On June 26, 2025, Nigeria reached a significant milestone in its fiscal history when President Bola Ahmed Tinubu signed into law four key tax reform bills which include; the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA).

These legislative reforms are being presented by the government as a comprehensive effort to streamline Nigeria’s tax system, expand the tax base, and promote inclusive economic development. Given Nigeria’s consistently low tax-to-GDP ratio and the dominance of informal economic activities, a critical question arises:

Do these reforms offer a genuine solution to the country’s structural fiscal challenges, or are they merely a cosmetic response to deeper underlying issues? Nigeria’s tax revenue has long been alarmingly low, with tax-to-GDP ratios hovering below 10%, far below the 15% minimum recommended by the IMF for developing economies.

This persistent shortfall has left the government overly dependent on oil revenues and borrowing, thereby exposing the economy to external shocks and fiscal instability. The consolidation of over 50 fragmented taxes into a unified tax code is a decisive step in simplifying Nigeria’s complex and inefficient tax architecture.

From a macroeconomic standpoint, this move signals a shift towards improved revenue collection efficiency and reduced administrative duplication, both of which are critical for fiscal sustainability.

Additionally, the revised structure of VAT revenue sharing, where 30% is based on consumption, 50% equally shared among states, and 20% by population, could help reduce the fiscal imbalance among states and foster greater subnational accountability.

The reforms come as a mixed bag for Nigerian businesses. On the one hand, the exemption of small companies (with turnover below ₦100 million and assets not exceeding ₦250 million) from Companies Income Tax (CIT), Capital Gains Tax, and the new Unified Development Levy is a welcome relief.

It reduces compliance pressure on struggling micro and small businesses and incentivizes formalization in the vast informal economy. For small businesses trying to navigate Nigeria’s tough business climate, characterized by inflation and poor infrastructure.

On the other hand, medium and large businesses will have to grapple with a restructured tax burden. While the reduction in CIT from 30% to 25% for large companies by 2026 suggests a pro-investment posture, the expanded scope of VAT and the introduction of strict penalties for non-compliance (₦100,000 for the first month and ₦50,000 for each subsequent month) raise concerns about the business particularly for industries already burdened by multiple regulatory bodies. Additionally, the 4% Unified Development Levy, although a simplification of existing levies, may still be seen as a disguised tax hike by businesses that are already stretched thin.

Company directors have a critical role to play in navigating the evolving tax policy. The new reforms places greater responsibility on directors to ensure compliance, maintain transparency, and realign their tax planning strategies in accordance with the law. The clarified rules on taxable items including prizes, grants, and awards demand improved internal control systems and tax reporting standards.

Directors must now become more proactive in aligning with the new compliance framework. The reforms, by design, increase the personal and institutional accountability of corporate leadership. Failure to file returns in time could now result not only in financial penalties but reputational risks and possible scrutiny from regulatory agencies.

For boards and audit committees, the emphasis must now shift from tax avoidance to efficient and ethical tax planning, while leveraging the exemptions and incentives provided in the reforms. Furthermore, with exemptions for ICT sector employees and start-ups, directors in the tech space now have an opportunity to innovate within a more favorable tax environment.

This is particularly important for job creation and digital transformation in Nigeria. However, if implementation is inconsistent or if loopholes emerge, the gains for the tech sector may be short-lived. While the reforms are a significant legislative achievement, their success hinges entirely on execution.

Without transparent enforcement, robust taxpayer education, and elimination of informal levies still rampant at the state and local levels, the reform may do little more than repackage old problems in new law. A genuine cure requires not just new tax laws, but the institutional capacity to enforce them fairly and uniformly, and the political will to resist the reintroduction of hidden taxes through unofficial channels.

Moreover, the reforms are largely silent on the expenditure side of the fiscal equation. Public trust in taxation remains weak in Nigeria due to decades of misuse of public funds. If tax collection increases without visible improvements in infrastructure, healthcare, education, and public services, the reforms may breed more resentment than compliance.

Nigeria’s 2025 tax reforms mark an ambitious step toward fixing a broken system. For the economy, the potential for improved revenue and macroeconomic stability is real. For businesses, especially SMEs, the simplification and exemptions offer short-term relief and long-term opportunity.

For directors, the reforms demand greater diligence, compliance, and ethical leadership. Yet, whether this drive becomes a true cure or remains a cosmetic fix depends on what happens next: implementation, accountability, and trust. Without these, the reform may be another chapter in Nigeria’s long history of policy without progress.

Ultimately, the success of these reforms will be measured not by the number of bills passed or penalties imposed, but by the tangible transformation in Nigeria’s fiscal landscape. Will the market woman in Aba or the tech entrepreneur in Lagos feel the change? Will honest taxpayers see their sacrifices translate into better roads, functioning hospitals, and quality education for their children? As the ink dries on these new laws, Nigeria stands at a fiscal crossroads. This is not just a technical exercise in tax policy; it is a test of national resolve. To build a resilient, inclusive economy, we must now match legislative ambition with administrative integrity, political courage, and a renewed social contract where citizens are not just taxed but also served.

Research & Advocacy Department,