In a historical move that is set to revamp the fiscal system in Nigeria, Alhaji Bola Tinubu signed four bills regarding tax reform into law on June 26, 2025. These bills, namely the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA),
Nigeria Revenue Service Establishment Act (NRSEA) and the Joint Revenue Board Establishment Act (JRBEA). Even as Nigeria approaches the implementation phase, these tax reform bills have become the subject of a robust discussion, including reports of changes since the passage of the legislation.
While much public discourse and analysis have focused on the headline features, several critical areas that might result in unforeseen consequences or allow unmet opportunities for better tax implementation remain significantly under-examined, and in the following sections, I highlight some of these dimensions and their potential implications.
The Informal Sector and Its Treatment: The informal economy is responsible for employing over 90% of Nigeria’s workforce, including market vendors, artisans, and small-scale business operators who may have incomplete accounts or limited tax knowledge. The presumptive tax provision will cater to this group by requiring them to pay taxes based on their estimated income, thus bringing them into the tax net. A critical consideration in this aspect is the potential for enforcement action against this group, which might have them revert to operating on a hidden or underground economy when adequate education and simplified systems are lacking for easy tax compliance for this group, who rely largely on a cash income without any system of documentation or very rudimentary ones. While this exemption for small-scale business operators (turnover below NGN100 million per annum) is very welcome, there is a lot to be done for this group, who operate cash-based businesses and may even be unregistered, or else this could potentially worsen evasion.
Implications for Fiscal Federalism and State Autonomy: With the changes to VAT sharing, the federal share is reduced while that of states’ and local governments’ increases, with sub-allocation based on equality (50%), population (20%), and consumption (30%). This shifts toward derivation principles, favouring consumption-heavy regions, coincidentally, southern states. This makes for sound economic judgement, but given how polarised the Nigerian political environment is, it could worsen regional tensions, citing unfair treatment of the underrepresented, in this case, northern states.
Taxation of the Digital Economy and Remote Workers: The rise in internet adoption, amongst other factors, created lots of opportunities for Nigerian youth.
The act taxes residents on worldwide income, including foreign-earned digital services, freelancing, and remote work. Nigeria partners with over 100 countries for data exchange, and it would be easy to track these incomes. This affects millions of freelancers on platforms like Upwork or remote employees for foreign firms, many previously untaxed. In some cases, issues like double taxation could arise, then compliance burdens (self-assessment, official exchange rates), enforcement feasibility, etc. If these workers feel the taxes are unfair, they could reduce work hours, which could, in turn, deter talent retention or push informal reporting, especially without robust support for digital nomads.
Environment and Energy Implications of the Fossil Fuel Surcharge: A 5% surcharge on fossil fuel products like petrol and diesel will help encourage clean fuels, with LPG, CNG, and alternative fuels being exempted.
For a country heavily dependent on oil, there would be a resultant increase in the cost of living, including an increase in fuel pump price, as high as ₦45–₦50 extra per litre, a real cost to households and businesses, given the epileptic power supply and drive for generators.
Revenue uses are not earmarked to be spent on green projects, and they prioritise fiscal needs above environmental goals. The behavioural changes in switching to clean fuels and inflationary transfers are relatively understudied areas.
Gender issues and women’s businesses
The informal sector is dominated by women as traders and small enterprise owners, many of whom face significant barriers to accessing formal financing and credit.
While the tax reforms’ exemptions for companies will provide relief to many women-owned SMEs, the legislation lacks targeted, gender-specific measures to address the unique challenges faced by women entrepreneurs. Another concern is the complete absence of recognition or provisions for unpaid care work. A significant portion of Nigerian women serve as homemakers, stay-at-home parents, or primary carers, roles that provide essential but uncompensated contributions to household and societal well-being. The tax system offers no form of financial acknowledgement, credit, or relief for this labour, overlooking an opportunity to promote greater gender equity through deductions, allowances, or other compensatory measures.
