Nigeria’s fiscal landscape is set to undergo major changes, with new tax reforms that promise to alleviate the tax burden on low-income earners, simplify tax compliance for businesses, and stimulate the economy. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, shared details of the reforms on Monday via X (formerly Twitter), where he outlined a roadmap aimed at achieving fairness, fostering economic growth, and promoting compliance within Nigeria’s tax system.
The proposed reforms bring good news for Nigeria’s lowest-paid workers. Oyedele confirmed that employees earning the new minimum wage or slightly above will be fully exempt from pay-as-you-earn (PAYE) tax. This exemption is part of a broader plan to ease the financial pressures on the most vulnerable citizens in line with what he described as a “policy philosophy of not taxing poverty.” For higher earners, the reforms propose an increase in personal income tax rates for those earning above ₦1.5 million monthly, while those earning ₦1.7 million or less will see reduced PAYE taxes. This shift means that about 98% of Nigeria’s workforce will pay lower taxes, with only the wealthiest 2% facing incremental increases that top out at a 25% rate for high-net-worth individuals.
For everyday Nigerians, the reforms offer substantial relief on basic needs, with a 0% VAT rate proposed for essential items such as food, education, health services, rent, and public transportation. Since these expenses represent a significant portion of household budgets—82% on average and nearly 100% for low-income families—the reforms are expected to ease the rising cost of living for the nation’s most financially strained households.
Self-employed Nigerians, entrepreneurs, and workers in the informal sector will also benefit from these reforms. Oyedele explained that self-employed individuals would qualify for similar tax exemptions as those in formal employment, ensuring equitable treatment across sectors. Moreover, the reforms include provisions to facilitate the growth of Nigeria’s youth workforce in the digital economy by adjusting income tax laws to support remote work opportunities within global business process outsourcing sectors.
The business community stands to gain significantly from these reforms as well, with several changes aimed at reducing complexity and boosting economic competitiveness. A major change includes a planned reduction in the corporate tax rate, gradually dropping from 30% to 25% over the next two years. Additionally, the reforms will remove minimum taxes for companies operating at a loss or with low margins and raise the threshold for corporate tax exemptions to businesses with annual turnovers below ₦50 million.
Oyedele also announced plans for an Office of the Tax Ombudsman, an oversight body designed to check administrative overreach and protect vulnerable taxpayers. This body would help ensure a fairer application of tax laws and maintain accountability within the system. In a bid to further simplify tax administration, Oyedele shared that the government will harness technology to unify tax processes, enabling agencies to focus more on governance than revenue generation.
Highlighting the inclusiveness of the reform process, Oyedele noted that the proposals were developed through extensive consultations. Over 80 contributors across government institutions, the private sector, trade associations, and civil society collaborated on the reforms. Contributions were also gathered from a wide range of stakeholders, including representatives from Nigeria’s geopolitical zones, students, and marginalized groups. This collaboration, Oyedele stated, ensures that the proposed tax changes are aligned with the needs and perspectives of Nigerians across different sectors and backgrounds.
The reforms are expected to have broad and far-reaching impacts, addressing the complexities of Nigeria’s current tax system, incentivizing compliance, and fostering economic growth. In addition to these primary changes, Oyedele noted that there are related proposals in the pipeline, including executive orders, the 2024 withholding tax regulations, and a new national fiscal policy. As these tax reforms progress, the Nigerian government hopes they will create a more equitable and growth-friendly environment that benefits both individuals and businesses across the nation.
