Ugonwa Uzor-Umeaku
When Ngozi, a public school teacher in Anambra State, heard about the newly signed tax laws in June 2025, she paused to listen. Tax policy had never felt personal—until now. The promise that her ₦70,000 monthly salary might no longer be taxed felt like more than policy. It felt like recognition.
On June 26, 2025, President Bola Tinubu signed four groundbreaking tax reform bills into law: the Nigeria Tax Act (NTA), Tax Administration Act (TAA), Nigeria Revenue Service Act (NRSA), and Joint Revenue Board Act (JRBA). While the official gazette publication is still pending, the federal government has confirmed that these reforms will take effect from January 1, 2026 (PwC, 2025).
This piece explores what these laws mean—especially for Nigeria’s average and minimum-earning citizens—and why they may signal a new fiscal era of fairness, simplicity, and dignity.
From Complication to Clarity
For years, Nigeria’s tax structure was a maze—over 50 tax laws, inconsistent enforcement, and burdens that fell hardest on the least empowered. But the Nigeria Tax Act (NTA) aims to change that by consolidating those laws into a single, streamlined code.
According to Premium Times (2025), the reforms are expected to help increase Nigeria’s tax-to-GDP ratio from about 6% to a target of 18%. That gap reflects decades of underperformance in collecting revenue—and excessive pressure on the informal sector.
For the first time, anyone earning ₦800,000 or less annually—about ₦66,000 monthly—is exempt from personal income tax. With the new minimum wage set at ₦70,000, this means the vast majority of Nigeria’s wage earners will see no deductions for income tax (PwC, 2025).
Ngozi says, “Even ₦3,000 less in deductions can mean exercise books for my children or airtime for emergencies. It gives me breathing room.”
More broadly, this exemption reflects a growing awareness of the need to protect low-income earners from regressive taxation.
Rent Relief and Real-Life Relevance
The reforms also introduce a new rent relief provision. Renters can now deduct 20% of their annual rent (or up to ₦500,000) from their taxable income. For junior civil servants, shopkeepers, and urban dwellers trying to stay afloat, this could shift the line between survival and saving (PwC, 2025).
These measures are designed not just to relieve, but to include. For decades, the tax system treated the average Nigerian as an afterthought. These reforms flip the script, placing the everyday citizen at the center of policy. It’s a signal that the state is beginning to understand and reflect the economic pressures on ordinary Nigerians.
Progressive Taxation, Not Punitive
For higher earners, income taxes are still in place—but now on a clearly progressive scale. The top tax rate of 25% kicks in only after income exceeds ₦50 million annually. According to KPMG (2025), this graduated structure mirrors international norms and ensures that the wealthiest Nigerians contribute their fair share.
The rate progression—from 15% on modest income to 25% at the highest level—means that taxation is aligned with capacity to pay, not merely income presence. This shift encourages trust in a system long criticized for overburdening lower earners while sparing elites.
A Reprieve for Small Businesses
Beyond personal relief, the reforms extend generous support to small businesses—often the only source of employment in many communities. Businesses with turnover up to ₦100 million and fixed assets under ₦250 million are exempt from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy (BBC, 2025).
This offers breathing space to thousands of microenterprises run by everyday Nigerians—tailors, farmers, food vendors, and local traders—who have long operated in fear or avoidance of a tax system they could barely understand.
For medium-sized businesses, the CIT rate will gradually decline from 30% to 25% by 2026, making Nigeria more competitive as an investment destination (ThisDayLive, 2025). By easing pressure on SMEs, the reforms aim to bring more businesses into the formal sector and support job creation.
VAT Reforms: Protecting the Essentials
While VAT remains at 7.5%, the new laws zero-rate basic food items, education, healthcare, electricity, and pharmaceuticals. That means no VAT is charged on these essentials, and producers can claim VAT input credits—potentially lowering costs across the board (Premium Times, 2025).
Ngozi puts it this way: “Even if they don’t raise the price of rice, the real difference is whether I can still afford detergent and malaria drugs too.”
This zero-rating policy is intended to protect the purchasing power of lower-income households, a step towards reducing the regressive impact of consumption taxes. In a country where inflation has eroded basic affordability, this measure is both timely and necessary.
A System That Works—If It’s Implemented
Much of the success depends on implementation. As of July 3, 2025, the reforms are signed but not yet gazetted. That means the final details are still being awaited by tax experts and the general public. But the framework is there.
Real-time electronic invoicing, universal Tax Identification Numbers (TINs), and automated reporting promise to reduce fraud and confusion. The creation of the Nigeria Revenue Service (NRS)—replacing FIRS—and a Tax Ombudsman will hopefully ensure transparency and a fair hearing for every taxpayer (PwC, 2025).
According to the BBC (2025), the transition to digital systems, including e-filing and real-time monitoring, is expected to reduce tax evasion and improve compliance—especially among medium and large firms.
However, for small business owners in rural areas or those without access to reliable digital infrastructure, adapting to these systems could prove challenging. Government outreach and phased support may be required to ensure inclusive compliance.
From Policy to People
The reforms signal something more profound than tax relief. They suggest a changing tone in public finance—one where inclusion, simplicity, and fairness matter.
For years, Nigeria’s poorest citizens have contributed in ways that aren’t always visible—through VAT on everyday goods, informal levies, and the sheer cost of navigating life without public support. These reforms, while technical in language, represent a promise to ease those burdens.
Tax experts note that broadening the tax base through voluntary compliance, rather than coercive enforcement, will require continuous public education. The laws are clear—but their implementation must be humane (KPMG, 2025).
If communicated effectively, these changes could mark a turning point in public trust. If mishandled, they risk becoming another layer of bureaucracy in a system already overburdened by red tape.
Final Thought
These tax reforms, at their heart, are about recognition. Recognition that a cleaner, simpler, and fairer tax system can restore dignity to workers like Ngozi. Recognition that the average Nigerian deserves not just to contribute to the nation—but to feel seen and protected by it.
It’s too early to declare victory. But for now, the message is clear: The era of taxing the poor to fund inefficiency may finally be giving way to one where fairness isn’t just aspirational—it’s policy.