliance burdens, and boost Nigeria’s tax-to-GDP ratio, currently lagging at 13.5%, below Africa’s continental average.
“For too long, our tax system has been a patchwork — complex, inequitable, and burdensome,” said Tinubu via social media.
Equity Meets Efficiency
Key provisions include:
- Corporate tax rate reduced from 30% to 25%
- Small businesses exempted from company tax entirely
- Increased fiscal autonomy for Nigeria’s 36 states through adjusted VAT allocations
- Rebranding and restructuring of the national tax agency into the Nigerian Revenue Service (NRS)
These changes aim to lighten the load for low-income earners and SMEs, while maintaining or increasing total government revenues through better compliance and broader coverage.
International Implications
Nigeria — once Africa’s largest economy, now fourth after South Africa, Egypt, and Algeria — is keen to regain its status as a magnet for foreign investment. With the cost of doing business currently inflated by overlapping tax jurisdictions, the reforms offer a simpler, clearer tax framework that could support investor confidence.
Controversy and Compromise
Initially, Tinubu proposed radical changes to the revenue-sharing model, which could have diverted funds from the historically less-industrialized northern states toward the oil-rich south. However, due to strong legislative pushback, these provisions were dropped. The final framework preserves inter-regional redistribution mechanisms, easing fears of economic marginalization.
Outlook: Execution Will Be the Test
Nigeria’s new tax regime is bold in scope and long overdue in ambition. The question that remains is whether its implementation will match its legislative promise. If executed effectively, it could serve as a model for fiscal modernization across Africa.
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