Nigeria’s Senate has approved four sweeping tax reform bills aimed at advancing President Bola Tinubu’s efforts to restructure and modernize the nation’s economy.
The newly passed legislation represents the most comprehensive overhaul of Nigeria’s tax structure in decades and is designed to address inefficiencies, expand the tax base and align the nation’s system with global standards.
The legislation, which excludes Tinubu’s earlier proposal to raise value-added tax (VAT), targets a complete modernization of the tax code, including the elimination of outdated levies dating back to Nigeria’s colonial past.
The bills are now set to be transmitted to the President for assent and could take effect later in 2025 or early 2026.
Nigeria currently maintains one of the world’s lowest tax-to-GDP ratios at approximately 10%.
The reform committee, chaired by Taiwo Oyedele, projects this ratio to rise to a minimum of 18% by the end of 2027, driven by the rationalization of over 60 overlapping taxes and levies across federal, state and local governments.
“We expect our tax to GDP ratio to increase from around 10% in 2023 to a minimum of 18% by the end of 2027,” said Oyedele. “The new tax laws are a major part of the overall economic reform.”
The approved bills introduce critical structural reforms, including the removal of burdensome taxes such as levies on wheelbarrows, entertainment, waste bins and so-called “merriment” taxes.
The government also abolished taxes on essential services such as public transport and basic food items to cushion the impact on low-income earners.
Also, individuals on the lowest income brackets will now be exempt from personal income tax under the new regime.
Despite challenges posed by Nigeria’s federal structure the National Assembly successfully passed uniform tax legislation at the federal level.
However, contentious proposals around VAT and company income tax were excluded. Tinubu’s proposal to double VAT to 15% over six years was rejected with the rate maintained at 7.5%.
Similarly, efforts to reduce the corporate income tax from 30% to 25% were not adopted.
In a significant shift, VAT distribution will now be allocated to the state where the consumption occurs, rather than where the producer files returns—a change expected to impact Lagos State, which historically benefited from centralised filings.
Stamp duties—originally introduced during British colonial rule—have also been restructured to improve compliance and reduce duplication.
The reform further mandates the establishment of a Joint Revenue Board that will work to harmonize disparate taxes imposed by subnational entities, a major step toward eliminating the inefficiencies that have long hindered business growth.
“The passage of these bills gives Nigeria a modernized tax act that brings us closer to global best practices,” Senate President Godswill Akpabio stated. “These are legacy laws that will define Nigeria’s economic future.”
The new framework also introduces measures to tax digital assets and incentivizes international companies to hire remotely from Nigeria, leveraging the country’s large pool of digitally skilled youth.
While the federal-level reforms represent significant progress, implementation at the local government level remains a concern.
Analysts warn that entrenched interests and aggressive tax enforcement practices may delay or dilute the expected impact unless backed by political will and transparency.
