As Nigeria started the implementation the 2026 tax reforms, millions of low-income workers, small business owners, and everyday Nigerians are watching closely.
The Nigerian Tax Act and the Nigerian Tax Administration Act, two of the four laws collectively known as the 2026 tax reforms, came into force on Jan. 1, reshaping personal and business taxation across the country.
Proponents of the reforms, including Dr Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said that these changes were not just technical updates to Nigeria’s fiscal framework.
Rather, they are pro-poor and pro-growth measures designed to provide relief, promote fairness, and stimulate the economy.
One of the most-talked-about aspects of the 2026 tax reform is its exemption provisions for low-income Nigerians.
Under the new personal income tax system, individuals earning up to N800,000 annually, which is roughly N62,000 monthly, will not pay any personal income tax.
Oyedele stressed that the reforms are designed to shield the poor and protect livelihoods.
He had earlier said that more than 90 per cent of Nigerian workers would either be exempted from Pay-As-You-Earn (PAYE) tax or would pay significantly lower rates after implementation.
According to him, what government cannot do is tax poverty and only top earners will contribute more under the updated structure.
This progressive approach aims to divert the tax burden away from those least able to pay, allowing lower-income households to retain more of their income to meet basic needs during a challenging economic period.
Beyond outright exemption, the reforms introduced additional deductions and reliefs that benefit everyday Nigerians.
Pension contributions, health insurance premiums, and National Housing Fund contributions remain deductible, thereby reducing taxable income.
Some capital transactions, such as the sale of an owner-occupied residence or the sale of personal vehicles, are exempted from capital gains tax up to specific limits.
Compensation for loss of employment up to N50 million will not be taxed, offering protection during periods of job transition.
These measures are designed to reduce the tax burden while encouraging savings, investment, and financial stability.
The reform also offers a better environment for the nation’s informal sector, which is a key driver of employment and commerce.
Many of these businesses had historically faced multiple levies and unclear charges, but the new tax laws will bring relief in several ways.
Small companies with turnovers below specific thresholds will enjoy zero corporate income tax, zero value-added tax (VAT), and significantly reduced withholding obligations.
Simplified tax processes and unified administration will reduce compliance stress that has traditionally hurt micro-businesses and market traders.
Bringing informal sector participants into a more transparent and equitable tax environment could help them access credit, insurance, and other opportunities.
Experts agree that these adjustments would strengthen the foundation of Nigeria’s small business economy.
For small businesses and the informal sector, long regarded as the backbone of employment, the reforms promise reduced compliance stress.
In Lagos, a small trader, Ms Aisha Mustapha, said exempting low earners from personal income tax could make a real difference if faithfully applied.
She said keeping more of her earnings would help families cope with everyday expenses, adding that sincerity in enforcement would determine whether the reform succeeds.
Young professionals, particularly those in the informal and digital economy, also see potential benefits in the promise of simplified processes and fairer treatment.
A freelance tech worker, Mr Emmanuel Eweje, said people were more likely to comply when tax rules appeared reasonable and evenly enforced.
According to him, most Nigerians were not opposed to paying taxes but resisted systems they perceived as confusing or unfair.
Under the 2026 tax reforms, small companies can avoid paying corporate income tax and related levies if they meet certain criteria.
Small companies are generally defined as those with an annual turnover not exceeding N100 million and total fixed assets not exceeding N250 million.
These qualifying businesses are exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT) and the four per cent Development Levy under the new law.
This expanded threshold is intended to bring more micro, small and growing businesses out of the regular tax net, ease compliance burdens and support business growth.
The Association of Enterprise Risk Management Professionals (AERMP) warned against such pushback, which could undermine tax revenue expectations for 2026.
Its Director-General, Dr Olayinka Odutola, told the News Agency of Nigeria (NAN) that “the tax law is for the benefit of everybody” and all hands must be on deck for its successful implementation.
Odutola said that the country and other developed economies were working and thriving because tax administration laws were effective there.
He said most of the nation’s elites and political class opposing the law were afraid of being captured in the dragnet, lamenting that only about 10 million Nigerians were paying taxes out of the population of about 200 million people.
“We cannot continue like this. So, I think everybody should embrace the tax laws.
“We should not be looking at perfection. This tax policy is something we should encourage.
“Everybody has a role to play one way or the other in the implementation of this tax law,” he said.
Odutola said some regions in the country were accustomed to not paying taxes and had become comfortable with the norms, which must be changed in the interest of national economic development.
Speaking on the controversies surrounding the gazetted copy being different from the version passed by the National Assembly, he said the issue was politicised and blown out of proportion.
Odutola said stakeholders could go back to the drawing board after implementation to straighten out grey areas instead of directly trying to stop the law.
He said although the president had said there was no going back on the implementation of the tax law, some people who do not understand its benefits.
According to him, they were wishing it were not implemented, thereby trying to sabotage or frustrate it.
Prof. Chris Onalo, Registrar of Nigerian Institute of Credit Administration (NICA), told NAN that small businesses and workers earning modest salaries should be removed from the tax basket entirely.
“These reforms will put money back in the hands of people who need it. Government must then push more funds into the credit system so these people can borrow easily,” he said.
Also, President of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr Victor Alonge, assured that the new tax reforms would impact the real estate sector positively.
Alonge, two days before implementation of the law, said the tax reforms would boost both real estate investments and home ownership opportunities.
“The new tax law is actually a positive thing for the real estate sector,” he said.
Meanwhile, the Chief Operating Officer of Qshelter Ltd., Mr Adegbenga Alamu, said debt servicing would become cheaper under the new law and would boost real estate investments.
Alamu explained that interest on mortgages is exempted from taxation under the new law.
“So, for instance, if your mortgage payment every month is N500,000 and out of it, N300,000 is interest, when computing your tax, they allow you to deduct the N300,000 before calculating your tax.
“So, for those of us who have done banking for many years, if I have cash, I would borrow. Debt is cheaper. Debt is better with the new law,” he said.
The Lagos State Government has also thrown its weight behind the law, saying that it is aligning state-level taxation with the new national structure in order to reduce multiple taxes and improve fairness.
Given that Lagos is Nigeria’s commercial nerve centre and hosts a large number of low-income earners, this alignment is considered vital.
- Grace Alegba writes for the News Agency of Nigeria
