The Nigerian Senate has approved two of the four tax reform bills proposed by President Bola Tinubu while rejecting a planned increase in the Value Added Tax (VAT) rate from 7.5 percent to 10 percent.
The approved bills are the Nigeria Revenue Service (Establishment) Bill and the Nigeria Tax Administration (Reform) Bill. The two legislations are designed to enhance tax collection efficiency, modernise revenue systems and strengthen compliance mechanisms across federal and sub-national levels.
The proposed VAT increase was omitted from the final passage due to concerns over its inflationary impact and the additional burden on consumers and small businesses amid weak purchasing power.
The Senate resolved to maintain the existing 7.5 percent rate.
In place of the VAT adjustment, lawmakers introduced a 4 percent development levy. Proceeds from the levy will be allocated to fund key federal development agencies including the Tertiary Education Trust Fund (TETFund), the National Information Technology Development Agency (NITDA) and the National Agency for Science and Engineering Infrastructure (NASENI).
Two additional bills—the Nigeria Tax Bill and the Joint Revenue Board (Establishment) Bill—are scheduled for deliberation. Upon passage and harmonisation with the House of Representatives, the full legislative package will be transmitted to the President for assent.
The tax reform programme is part of the administration’s broader fiscal strategy to expand non-oil revenue, reduce fiscal dependence on crude oil and improve Nigeria’s debt sustainability metrics. With over 80 percent of the country’s export earnings still tied to hydrocarbons, the government is seeking to diversify revenue streams and formalise the tax base.
Senate leaders noted that the reforms are intended to reposition Nigeria’s fiscal system for greater transparency, administrative efficiency, and investor confidence.
The Federal Government has also reiterated its commitment to implementing a phased tax transition framework through the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele.
Investors will be monitoring the outcome of the remaining bills and their fiscal implications ahead of the 2025 budget cycle.
