President Tinubu’s Nigeria New Tax Rules Explained - What Changes for You
Nigeria Tax Reform Explained: New Brackets, Exemptions, and Agency Merger.
Nigeria’s tax system is about to change, and the impact hits workers, small businesses, and high-income earners from 1 January 2026. President Bola Tinubu has signed the bill into law, aiming to finally dismantle the bureaucratic mess that crippled Nigeria's non-oil revenue.
For years, the system was a disaster. Nigeria managed over 60 different taxes, yet its tax-to-GDP ratio hovered at a crippling 9.4% in 2023, among the lowest globally. This failure was rooted in complexity, mass non-compliance, and the chaos of multiple agencies collecting the same levies.
This reform is designed to compel the few to contribute more while strategically exempting the many who hustle daily.
Here’s the clean breakdown of what the reform does, why it matters, and how it affects your money.
Nigeria's New Tax Law: Why the Reform Happened
For years, Nigeria’s tax structure was messy, inefficient, and unable to fund public services. More than 60 taxes existed on paper, but only a handful generated real revenue.
Multiple agencies collected taxes independently, causing duplication, confusion, and heavy pressure on small businesses.
Nigeria’s tax-to-GDP ratio was 9.4% in 2023, one of the world’s lowest. After initial reforms, it rose to 13.5% in 2024, but the government says deeper structural changes are needed.
The new tax law attempts to fix three major problems:
- Low revenue collection
- Multiple taxation across federal, state, and local levels
- Weak enforcement and low trust in the system
Tax Reform Calculator: What Changes for Individuals
1.Income Under ₦800k Is Tax-Free
Workers earning less than ₦800,000 yearly won’t pay income tax.
But the threshold is below the new minimum wage, so most formal workers will still be taxed.
The real beneficiaries here are informal workers, students, domestic workers, and part-time earners.
2. New Progressive Tax Brackets
The reform adjusts how much individuals pay based on earnings.
₦0 – ₦800k: 0%
₦800k – ₦3m: 15%
₦3m – ₦12m: 18%
₦12m – ₦25m: 21%
₦25m – ₦50m: 23%
Above ₦50m: 25%
High-income earners face the steepest jump.
What Changes for Businesses
1. Small Businesses Get Full Exemption
Micro and small enterprises, the bulk of Nigerian businesses, will no longer pay Company Income Tax.
This is aimed at reducing pressure on the informal sector and helping small firms scale.
2. Corporate Tax Drops in 2026
Medium and large companies will see their Company Income Tax rate fall from 30% to 25% in 2026.
A New Tax System: One Agency in Charge
The Federal Inland Revenue Service (FIRS) becomes the Nigeria Revenue Service (NRS) with expanded powers. The NRS will coordinate tax collection for:
- Customs
- NUPRC
- NPA
- NIMASA
This consolidation is meant to end multiple taxation and improve compliance.
VAT, Spending, and New Levies
VAT Stays at 7.5%
The earlier proposal to increase VAT was paused.
Essential items, food, school fees, medical services, pharmaceuticals, electricity, remain VAT-free.
States That Generate More Keep More
The revenue-sharing formula shifts slightly to reward high-performing states, though the original 60% proposal was cut to 30% after pushback.
New Taxes on Betting and Telecoms
5% excise on betting/lottery/gaming
5% excise on airtime and data usage
Development Levy (2% – 4%)
Funds will support:
- Student loans (NELFUND)
- TETFund
- NITDA
- NASENI
New Tax Law in Nigeria - Timeline
Immediately: New income tax brackets, small business exemptions, NRS launch
January 2026: Corporate tax reduction
Ongoing: Development levy implementation
Tinubu Tax Reform Bill - What This Means for You
Students & Informal Workers: Most earnings remain tax-free.
Regular Employees (₦100k–₦500k/month): Slightly lower effective tax rates.
High Earners (₦1m+/month): Higher obligations under the new brackets.
Small Business Owners: Full relief from income tax, the biggest structural benefit.
Large Corporates: Lower rates in 2026 but higher compliance requirements.
Nigeria's New Tax Law Bottom Line
The reform promises:
- A simpler tax system
- Fewer agencies
- Better protection for small businesses
- Higher contributions from wealthy individuals
- More funding for education, tech, and innovation
The real test is whether implementation matches the ambition, and whether these changes reduce the confusion that has long defined Nigeria’s tax environment.
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