Nigeria’s newly enforced tax laws are facing mounting uncertainty as public distrust of government, lingering economic challenges and reform fatigue threaten to undermine compliance, according to the Centre for the Promotion of Private Enterprise (CPPE).
The think tank warns that while the reforms are broadly sound, a blanket rollout risks weakening their credibility before the intended benefits materialise. With businesses and households still recovering from recent macroeconomic shocks, CPPE argues that full and simultaneous compliance across all sectors of the economy is unlikely.
“Without careful sequencing, political sensitivity and economic realism, even well-intentioned reforms can trigger resistance, disrupt livelihoods and further erode public trust,” CPPE said in a recent policy note.
The new tax laws, which took effect on January 1, 2026, are designed to strengthen revenue mobilisation, improve equity, simplify Nigeria’s complex tax system and align fiscal policy with the government’s diversification and growth objectives. CPPE describes the framework as progressive in intent, but cautions that Nigeria’s policy history has made citizens sceptical of promised outcomes.
“For many Nigerians, past reforms have translated into higher living costs and declining welfare, with little evidence that sacrifices result in improved public services,” the group noted. This recurring experience, it said, has weakened confidence that additional tax revenue will be transparently and efficiently deployed.
As the economy continues to reel from the aftershocks of elevated inflation, foreign exchange reforms and fuel subsidy removal, tolerance for new policy compliance remains low, fueling strong public resistance.
The CPPE said these pressures are likely to intensify as the country approaches the politically sensitive pre-election period in 2026.
Reform merits
Despite the controversy around Nigeria’s sweeping tax reforms, the CPPE acknowledges that the framework is not without merit.
By exempting low-income earners from personal income tax and extending value-added tax relief to basic goods and essential services, the think tank says the package offers some social protection at a time when household budgets remain under strain. Sparing small businesses from VAT and company income tax could also ease compliance pressures for vulnerable enterprises.
On the growth side, private sector experts note that targeted incentives for priority and job-creating sectors will better align tax policy with Nigeria’s industrialisation and diversification goals. The reforms also attempt to tidy up Nigeria’s fragmented tax system through the repeal of obsolete laws, fewer overlapping taxes and improved policy coordination — long-standing demands from investors and organised businesses.
CPPE highlights concerns
However, CPPE and private sector stakeholders have raised concerns about specific provisions that could discourage investment and compliance if left unaddressed.
One major source of anxiety is the mandatory reporting of quarterly bank transactions of ₦25 million ($17,495) and above to tax authorities. SMEs that manage pass-through or custodial funds fear increased scrutiny of transactions that do not constitute income, exposing high-turnover, low-margin businesses to costly disputes.
Proposals to raise capital gains tax to 30% from 10% have also unsettled investors in the equity and property markets, despite government assurances around thresholds. At a time when investor confidence remains fragile, CPPE warns that abrupt tax hikes could deter capital formation.
Similarly, the ₦500,000 ($350) annual rent relief cap is seen as misaligned with prevailing urban housing costs, potentially squeezing middle-class disposable income. Concerns are further compounded by the breadth of enforcement powers granted to tax authorities and the severity of penalties embedded in the new laws.
Charting a way forward
According to the policy group, the success of the reforms will hinge less on the legislative fine print and more on their implementation strategy. “Aggressive, broad-based enforcement risks social discontent, political backlash, and potential reform reversal,” CPPE said.
In the near term, private sector experts urge authorities to focus on the formal sector, where compliance capacity already exists, while integrating the informal sector gradually through incentives, simplified processes and digital tools. With elections approaching, CPPE say stability and trust-building should be prioritised over aggressive enforcement optics.
“A phased, pragmatic, and socially sensitive approach—anchored on trust, economic realities, and political timing—offers the most credible pathway to sustainable revenue growth, expanded compliance, and long-term legitimacy,” the group added.
NB: Local currency figures were converted to US dollars using ₦1,429, the official exchange rate as of January 5, 2025.
