Nigeria is set for a sweeping overhaul of its tax system, with the Federal Inland Revenue Service (FIRS) announcing that food, education, agriculture, and shared transportation will be exempt from value-added tax (VAT) under newly signed reforms.
The reforms, described as the most ambitious fiscal transformation since independence, aim to ease the burden on citizens and businesses while boosting government revenue collection.
Executive Chairman of FIRS, Zacch Adedeji, disclosed the details in Abuja during an interview marking his two years in office. He credited President Bola Tinubu for driving the initiative, saying it fulfils the administration’s campaign pledge to simplify taxation and encourage enterprise.
“With these new laws, food, education, transport, and agriculture will be VAT-free,” Adedeji said. “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, due to take effect in January. The new framework reduces Nigeria’s tax types to single digits, simplifies compliance for individuals and businesses, and introduces reliefs for smaller enterprises.
Companies with an annual turnover below ₦50 million will be exempt from tax, while thresholds for personal income tax have been adjusted to protect low-income earners.
President Tinubu had signed four key bills into law on June 26, 2025: the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and Joint Revenue Board Establishment Act. Collectively known as the Tax Acts Quartet, they are designed to broaden the tax base, improve compliance, and enhance transparency across all tiers of government.
The Presidential Committee on Fiscal Policy and Tax Reforms, chaired by tax expert Taiwo Oyedele of PricewaterhouseCoopers, played a pivotal role in drafting and refining 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 within two years, with a target of 18 per cent by 2027.
In August, the Federation Account Allocation Committee disbursed a record ₦2 trillion, nearly 70 per cent of which came from taxes collected by the FIRS. Improved revenue, he noted, enabled 30 states to repay ₦1.85 trillion in debts over the past 18 months. Debt servicing costs, which once consumed 90 per cent of government revenue, have dropped to about 50 per cent, while external reserves have also grown on the back of stronger fiscal stability.
Adedeji further announced that the FIRS would be rebranded as the Nigeria Revenue Service to reflect its broader role. “The word ‘federal’ gave the wrong impression that we only collect for the federal government. In reality, we collect VAT, of which 90 per cent belongs to the states,” he explained.
While acknowledging the hardship that followed subsidy removal and exchange rate unification, Adedeji insisted the reforms are necessary. He likened them to “the pain of a woman in labour,” adding that government interventions—such as compressed natural gas buses and crude-for-naira support for local refiners—are cushioning the impact, with fuel prices beginning to decline.
He emphasised that the consolidated tax law is also designed to curb evasion. Taxpayers are now classified into small, medium, and large groups, with one-stop shops created for filing and payments. “We are service providers to taxpayers rather than just an enforcement agency,” he said.
On the proposed petrol surcharge contained in the new law, Adedeji clarified that it would not take effect automatically. “It will only apply if activated by a ministerial order and published in the official gazette,” he assured.
Call for Compliance
Urging Nigerians to embrace the reforms, Adedeji said the measures will strengthen both businesses and the economy at large.
“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,” he concluded.
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