By Comrade Nosakhare Toluwalase Ogbomo
Abuja (Precise Post) – As Nigeria begins the implementation of its most comprehensive tax reform in decades, effective January 1, 2026, there is a growing need for public awareness, especially among small business owners, informal workers, and the general population.
The government has branded the reform as progressive and pro-poor, aimed at streamlining the tax system, boosting revenue, and reducing inequality. However, in a country grappling with economic hardship, high inflation, and unemployment, even well-intentioned policies can have complex ripple effects — both positive and negative.
Key Components of the 2026 Tax Reform
Signed into law on June 26, 2025, the new framework is anchored on four major legislative acts:
- Nigeria Tax Act (NTA) 2025:
Harmonizes all existing tax laws (Personal Income Tax, Corporate Income Tax, VAT, Capital Gains Tax, Petroleum Profits Tax, and Stamp Duties) into a single, unified statute. - Nigeria Tax Administration Act (NTAA) 2025:
Standardizes tax procedures and enforcement across federal, state, and local governments. - Nigeria Revenue Service (Establishment) Act (NRSA) 2025:
Establishes the Nigeria Revenue Service (NRS), replacing the Federal Inland Revenue Service (FIRS) with a more autonomous, tech-driven agency. - Joint Revenue Board Act (JRBA) 2025:
Strengthens coordination among federal, state, and local tax authorities to avoid double taxation and improve oversight.
New Personal Income Tax (PIT) Rates – Effective January 1, 2026
| Annual Income (₦) | Tax Rate |
|---|---|
| 0 – 800,000 | 0% (Exempt) |
| Next ₦2,200,000 | 15% |
| ₦3,000,001 – ₦5,000,000 | 19% |
| ₦5,000,001 – ₦8,000,000 | 21% |
| ₦8,000,001 – ₦11,000,000 | 24% |
| Above ₦11,000,000 | 25% (Cap) |
Other Key Provisions:
- Corporate Income Tax (CIT):
Small businesses are exempt, but ambiguity persists — some drafts cited ₦100 million turnover, while the official gazette refers to ₦50 million turnover and ₦250 million in fixed assets. Clarification from the NRS is pending. - Value Added Tax (VAT):
Remains at 7.5%, but zero-rated items now include basic foodstuffs, essential medicines, educational materials, electricity, and non-oil exports. Input VAT recovery has been expanded to include services and fixed assets. - Fossil Fuel Levy:
A new 5% surcharge on fossil fuel products took effect on January 1, 2026. This applies at the pump and is expected to impact transportation and energy costs. - Rent Relief:
Taxpayers can deduct 20% of annual rent paid, up to a maximum of ₦500,000, provided documentation is submitted. - Development Levy:
A new unified levy of approximately 4% replaces multiple sector-based levies such as the Education Tax and NASENI levy. - Pillar Two Compliance:
Large multinational companies are now subject to a 15% minimum effective tax rate, with a mandatory top-up if their actual rate falls short. - Concerns and Potential Challenges
Despite the government’s push for transparency and equity, several concerns remain:
- Fuel Levy Impact:
The 5% fossil fuel surcharge may raise transport and logistics costs, disproportionately affecting low-income households and small businesses. - Rent Relief Cap:
With rents in cities like Lagos and Abuja often exceeding ₦2 million annually, the ₦500,000 cap may offer limited relief to middle-income earners. - Exclusion of Informal Sector Benefits:
Informal businesses — which constitute over 97% of Nigeria’s MSMEs — are largely exempt from PIT but excluded from relief measures like rent deductions and VAT input recovery. - Jurisdictional Overlap:
Although harmonization is the goal, states and local governments still retain constitutional rights to impose certain taxes. Without constitutional amendments, the risk of multiple or “nuisance” taxes remains high.
How Small Businesses and Informal Workers Can Prepare
To adapt and benefit from the new tax landscape, small businesses and informal operators are advised to:
- Formalize operations: Register with the Corporate Affairs Commission (CAC) and open a business bank account to gain access to exemptions, loans, and tax reliefs.
- Use the PIT Calculator: The NRS is expected to release a tax calculator to help individuals estimate liabilities and plan accordingly.
- Maintain accurate records: Keep receipts and documentation for rent, income, and business expenses to qualify for deductions.
- Adopt e-invoicing systems: VAT-registered businesses will be mandated to use e-invoicing and fiscalisation systems for transparency and compliance.
- Join trade associations: Collaborate with cooperatives and trade unions to lobby for inclusive policies, subsidies, and better credit access.
A New Social Contract: Between the State and the People
This reform represents more than a policy shift — it is a new social contract between government and citizens. But clarity, fairness, and accountability must guide its implementation.
While the legislation is ambitious and far-reaching, the outcome depends on how it is rolled out, how disputes are resolved, and how inclusive the benefits truly are.
Nigerians must stay informed, speak up, and remain engaged. Reform can drive development — but only if it leaves no one behind.
“Let them breathe. But let them thrive.”
At a Glance: Key Changes from January 1, 2026
| Item | Change |
|---|---|
| PIT Rates | New progressive bands, capped at 25% |
| CIT Relief | Exemption for small businesses (threshold pending: ₦50m or ₦100m) |
| VAT | Still 7.5%, broader zero-rating and input VAT recovery |
| Fuel | 5% fossil fuel levy at point of sale |
| Rent Deduction | 20% of rent (max ₦500,000), with documentation |
| Development Levy | Unified 4% levy replaces multiple sector-based taxes |
| Large Corporates | Subject to Pillar 2 minimum 15% tax rate |
| Tax Agency | NRS replaces FIRS with digital-first approach |
| Informal Sector | Mostly exempt but may face presumptive tax systems |
| Documentation | Accurate records critical for relief eligibility |
