2025 Tax Laws: Nigeria at the Crossroads of Reform and Reality

Nigeria’s tax system, with its limited tax bases, overworked laborers, undertaxed elites, flourishing informal sector, and widespread corruption, has for decades represented every aspect of the nation’s overall fiscal culture.

Nigeria is still among the worst tax payers in Africa, with a tax-to-GDP ratio that has consistently ranged between 6% and 8%.

The nation has been pushed into the grips of debt, reliance on aid, and unstable oil markets as a result.

The signing of four important pieces of legislation in 2025—the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act—marks a turning point in this regard.

These laws are more than just administrative decrees; they seek to reinterpret Nigeria’s taxation concept. But where previous changes failed, can they succeed?

The new tax architecture’s purposeful leaning toward progressivity is one of its best qualities.

Low-income earners—those making ₦800,000 or less per year—are now legally excluded from personal income tax for the first time in Nigerian history, according to Section 58 of the Nigeria Tax Act, 2025.

Millions of people in this nation live on less than $1 a day, therefore this is a brave and kind act.

Simultaneously, SMEs with annual revenue under ₦100 million enjoy easier compliance, while those with annual revenue under N25 million are exempt from Company Income Tax (Section 56). If carefully put into practice, these policies could promote business formalization and lessen the financial burden on the impoverished.

Digitization has ceased to be an aim. It is now a law.

By integrating with national identity systems like NIN and BVN, the Tax Administration Act’s Sections 4–8—which mandate that people, businesses, and all government bodies utilize Tax Identification Numbers (TINs)—are strengthened.

Fiscalization systems will link taxpayer data, allow electronic return filing, and track VAT in real time (Section 23). The futuristic terms “artificial intelligence,” “e-invoicing,” and “API-based validation” are now legally required.

An era of traceability, efficiency, and fraud reduction may be ushered in by faithfully implementing these requirements.

Harmonization is an equally crucial step.

The authority to coordinate the operational frameworks of federal, state, and local tax organizations is granted to the Joint Revenue Board by Sections 3 and 5 of the JRBE Act. The various taxation issue that has long stifled businesses may now be resolved since states have the legal authority to designate the Nigeria Revenue Service to collect specific taxes on their behalf (NRS Act, Section 5). Finally, the creation of the Office of the Tax Ombud (Tax Admin Act, Section 141) gives taxpayers a forum for the protection of their rights and grievances, which is essential to restoring confidence.

Importantly, the legislation clarifies wealth taxation. For the Nigeria Tax Act, Sections 33–49, the long-ignored Capital Gains Tax (CGT) now applies to the sale of shares, land, digital assets, and intellectual property. Reinvestments, charitable contributions, and minor gains (less than ₦10 million) are all exempt. The Withholding Tax (WHT) has also been strengthened and explained.

Now, payments for digital services, royalties, rent, consulting, and dividends are subject to source taxation (Tax Admin Act, Section 51). Noncompliance carries severe penalties, such as a 10% penalty and joint liability clauses.

The changes also address long-standing worries about multinational firms evading taxes. Arm’s-length pricing for related-party transactions is required by Sections 190–195 of the Nigeria Tax Act, which also authorizes audits of offshore agreements. In order to stop profit shifting and base erosion, these tools are essential.

Even the most promising reforms, however, have flaws. There is no comprehensive rate schedule or streamlined taxpayer handbook, despite the fact that exemption thresholds are explicitly indicated. For informal traders and small enterprises, negotiating this new landscape may resemble negotiating a maze of laws. Even more concerning, the laws do not adequately address gender issues. The special difficulties experienced by women-led enterprises, especially in the unorganized sector, are still disregarded by Nigeria’s tax system. They are not supported by specific tax incentives, waivers, or allowances for capacity-building.

Exemptions by themselves are insufficient to make pro-poor taxation relevant. Nigeria’s social security framework, which includes conditional cash transfers, health insurance programs, and tax IDs linked to the National Social Register, must incorporate tax reforms. Social equity must coexist with tax justice.

In addition, the way tax refunds are handled is troubling. Although a return system is provided in Section 55 of the Tax Administration Act, no required deadlines or automated triggers are mentioned. This uncertainty may deter voluntary compliance and harm lawful enterprises, especially exporters and large purchasers with input tax credits, in a system known for its bureaucratic lethargy.

One such obvious shortcoming is the absence of a formal structure for reporting tax expenditures. Even though Section 27 of the law requires individual businesses to file tax incentive filings, Nigeria does not yet have a complete framework for government-wide tax expenditure reporting that would publish, aggregate, and assess the entire cost of tax incentives across all sectors on an annual basis. Unlike South Africa, Kenya, and Canada, Nigeria does not yet have a national annual tax expenditure statement. Additionally, neither a procedure for performing cost-benefit assessments of tax incentives nor a requirement for public disclosure of the total income lost due to waivers and exclusions exist. Because of this, residents and policymakers are unable to fully understand the trade-offs that are part of Nigeria’s fiscal system. Numerous nations now release yearly statistics that reveal the financial burden of exemptions and waivers. Considering that Nigeria forgoes a substantial amount of income through business incentives, this is essential for accountability and transparency.

The implementation issue is still the biggest concern. Many LGAs lack even the most basic infrastructure, such as digital systems, qualified staff, and connectivity, despite the legislative aspirations. Inequities may worsen if high-performing states like Lagos are separated from areas that lack access to digital technology.

Additionally, federal-state conflicts over revenue collection, particularly in politically heated settings, could jeopardize the Joint Revenue Board’s harmonisation objective.

Depriving revenue authorities of institutional independence also runs the risk of politicizing tax enforcement. Political meddling is not protected in the selection of NRS and State IRS leaders. For reform to last, it need strong institutions as well as strong laws.

The improvements, however, have the potential to be revolutionary.

The legislative foundation for taxation digital transactions, virtual assets, and non-resident service providers aligns Nigeria with international trends. A 5% fossil fuel surcharge and environmental taxes (Tax Act, Section 159) provide the groundwork for climate funding and green taxation. Section 27 of the Tax Administration Act requires businesses to file tax incentive filings, which may increase openness and reveal exploitation.

However, it is still unclear if incentives are beneficial. Although businesses are now required to submit tax incentive returns, the government is under no need to make the cost-benefit analysis of these waivers publicly available. In the absence of impact analysis, incentives might continue to be opaque rent-seeking instruments rather than growth-promoting agents.

Ghana, South Africa, Kenya, Rwanda, and other nations have achieved impressive progress in smart taxation. But in order to be effective, taxes must influence planning, budgeting, and delivery in addition to collecting. Reforms in public financial management must thus establish a direct connection between tax revenue and the national and subnational budget cycles. The way taxes pay for public assets like roads, hospitals, and schools should be transparent to the public.

Community scorecards, tax-tagged project monitoring, and budget transparency portals can all aid in restoring the public’s and governments’ lack of trust. Participatory budgeting systems should be established in Nigeria so that local people may see and influence the distribution of tax dollars.

Nigeria needs to not just catch up, but also take the lead. With the correct leadership, we can integrate blockchain, artificial intelligence, and geospatial analytics into compliance systems and lead the way in tax innovation.

Additionally, the reforms bring up significant issues with fiscal federalism. Nigeria’s unsettled fiscal arrangements are the core problem, which goes beyond structural harmonisation.

The conflict between state-level autonomy and centralized tax administration, particularly with regard to VAT and mineral revenue, calls for constitutional clarification rather than merely administrative alignment. It might be difficult for the Joint Revenue Board to gain support from all of Nigeria’s federating units if these fundamental conflicts are not resolved.

Furthermore, Nigeria is in a better position to comply with the Base Erosion and Profit Shifting (BEPS) action plans of the OECD thanks to the 2025 laws. To guarantee that African interests are represented in the creation of more equitable international tax laws, Nigeria must actively engage in multilateral fora as digital taxation and global minimum tax regulations develop.

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In order to unlock Nigeria’s extensive informal and youth-led economy, changes must be combined with specific tools, such as incentives for digital bookkeeping, mobile-based registration, and streamlined presumptive tax systems. One potential game-changer is a teenage tax transition program that offers tax exemptions in return for digital onboarding.

Even if the Tax Appeal Tribunal and Ombudsman provide organized remedies, prompt settlement of tax issues is nonetheless hampered by a backlogged and underfunded judiciary. Thus, judicial capacity-building, particularly at the state level, must go hand in hand with tax changes in order to provide consistent, prompt, and equitable rulings.

On paper, the NRS’s consolidation of tax authorities is effective, but it runs the risk of recentralizing fiscal authority in a way that weakens state authority. Local innovation and national uniformity must be carefully balanced, particularly in states with distinct economic profiles or reform momentum.

As a compliance partner, Nigeria’s flourishing fintech ecosystem presents unrealized opportunity. Together with entrepreneurs, the government may develop low-code solutions and APIs to streamline tax reporting for gig workers, track VAT in retail, and onboard informal traders.

It is admirable that Nigeria has implemented a fossil fuel tariff. It is equally important to use tax reforms as an anti-corruption instrument. AI-enabled audit tools and the integration of taxpayer identity with financial data open up new avenues for identifying off-budget expenditures, illegal enrichment, and procurement fraud. Public officials ought to be subject to tax openness as well, with yearly asset reports that correspond with tax documentation. By associating taxation with the integrity of governance, Nigeria can target the core causes of corruption. True green taxation, however, will necessitate a more comprehensive set of policies, including carbon pricing, environmental taxes on extractive companies, and climate-smart agriculture subsidies. The low-carbon transition and climate resilience could be accelerated via a national green fund financed by eco-taxes.

In addition to legal reform, citizens want useful tools. Persons with disabilities (PWDs), elderly Nigerians, and other vulnerable groups are among the categories most impacted by taxes. However, these groups are not specifically eligible for any tax breaks, exemptions, or incentives under the current regulations.

Tax justice needs to be considerate of marginalization, age, and ability. To reconcile the tax system with social fairness, for example, PIT exemptions for seniors with low pensions or VAT exemptions for assistive devices and services related to disabilities can be offered. For PWDs and the elderly, the government should also take into account tax help initiatives like community tax consultants or mobile filing assistance. Community-based tax education, streamlined rate tables, and a national tax calculator app will demystify compliance. Without clarity, even well-intentioned policies run the danger of offending the very people they are meant to help.

In addition to new regulations, the tax reform laws of 2025 offer new opportunities. A chance to turn taxes into a tool for growth and justice. A chance to help Nigeria transition away from its reliance on oil. An opportunity for the taxpayer to regain their dignity. Depending on the bravery of leaders, the honesty of institutions, and the dedication of citizens, these laws may or may not fulfill their promises. Nigeria is the author of the laws. The legacy must now be written.

Development economist and fiscal governance specialist Prof. Chiwuike Uba* has written several policy papers on public finance and tax reform. The ACUF Initiative for Policy and Governance is led by him as its chairman.