For years, Nigerians had viewed taxation as a burden rather than a pathway to development. Confusing levies, inconsistent enforcement, and harassment by non-state actors had created widespread distrust in the system. The Federal Government, however, initiated one of the most ambitious tax reform agendas in decades, led by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.
Oyedele explained that the goal was to make taxation fair, efficient, and transparent. Earlier in the year, his committee had proposed reducing more than sixty overlapping taxes to single-digit figures, expanding the tax net through technology rather than higher rates, and ensuring that low-income Nigerians and small businesses benefited from relief measures. He noted that the reforms could raise Nigeria’s tax-to-GDP ratio from below 10 percent to about 18 percent over a few years, aligning the country with global benchmarks.
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He emphasized that fears about heavier tax burdens were unfounded. Taxes were expected to reduce for most Nigerians starting January. High-net-worth individuals might pay slightly more in personal income tax, but their companies would enjoy lower corporate taxes and fewer compliance bottlenecks. Corporate tax, for instance, was set to fall from 30 percent to 25 percent, and businesses would receive VAT refunds on assets and operating costs.
A major part of the reform involved restructuring VAT. Oyedele explained that VAT would no longer burden low- and middle-income earners. The committee had reviewed national spending patterns and identified five major items Nigerians spent most on: food, rent, transportation, education, and health. All had been made zero-rated. This meant that businesses involved in these areas could recover all VAT paid on inputs, reducing their operational costs and ultimately lowering prices for consumers.
Bread was one example he cited. Under the old law, bread had been exempt, meaning bakers did not charge VAT but could not reclaim VAT on their equipment, fuel, or other inputs. Costs were passed on to consumers. Under the new reform, bread became zero-rated, allowing full VAT refunds and reducing production costs. Similar measures applied across food production, pharmaceuticals, schooling, medical care, and housing.
Oyedele stressed that most fears circulating on social media had been based on misunderstandings. Nothing in the reforms imposed VAT on essentials or required students, retirees, or low-income workers to pay more tax. Personal income tax applied only to those earning above the exemption threshold. The reform lifted millions of low-wage earners entirely out of the tax net.
He also clarified that small restaurants and “mama put” operators would not charge VAT if their annual turnover remained below one hundred million naira. Only high-end restaurants would charge VAT because their revenue exceeded the threshold. This illustrated how progressive taxation worked, with those having greater economic capacity contributing more.
Religious institutions remained tax-exempt unless they engaged in commercial ventures, though salaries of staff were taxable like any other workplace. Oyedele noted that the law was neutral regarding religion and focused only on earnings.
There had been concern about fuel-related taxes. Many Nigerians reacted strongly to a proposed five percent charge on petrol, particularly after subsidy removal. Oyedele explained that the five percent had been introduced into law in 2007 but never implemented. The new reform did not activate it immediately. The law explicitly delayed its implementation until an appropriate time when it would not affect fuel prices. If ever applied, the proceeds would go directly to improving road infrastructure.
When asked whether governments should tax themselves instead of citizens, he argued that the combined public sector still lacked sufficient revenue to fund national needs. Lavish government lifestyles had caused public distrust, but the real problem lay in low productivity and extremely low tax-to-GDP ratios. Even if all officials forfeited salaries and perks, Nigeria would still struggle with insufficient revenue.
On the 15 percent charge on imported fuel, Oyedele explained that it aimed to support local refineries, not raise domestic fuel prices. Local producers had complained about substandard imports destabilizing the market. If domestic refineries collapsed, Nigeria would return to import dependence and price volatility. Supporting local refining capacity ensured long-term price stability.
He also addressed viral stories, such as a TikTok content creator who claimed he was asked to pay thirty-six million naira in tax. Oyedele explained that Nigeria operated a self-assessment system. If someone publicly claimed huge earnings, the tax authority would invite them to justify it. If exaggerated, they would clarify; if real, they paid what was due. If self-assessment was ignored, the authority assessed them based on lifestyle indicators such as assets, travel, and spending.
The reforms prioritized fairness for businesses. Companies were set to pay less tax. Long-standing disputes, such as non-refundability of input VAT, had been corrected, reducing costs for manufacturing, education services, transportation, and agriculture. Small businesses with less than one hundred million naira turnover would pay zero tax from January.
To increase revenue without raising rates, more people needed to be brought into the tax net. Nigeria had over two hundred million people, with around eighty-six million actively employed, yet fewer than ten million paid tax. Out of over a million registered companies, fewer than one hundred thousand were active taxpayers. To address this, the system would integrate banking records, travel history, electricity usage, card payments, and automated invoicing. Citizens would declare income while government verified it. The system targeted large discrepancies, not small earners.
The reforms also addressed harassment and crude collection practices. Oyedele said the days of chasing vehicles, seizing number plates, and collecting taxes by force had ended. Harmonized taxes, removal of cash-based collections, and elimination of outdated levies were part of the reforms.
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The danger of multiple taxation, frequently complained about by businesses, had been real. The reforms aimed to eliminate it completely. Local governments had reported less than fifty billion naira in a year despite heavy cash collections, revealing severe leakages, which the reforms sought to stop.
Integrating thirty to forty million additional taxpayers would take two to three years. Even if many did not pay tax immediately, inclusion enabled better planning and access to welfare programs. Countries with robust tax data had supported citizens during COVID instantly; Nigeria had lacked such visibility.
Many feared price increases in January simply because new tax laws took effect. Oyedele said there was no basis for such inflation. The reforms reduced costs for producers, service providers, schools, and farms. Panic and misinformation, rather than policy, were the real risk to prices.
Ultimately, Taiwo Oyedele presented the reforms as a reset for Nigeria’s tax system. He insisted that the intention was not to extract more from citizens but to simplify the system, remove inefficiencies, support businesses, and ensure everyone contributed fairly. Success depended on public understanding, government discipline, and transparent implementation.
