By Ugo Inyama

Nigeria has taken a decisive step in reengineering its fiscal architecture with the recent signing of a landmark tax reform bill into law by President Bola Ahmed Tinubu. The reform package, one of the most comprehensive in recent Nigerian history, is designed to modernise tax administration, increase revenue generation, and improve Nigeria’s reputation among global investors and development partners.

A New Fiscal Direction

The newly signed legislation includes several components: the Nigeria Tax Bill, the Tax Administration Bill, the Revenue Service Establishment Bill, and the Joint Revenue Board Bill. Together, these overhaul outdated tax structures and introduce a more unified and digital tax regime.

Key provisions include:

• A simplified tax filing system anchored on a single taxpayer identification number (TIN) for individuals and businesses.
• Introduction of digital-first tax reporting, reducing human interference and opportunities for corruption.
• Gradual reduction of corporate income tax from 30% to 27.5% in 2025, and eventually 25% by 2026.
• Exemption of small businesses earning less than ₦50 million annually from corporate income tax.
• Recalibration of Value Added Tax (VAT) revenue sharing: 55% to states, 35% to local governments, and 10% to the federal government, with a consumption-based formula incentivising productivity and consumption.

These reforms aim to address Nigeria’s alarmingly low tax-to-GDP ratio, which stood at just 10.8% in 2023, far below the Sub-Saharan Africa average of 16% and the global average of 33% (World Bank, 2024).

Global Perception and Investor Confidence

International observers, including the International Monetary Fund (IMF) and World Bank, have welcomed the reforms as critical to enhancing Nigeria’s creditworthiness and fiscal sustainability. A May 2025 note from the IMF’s Article IV consultation commended Nigeria for “taking bold steps towards widening its tax base and improving compliance,” describing the bill as a “foundation for inclusive growth.”

Multilateral agencies and ratings firms have long expressed concern over Nigeria’s overreliance on oil exports and its volatile revenue structure. By shifting towards broader, non-oil tax revenue and improving administrative transparency, the new tax laws send a clear signal of reform seriousness—potentially improving Nigeria’s sovereign credit outlook and unlocking foreign direct investment (FDI).

Already, Moody’s and Fitch Ratings have noted in recent updates that “structural reforms like the new tax bill could reduce Nigeria’s fiscal vulnerability to oil price shocks.”

Domestic Concerns and Political Implications

While the reforms have received international praise, domestic reactions have been mixed. A major source of contention lies in the VAT revenue-sharing formula. Several northern governors argue that using consumption as a basis for allocation could disproportionately benefit more urbanised and commercially active southern states, potentially deepening regional inequality (The Guardian Nigeria, 2025).

Furthermore, civil society organisations have expressed concern about enforcement, especially after past controversies surrounding privatised tax collection contracts in Lagos State, which lacked transparency and sparked allegations of corruption.

However, supporters of the reform argue that by digitising tax systems, streamlining collections, and strengthening the independence of revenue agencies, Nigeria could reduce opportunities for leakages and align with global anti-corruption norms.

Improving Global Image

This tax reform has broader implications beyond economics. Nigeria has consistently scored poorly on Transparency International’s Corruption Perceptions Index, ranking 140th out of 180 countries in 2024 with a score of 26/100. A more transparent, digitised tax framework could bolster its credibility as a country committed to good governance.

Moreover, as countries like Rwanda, Ghana, and Kenya continue to attract development finance and tech investments due to their improving business environments, Nigeria’s reforms help it reclaim lost ground. According to a recent PwC Africa report, “Nigeria’s new tax regime is a step towards removing structural barriers to private sector growth and rebuilding international investor confidence.”

Conclusion

Nigeria’s new tax reform bill is not merely a fiscal tool—it is a signal to the world. By rethinking how taxes are collected, allocated, and enforced, the government is attempting to chart a new course towards sustainable development, financial inclusion, and international respectability.

If implementation is transparent, equitable, and consistent, Nigeria may well transform its image from a volatile oil-dependent economy into one seen as an emerging reform-minded power in Africa. The next challenge lies not in passing the law, but in making it work.

Valete ad tempus!

*Ugo Inyama writes from Manchester, UK

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