Nigeria has, for decades, operated under outdated tax laws that constrained economic growth and discouraged investment. The former tax system, marked by multiple and overlapping levies imposed by federal, state, and local authorities, created uncertainty for businesses and raised the cost of compliance. In many cases, communities introduced taxes arbitrarily, a practice that analysts warned posed serious risks to the national economy. Despite the heavy tax burden, the benefits of these collections were scarcely felt by the public. Weak enforcement and collection mechanisms allowed revenues to leak into private hands, while the burden of taxation fell largely on vulnerable citizens and small businesses.
Meanwhile, large corporations and powerful individuals often paid less than their fair share, undermining economic development. These challenges prompted the administration of President Bola Ahmed Tinubu to initiate a comprehensive overhaul of Nigeria’s tax framework. Four major tax laws were subsequently passed by the National Assembly. Two are already in force, while the remaining two are scheduled to take effect from January 1, 2026. However, the impending implementation of the remaining reforms has sparked public concern, with critics warning that the measures could deepen poverty and increase the cost of doing business.
Government officials and economic analysts argue that such fears are unfounded, noting that the reforms are designed to stimulate investment, create jobs, and boost economic growth if properly implemented.
According to policy documents, the new tax regime seeks to simplify the system by eliminating multiple taxes and introducing clearer, more predictable rules. It provides relief for small and medium-sized enterprises and low-income earners, closes long-standing loopholes, and aligns Nigeria’s tax policies with global best practices—key factors that signal a more stable investment environment.
A central feature of the reforms is the consolidation of several existing levies into a single Development Levy. Under the new framework, multinational companies will be subject to a 15 percent minimum tax in line with international standards, while capital gains tax has been updated to reflect current economic realities. The reforms also retain incentives for Free Trade Zones.
Officials argue that merging multiple levies into one will reduce compliance costs, improve transparency, and allow investors to plan more effectively. This marks a significant departure from the previous system, which relied on numerous agencies collecting separate taxes, often resulting in confusion and uncertainty.
The 4% Development Levy has been widely misunderstood as a new tax. Authorities clarify that it replaces several existing charges, including the Tertiary Education Tax, the National Information Technology Development Agency (NITDA) levy, the National Agency for Science and Engineering Infrastructure (NASENI) levy, and the Police Trust Fund levy. When combined under the old system, these levies often exceeded 4%, particularly in the technology, telecommunications, and financial sectors. Small businesses with turnovers of ₦100 million or less, as well as non-resident companies, are exempt.
Addressing concerns over Free Trade Zones, the government maintains that incentives remain intact. Under the Nigeria Tax Act, Free Trade Zone companies may sell up to 25 percent of their output in the domestic market while retaining tax exemptions during a three-year transition period from 2026 to 2028. The policy aims to ensure that Free Trade Zones continue to support exports and foreign exchange earnings without distorting domestic competition.
Commenting on the reforms, the President’s Special Adviser on Economic Affairs, Tope Fasua, described the new tax framework as one of the most significant and investor-friendly overhauls in decades. He noted that the reforms simplify the tax landscape, reduce compliance burdens, and introduce progressive measures consistent with the administration’s broader economic objectives. With the Nigeria Tax Act and the Nigeria Tax Administration Act now in place, officials say the reforms represent a decisive shift toward a modern, transparent, and growth-oriented tax system, positioning Nigeria to attract investment and strengthen its economic foundations.