Centre for the Promotion of Private Enterprise (CPPE) says the success of the ongoing tax reform will depend largely on implementation strategy, timing and public trust, rather than the strength of its legislative provisions.
Dr Muda Yusuf, Founder and Chief Executive Officer of CPPE, stated this in Lagos on Sunday via a statement while assessing the tax reform framework.
Yusuf described the reforms as sound, progressive and among the most ambitious fiscal restructuring efforts in recent decades, but warned that good policy design does not automatically translate into positive outcomes.
He, however, noted history had shown that poorly sequenced and rigid implementation could undermine even well-intentioned reforms.
According to him, the ultimate success or failure of the tax reform will depend far more on how it is implemented than on the laws themselves.
“Without careful sequencing, political sensitivity and economic realism, even well-intentioned reforms can trigger resistance, disrupt livelihoods and further erode public trust,” Yusuf said.
He stressed that tax reform should be seen as a process rather than a one-off event, noting that it must evolve with implementation feedback, economic conditions and social realities.
Yusuf observed that the reform was unfolding under particularly delicate circumstances, as the economy was still grappling with elevated inflation, weakened purchasing power and the adjustment costs of fuel subsidy removal and foreign exchange reforms.
He added that households and businesses were experiencing reform fatigue, with a politically sensitive pre-election period approaching.
“In this context, expecting full and simultaneous compliance across all sectors of the economy is unrealistic.
“A rigid, enforcement-heavy approach risks undermining reform credibility before its benefits have time to materialise,” he said.
Yusuf acknowledged that the tax reform framework contained several pro-welfare provisions, including exemption of low-income earners from personal income tax and VAT relief on basic goods and essential services such as education, healthcare and agriculture.
He noted that small businesses were also granted relief from company income tax and VAT obligations, while incentives for priority and job-creating sectors aligned tax policy with Nigeria’s diversification agenda.
According to him, the rationalisation of multiple taxes, repeal of obsolete laws and improved coherence of the tax system address long-standing private sector concerns and could enhance investor confidence if properly implemented.
However, Yusuf said public resistance to the reform was rooted in lived experience, as many Nigerians associated past reforms with rising living costs and declining welfare, without corresponding improvements in public services.
He said a weak social contract continued to undermine confidence that additional tax revenues would be transparently and efficiently utilised.
The CPPE boss also warned that the scale of Nigeria’s informal economy could not be ignored in tax reform implementation.
He said Nigeria had an estimated 40 million micro, small and nano enterprises, with over 80 per cent operating informally and accounting for more than 90 per cent of jobs, according to the National Bureau of Statistics.
Yusuf noted that most informal operators lacked proper record-keeping systems, tax knowledge, digital capacity and compliance structures, adding that enforcement-heavy measures could criminalise informality rather than encourage gradual formalisation.
He identified some policy flashpoints fueling anxiety, including mandatory reporting of bank transactions of N25 million and above, which he said could expose high-turnover, low-margin businesses to undue scrutiny.
Yusuf also expressed concern over the proposed increase in capital gains tax from 10 per cent to 30 per cent and the N500,000 annual rent relief cap, which he said were misaligned with prevailing economic realities.
He further raised concerns about the wide enforcement powers and severity of penalties embedded in the tax laws.
Yusuf advocated a strategic implementation framework anchored on revenue efficiency rather than blanket enforcement.
He said empirical evidence showed that a small proportion of taxpayers accounted for the bulk of tax revenue, noting that roughly 20 per cent of businesses generated close to 90 per cent of tax receipts.
According to him, concentrating enforcement on large corporations, established SMEs and high-net-worth individuals would deliver significant revenue without destabilising livelihoods.
He advised tax authorities to prioritise the formal sector in the short to medium term, while integrating the informal sector gradually through incentives, sustained tax education and simplified compliance tools.
“With 2026 shaping up as a pre-election year, political and social caution is imperative.
“Stability, trust-building and reform credibility should take precedence over short-term enforcement optics,” Yusuf said.
He said that while tax reform was essential for Nigeria’s fiscal sustainability, a phased, pragmatic and socially sensitive implementation approach offered the most credible pathway to sustainable revenue growth and long-term legitimacy.
