By Abu Hassan
ABUJA, Nigeria – President Bola Tinubu of Nigeria has signed into law four key bills designed to overhaul the nation’s tax system, marking a significant step in his administration’s economic reform agenda. The move aims to boost revenue generation, simplify tax processes, and alleviate the burden on low-income earners in Africa’s most populous nation.
Nigeria’s current tax-to-GDP ratio stands at a relatively low 13.5%, lagging behind the continental average. The new laws aim to address this, promising to “harmonize” levies across the country’s 36 states and create a more equitable system.
“For too long, our tax system has been a patchwork—complex, inequitable, and burdensome,” Tinubu stated ahead of the signing, vowing to provide relief for the working class and those struggling to make ends meet.
The four new laws – the Nigeria Tax Law, Nigeria Tax Administration Law, Nigeria Revenue Service (Establishment) Law, and Joint Revenue Board (Establishment) Law – are envisioned as a comprehensive “one-stop shop” for tax reform. They include provisions to exempt low-revenue small businesses from company tax and reduce corporate tax from 30% to 25%.
These measures come as Nigeria grapples with one of its worst economic crises in decades. While Tinubu’s earlier reforms, including the removal of a costly fuel subsidy and the liberalization of the Naira exchange rate, have garnered praise from economists, they have also triggered soaring inflation and a severe cost of living crisis.
One key aspect of the overhaul is the restructuring of revenue-sharing between the federal and state governments. While initial proposals for radical changes to the revenue allocation formula were ultimately dropped due to political sensitivities, the new laws aim to grant more financial autonomy to individual states, with a greater share of Value Added Tax (VAT) revenue being directed to them.
The reforms have renamed the country’s tax office to the Nigerian Revenue Service (NRS) and aim to bolster its revenue generation capacity. However, experts emphasize that the success of these changes hinges on effective and transparent management of the increased revenue.
“The question is, how effective, efficient, and how prudent are they managing what they have been collecting with the current taxes?” questioned Nongomin Joshua, of Nongomin & Co, Practitioners, an accounting group.
The government hopes the tax overhaul will improve the business environment for both domestic and foreign firms, potentially reversing the recent decline in Nigeria’s economic ranking within Africa.
Economist Kelvin Emmanuel believes the reforms are crucial for raising Nigeria’s tax-to-GDP ratio. He also emphasized the potential for strengthening fiscal administration at the local government level, fostering greater autonomy.
While the steps are being praised by some, the true impact of these reforms will depend on effective implementation and the government’s ability to manage the increased revenue transparently and effectively, ensuring that it benefits all Nigerians and contributes to sustainable economic growth.
