Reshaping Nigeria’s Economic Future: Dissecting Tinubu’s Tax Reforms, by Bayonle Fesobi

Editor's note: In this piece, Bayonle Fesobi, a policy analyst, analyses President Tinubu’s sweeping tax reforms. He argues they mark a pivotal shift in Nigeria’s fiscal direction, impacting governance, business, and everyday Nigerians in tangible, long-term ways.

Giving an objective and critical look at the scoreboard of economic trajectory in Nigeria under the current Bola Ahmed Tinubu Administration, it is safe to state that Nigeria’s fiscal framework is quietly undergoing a revolution. While fuel subsidy removal dominated early headlines in President Bola Tinubu’s administration, perhaps the most transformative yet underappreciated action lies in his comprehensive tax reform agenda.

With the passage of four landmark tax bills in 2023, Nigeria’s tax system has undergone a historic overhaul aimed not just at simplifying compliance but at repositioning the nation’s economy for sustainable growth. As oil revenue continues to decline and pressure mounts to diversify government income, these reforms offer a new path forward. For the average Nigerian—be it the market woman, the digital entrepreneur, or the teacher—the stakes are high and the ripple effects inevitable. This series unpacks the five most critical aspects of Tinubu’s tax reforms and what they mean for ordinary citizens and businesses alike.

Unified tax code: The end of fragmentation

For decades, Nigeria’s tax system was a confusing labyrinth with over 60 separate pieces of legislation scattered across various documents and jurisdictions. The need to modernize a tattered fiscal architecture becomes imperative. This structural chaos not only complicated tax compliance for individuals and businesses but also made enforcement a bureaucratic nightmare. Tinubu’s Nigerian Tax Act collapses these disparate laws into a single, comprehensive code—a move long overdue. Alongside this, the Tax Administration Act and the creation of a Joint Tax Board ensure that federal, state, and local authorities now have a unified platform for coordination.

This has a huge impact on Governance and Compliance, as this consolidation is not just cosmetic. It simplifies the tax landscape and eliminates overlaps and contradictory provisions, making it easier for citizens to understand their obligations. For civil servants, business owners, and investors, clarity in the tax system translates to reduced legal ambiguity and better compliance. This also strengthens accountability and transparency in how taxes are levied and collected.

For everyday Nigerians, especially small business owners, this means fewer surprises and arbitrary levies from conflicting tax jurisdictions. It reduces the fear and harassment often associated with tax collectors and encourages more people to formalize their businesses, thus expanding the tax net. In essence, the unified tax code is laying the foundation for a fairer, more predictable fiscal society.

Redefined tax thresholds: A progressive turn

One of the most immediate wins for ordinary citizens is the upward revision of the personal income tax threshold. Previously, individuals earning ₦3.2 million ($2,000) annually were liable for tax. Under the new regime, that threshold now stands at ₦9.6 million ($6,200), meaning that millions of low-income earners—particularly civil servants, teachers, and artisans—are now exempt from paying income tax. This holds the potential of putting more money in the pockets of Nigerians and laying the foundation for a new era of tax justice.

This policy aligns with progressive taxation principles, where the burden shifts from the vulnerable to those with greater capacity to pay. High-income earners are now subjected to a 25% rate, reinforcing the ethos of equitable contribution to national development. On the corporate side, small businesses earning below ₦50 million are exempt from company tax, allowing them to reinvest and grow. One way this would have a direct benefit for the common man is that the reform represents a direct relief for average households struggling with inflation and rising costs of living. It empowers small businesses and employees to retain more of their income, improve welfare, and build resilience. It also sends a strong message of inclusion—that the government recognizes the importance of protecting the financially vulnerable while rewarding productivity.

Local advantage: Rationalising withholding taxes

A less discussed but highly impactful reform is the restructuring of withholding tax regimes. For years, Nigerian businesses paid the same withholding tax rates as foreign entities, placing them at a disadvantage. The Tinubu reforms cut rates on consultancy, commission, and technical fees for Nigerian companies to 5%, while maintaining the 10% rate for non-resident firms. While levelling the playing field for indigenous businesses by encouraging domestic productivity and job creation, creating a preferential tax environment for local firms, the policy incentivizes job creation, enhances competitiveness, and keeps more capital circulating within the Nigerian economy. It effectively reduces the cost of doing business for indigenous firms, encouraging more partnerships, services, and innovation within local value chains.

For the Nigerian youth launching startups in tech, agriculture, or services, this adjustment means more retained revenue and greater viability. It’s a policy that empowers the next generation of entrepreneurs and signals a shift toward domestic economic sovereignty. By giving Nigerian firms a tax edge, the government is making a bold statement: “Buy Nigerian, Hire Nigerian.”

Shifting away from oil dependency: A strategic pivot

For decades, oil exports served as the backbone of Nigeria’s economy. But with falling global prices, underproduction, and rampant oil theft, the once-reliable lifeline has weakened. The Tinubu administration recognized this vulnerability and launched tax reforms as part of a broader fiscal diversification agenda. With enhanced tax collection and policy consistency, the government seeks to raise alternative revenue streams and reduce reliance on oil. This urgency is communicated by the reform, and it relies on a tested model from Lagos. Tinubu’s fiscal legacy in Lagos provides a precedent. As governor, he boosted Internally Generated Revenue (IGR) through structured tax reforms, enabling infrastructure development like the Lagos metro. The same principle now applies nationally: use improved tax collection to raise funds for roads, schools, energy, and digital infrastructure. This pivot has become even more urgent with Nigeria's OPEC production falling short year after year.

National development begins to enjoy this strategic shift, which means that future budgets won’t rise or fall solely on oil prices. It opens up more consistent funding for education, healthcare, and innovation. It builds economic resilience and puts the country on track for inclusive, broad-based growth. Citizens should expect better accountability, as revenue comes increasingly from their economic activity.

Raising revenue, not rates: The path to 18% tax-to-GDP

In 2024, Nigeria recorded a remarkable 76% increase in tax revenue, rising to ₦21.6 trillion and moving the tax-to-GDP ratio from 8% to 10.3%. This is a clear result of more efficient tax administration and compliance, not an increase in rates. For context, the African average stands at 15.6%, while global standards hover around 19%. The government now targets 18% by 2026.

Rather than burdening taxpayers with higher rates, the strategy focuses on capturing more of the existing economic activity, especially from the informal sector. Digitization, taxpayer education, and streamlined processes will be central to this. The Nigerian Revenue Service (NRS), replacing the FIRS, is being equipped to drive this evolution.

The takeaway is simple: the government wants to collect more from more people, but fairly. As systems get better, the days of evasion and arbitrary collection may fade, replaced by professionalism and predictability. Citizens will fund national development with confidence, knowing that their contributions count.

Conclusion: Toward a tax culture that works for all

Tinubu’s tax reforms are a watershed moment in Nigeria’s journey toward sustainable economic governance. By simplifying laws, protecting the vulnerable, incentivizing local enterprise, and raising revenue without raising rates, the government is laying the groundwork for a stronger, more inclusive future. The reforms may not yet be perfect, and implementation gaps remain. However, they represent a bold step away from oil dependency and toward citizen-driven development.

For the average Nigerian, these changes offer hope—a chance to thrive in a system that recognizes their effort, supports their growth, and reinvests in their well-being. The task ahead lies in ensuring transparency, fairness, and continuous improvement. If well executed, this reform wave could go down as the most impactful economic turning point since Nigeria’s return to democracy.

Bayonle Fesobi is a Research and Policy Analyst at Ominira Initiative for Economic Advancement and Director of Training and Fellowship with Chale Institute. He can be reached at fesobibayonle@gmail.com.

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Legit.ng.

Source: Legit.ng