By Justice Okamgba
Nigeria’s tax landscape is set for a historic overhaul, as the Federal Inland Revenue Service has explained that the government’s reforms exempt food, education, shared transportation, and agriculture from value-added tax.
The reforms, described as the most significant fiscal transformation since independence, are designed to ease the burden on citizens and businesses, while improving government revenue collection.
The Executive Chairman of FIRS, Zacch Adedeji, revealed the changes in an interview marking his two years in office. He credited President Bola Tinubu for fulfilling his campaign promise to simplify tax compliance and remove hurdles faced by taxpayers.
“With these new laws, food, education, transport, and agriculture will be VAT-free,” Adedeji declared. “The President has fulfilled his promise to make businesses flourish by removing all burdens and hurdles. This is the best thing that has happened to Nigeria’s fiscal ecosystem since 1960.”
The reforms consolidate multiple tax laws into a single code, scheduled to take effect in January. The new code reduces the number of tax types to single digits, introduces a simpler framework for individuals and businesses, and provides relief for smaller enterprises. Under the provisions, businesses with annual turnover below N50m will no longer pay tax, while thresholds for personal income tax have been adjusted to protect low-income earners.
President Tinubu signed four major bills into law on June 26, 2025—the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act.
Collectively known as the Tax Acts quartet, they aim to broaden the tax base, improve compliance, and enhance transparency across all tiers of government.
Tinubu also appointed Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, to chair the Presidential Committee on Fiscal Policy and Tax Reforms. The committee, comprising private and public sector experts, has been instrumental in designing and implementing the reforms.
According to Adedeji, the reforms are already yielding results. Nigeria’s tax-to-GDP ratio has risen from 10 per cent to 13.5 per cent in just two years, with a target of 18 per cent by 2027. In August, the federation account disbursed a record ₦2tn, with nearly 70 per cent of monthly government allocations now coming from taxes collected by the FIRS.
He disclosed that improved revenue has helped 30 states repay ₦1.85tn in debts within the past 18 months, while debt servicing costs—previously consuming 90 per cent of government revenue—have dropped to about 50 per cent. External reserves have also grown on the back of stronger fiscal stability.
As part of the changes, the FIRS will be renamed the Nigeria Revenue Service to reflect its role as the central tax authority for all tiers of government, not just the federal level. “The word ‘federal’ gave the wrong impression that we only collect for the federal government,” Adedeji explained. “In reality, we collect VAT, of which 90 per cent belongs to the states.”
He credited Tinubu’s broader economic decisions, including fuel subsidy removal and exchange rate unification, with strengthening the federation account. “The health of the federation account has blossomed greatly, as there are no bogus subsidy claims to deplete the pool,” he said.
Adedeji acknowledged that the reforms have caused short-term hardship, likening them to “the pain of a woman in labour.” He stressed, however, that government interventions—such as compressed natural gas buses and crude-for-naira support for local refiners—are already cushioning the effects, with fuel prices showing signs of decline.
He further explained that the consolidated tax law strengthens compliance and curbs evasion by restructuring FIRS operations. Taxpayers are now grouped into small, medium, and large categories, with one-stop shops created for filing and payments. “We are service providers to taxpayers rather than just an enforcement agency,” he said.
On concerns over a petrol surcharge included in the new law, Adedeji clarified that it would not apply automatically. “It will only take effect if activated by a ministerial order and published in the official gazette,” he noted.
Urging taxpayers to embrace the reforms, Adedeji concluded: “When companies are doing well, expanding, and making profits, we will benefit from their growth. Our task is to remove hurdles in their way, and that is what the president has done with these new laws.”