FG Bans Roadblocks for Tax Collection Nationwide
The Federal Government has prohibited the use of roadblocks for tax collection across Nigeria as part of a sweeping reform of informal sector taxation, introducing presumptive tax regulations designed to bring millions of small businesses into the tax net while exempting the poorest enterprises.
The Joint Revenue Board, in collaboration with the Federal Ministry of Finance, has officially banned the use of roadblocks for tax collection nationwide, marking a significant shift in how informal sector businesses will be assessed and taxed. The policy change accompanies the rollout of the Presumptive Tax Regulations, unveiled by Finance Minister and Coordinating Minister of the Economy, Wale Edun, at a formal launch ceremony in Abuja.
The regulations establish a coordinated framework for taxing informal sector businesses, addressing long-standing complaints about multiple taxation, harassment of small traders, and the disruptive nature of physical tax enforcement along highways and market routes. Under the new rules, nano and small businesses with annual turnover of N12 million and below are completely exempted from taxation, while other informal businesses will pay a flat 1% tax on turnover.
Executive Secretary of the Joint Revenue Board, Olusegun Adesokan, explained that the regulations provide a structured approach to tax collection that prioritizes business continuity and economic stability. “The regulations provide a coordinated framework for tax collection, ensuring businesses are not disrupted,” Adesokan said, emphasizing that the elimination of roadblocks addresses one of the most persistent complaints from small business operators who have long faced extortion and harassment at illegal checkpoints disguised as tax collection points.
The Joint Revenue Board serves as the umbrella body coordinating tax administration across federal, state, and local government levels, making the new regulations binding on all tiers of government. The ban on roadblocks applies to all tax authorities nationwide, requiring them to adopt alternative methods of assessment and collection that do not involve physical obstruction of roads or markets.
The Presumptive Tax Regulations introduce a simplified tax regime specifically designed for businesses operating in Nigeria’s vast informal economy, which according to International Monetary Fund estimates accounts for approximately 50% to 65% of the country’s Gross Domestic Product. The informal sector employs an estimated 80% of Nigeria’s workforce, yet contributes minimally to formal tax revenues due to the difficulty of assessing and collecting taxes from businesses that keep limited records and operate outside formal financial systems.
Under the new framework, businesses with annual turnover above N12 million but below N25 million will be subject to the 1% presumptive tax on turnover, calculated based on observable business characteristics rather than detailed accounting records. This approach, known as presumptive taxation, uses indicators such as business size, location, type of activity, and visible assets to estimate income and tax liability, reducing the compliance burden on small businesses while ensuring they contribute to government revenues.
The exemption for businesses with turnover of N12 million and below protects the smallest enterprises, including market traders, street vendors, artisans, and micro-businesses that operate on thin margins. These businesses, which form the backbone of local economies across Nigeria, will remain entirely outside the formal tax system under the new regulations, allowing them to focus on growth without the administrative burden of tax compliance.
For businesses above the threshold, the 1% turnover tax replaces multiple informal levies and charges that have traditionally been imposed by local government authorities, state internal revenue services, and ad-hoc task forces. The simplified rate is intended to encourage voluntary compliance by making tax obligations predictable and affordable, while the elimination of roadblocks removes the opportunity for extortion by unauthorized collectors.
Speaking at the launch of the regulations, Finance Minister Wale Edun framed the new tax regime as central to the government’s broader economic transformation agenda. Edun, who also serves as Coordinating Minister of the Economy, emphasized that the reforms are designed to support business growth while expanding the tax base in a fair and transparent manner.
“These regulations ensure transparency, fairness, and economic inclusion. They formalize a pathway for small businesses to grow and eventually enter the formal economy, contributing to sustainable national growth,” Edun said.
The Minister provided context on Nigeria’s recent economic performance, noting that Gross Domestic Product grew by over 4% in the final quarter of 2025. He stated that the government aims to achieve 7% economic growth in the near term, a target aligned with President Bola Tinubu’s vision of expanding the economy to $1 trillion by 2030.
Edun described the tax reforms as “a growth-oriented system designed to create jobs, support small and medium enterprises, and promote investment from Nigerians at home and in the diaspora.” He emphasized that the new framework would be implemented through coordinated action across all three tiers of government, with monitoring mechanisms to ensure fairness and compliance with the regulations.
The Minister also announced that tax administration under the new framework would be subject to oversight by the Ombudsman, who will receive and investigate complaints about improper tax collection practices. This provision addresses concerns about enforcement abuses and provides a formal channel for businesses to challenge unfair treatment by tax officials.
“Tax administration under the new framework would be coordinated across federal, state, and local governments, monitored for fairness, and overseen by the Ombudsman to ensure proper implementation,” Edun stated, outlining the institutional arrangements designed to prevent the re-emergence of roadblocks and other prohibited enforcement methods.
The ban on roadblocks addresses a practice with deep roots in Nigeria’s tax administration history. For decades, roadblocks staffed by local government officials, state tax authorities, and various ad-hoc task forces have been a ubiquitous feature of major highways and rural roads, particularly in the northern and southwestern regions of the country.
These checkpoints, ostensibly established to collect levies from commercial vehicle operators and traders transporting goods, have been widely criticized for their lack of transparency, susceptibility to abuse, and negative impact on commerce. Drivers and traders frequently report paying multiple levies at successive checkpoints along a single journey, with receipts from one local government often unrecognized by the next.
The practice has also been linked to extortion and harassment, with collectors demanding payments without proper receipts or legal authority. A 2019 study by the Nigerian Economic Summit Group and the World Bank estimated that informal payments at roadblocks cost the economy billions of naira annually in lost productivity and increased transportation costs, while failing to generate significant revenues for government treasuries.
The proliferation of illegal checkpoints has been particularly pronounced in states where internally generated revenue targets place pressure on local governments to collect from informal sector operators. Without clear legal frameworks governing informal sector taxation, many local authorities resorted to direct enforcement methods that prioritized revenue collection over business facilitation.
The new presumptive tax regulations seek to replace this chaotic and extractive system with a structured approach that removes physical barriers to commerce while ensuring that businesses contribute to tax revenues based on their actual capacity to pay.
For Nigeria’s estimated 40 million micro, small, and medium enterprises, the new regulations represent a significant shift in the operating environment. Small business owners who have long navigated a complex landscape of multiple taxes, levies, and informal payments now face a simplified regime with clear thresholds and a single rate.
The N12 million turnover exemption threshold protects the majority of micro-businesses from any formal tax obligation. According to data from the Small and Medium Enterprises Development Agency of Nigeria, approximately 90% of businesses in Nigeria fall into the micro-enterprise category, with annual turnover well below the N12 million threshold. These businesses, which include street vendors, kiosk operators, artisans, and small-scale traders, will continue operating entirely outside the formal tax system.
For businesses above the threshold, the 1% turnover tax replaces a patchwork of informal charges that often exceeded this rate while providing no formal recognition or taxpayer status. By formalizing their tax obligations, these businesses gain access to the benefits of formal sector participation, including the ability to obtain tax clearance certificates required for government contracts, bank loans, and international travel.
The regulations also address a long-standing complaint from formal sector businesses about unfair competition from informal operators who avoid tax obligations entirely. By bringing larger informal businesses into the tax net at a simplified rate, the government aims to level the competitive playing field while gradually transitioning successful informal enterprises into the full formal tax system.
The success of the new regulations depends critically on coordination across Nigeria’s 36 states and 774 local government areas, each with its own internally generated revenue targets and established practices for informal sector taxation. The Joint Revenue Board, established under the Companies Income Tax Act, provides the institutional framework for this coordination but faces significant challenges in ensuring compliance with the new rules.
State governments, which rely heavily on internally generated revenues to fund their operations, may resist restrictions on their ability to collect from informal sector businesses. Many states have established informal sector tax units that use direct enforcement methods including market raids and roadblocks, and transitioning these units to the new presumptive framework will require retraining of personnel and restructuring of collection systems.
Local government authorities face even greater challenges, as informal sector levies often constitute a significant portion of their internally generated revenues. The abolition of roadblocks removes one of the primary collection methods used by local governments, requiring them to develop alternative approaches that do not involve physical obstruction of roads and markets.
The oversight role assigned to the Ombudsman will be crucial in addressing complaints about non-compliance by tax authorities. Businesses that encounter continued use of roadblocks or other prohibited collection methods can now file formal complaints, creating accountability mechanisms that were previously unavailable. However, the effectiveness of this oversight will depend on the Ombudsman’s capacity to investigate complaints and enforce compliance across multiple jurisdictions.
The presumptive tax regulations form part of a wider reform agenda aimed at transforming Nigeria’s tax system to support economic growth while increasing revenue mobilization. The government has pursued multiple tax reform initiatives in recent years, including the introduction of the Finance Acts, which have progressively amended tax laws to address emerging issues and simplify compliance.
The 1% turnover tax for informal businesses aligns with international best practices in presumptive taxation, which many developing countries have adopted to bring informal sector operators into the tax net. Countries including Kenya, Tanzania, and Ghana have implemented similar regimes with simplified rates and thresholds designed to encourage compliance while minimizing administrative costs.
For Nigeria, the reform addresses a fundamental challenge of tax administration: how to tax a predominantly informal economy without stifling the businesses that provide livelihoods for the majority of the population. The informal sector’s size and diversity make conventional tax administration methods ineffective, as they rely on accounting records and formal business structures that informal operators do not possess.
The presumptive approach uses observable indicators of business activity to estimate tax liability, reducing the compliance burden while ensuring that successful informal businesses contribute to public revenues. As businesses grow and formalize, they transition from the presumptive regime to the full tax system, creating a pathway from informality to formal sector participation.
The government’s economic targets provide the broader context for the tax reforms. With GDP growth of over 4% recorded in the fourth quarter of 2025, the economy has shown resilience despite global headwinds and domestic challenges. Achieving the targeted 7% growth will require sustained expansion across all sectors, with small and medium enterprises playing a crucial role in job creation and output growth.
The $1 trillion economy target by 2030 represents an ambitious vision that would require Nigeria to more than double its current GDP over the next four years. Achieving this scale of economic expansion will depend on mobilizing domestic resources for investment, creating an enabling environment for business growth, and attracting both domestic and diaspora investment.
Tax reforms that reduce the burden on small businesses while expanding the tax base contribute to this vision by improving the business environment and increasing government revenues for infrastructure and public services. The presumptive tax regime, by eliminating disruptive collection methods and providing clear rules for informal sector taxation, addresses one of the frequently cited obstacles to business growth in Nigeria.
Revenue projections from the new regime remain uncertain, as the government has not published estimates of how many informal businesses will be brought into the tax net or how much additional revenue the 1% turnover tax will generate. However, the primary objective appears to be formalization and compliance rather than immediate revenue maximization, with the expectation that as businesses grow and formalize, they will contribute increasingly to tax revenues.
The announcement has generated mixed reactions from business associations and tax professionals. The Nigerian Association of Small and Medium Enterprises welcomed the exemption threshold and the elimination of roadblocks but called for clarity on how turnover will be assessed for businesses without formal accounting records.
Manufacturers and larger businesses have expressed support for the reforms, noting that eliminating roadblocks will reduce transportation costs and improve supply chain efficiency. The Lagos Chamber of Commerce and Industry issued a statement describing the ban on roadblocks as “long overdue” and urging strict enforcement to prevent the re-emergence of illegal checkpoints.
Tax professionals have raised questions about the coordination mechanisms between federal, state, and local authorities, noting that past reform efforts have foundered on the inability to enforce compliance across all tiers of government. The effectiveness of Ombudsman oversight will be critical in addressing these coordination challenges and ensuring that the reforms translate into actual changes in enforcement practices.
The Joint Revenue Board has not announced a specific implementation timeline for the regulations, stating that they take immediate effect but that full compliance will require training of tax officials and development of new collection systems. Businesses that continue to encounter roadblocks or other prohibited enforcement methods have been encouraged to report such incidents to the Board or the Ombudsman.