The Federal Inland Revenue Service (FIRS) has announced sweeping tax reforms that exempt food, education, shared transportation, and agriculture from value-added tax (VAT), marking what it described as the most significant fiscal transformation since Nigeria’s independence.
The reforms are designed to ease the burden on citizens and businesses while strengthening government revenue collection.
FIRS Executive Chairman, Zacch Adedeji, revealed the changes in an interview commemorating his two years in office, crediting President Bola Tinubu for fulfilling his campaign promise to simplify tax compliance and remove obstacles for taxpayers.
“With these new laws, food, education, transport, and agriculture will be VAT-free,” Adedeji stated. “The President has fulfilled his promise to make businesses flourish by removing burdens and hurdles. This is the best thing that has happened to Nigeria’s fiscal ecosystem since 1960.”
The new code, which consolidates multiple tax laws into a single framework, will take effect in January. It reduces the number of tax types to single digits, introduces a simplified process for individuals and companies, and provides relief for smaller enterprises. Businesses with annual turnover below ₦50 million will be exempt from tax, while personal income tax thresholds have been adjusted to protect low-income earners.
President Tinubu signed four major bills into law on June 26, 2025 — the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act.
Collectively referred to as the Tax Acts quartet, they aim to broaden the tax base, improve compliance, and strengthen transparency across all tiers of government.
As part of the reforms, Tinubu also appointed Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, to chair the Presidential Committee on Fiscal Policy and Tax Reforms.
The committee, made up of public and private sector experts, has been central to designing and implementing the policies.
According to Adedeji, the impact of the reforms is already visible. 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 recorded a historic ₦2 trillion disbursement, with nearly 70 per cent of allocations now sourced from FIRS collections.
He added that improved revenue has enabled 30 states to repay ₦1.85 trillion in debts within 18 months, while debt servicing — which previously consumed 90 per cent of government income — has dropped to about 50 per cent. Nigeria’s external reserves, he noted, have also improved due to stronger fiscal stability.
Another key element of the reforms is the renaming of FIRS to the Nigeria Revenue Service, to reflect its role as the central tax authority for all levels of government.
“The word ‘federal’ gave the wrong impression that we only collect for the federal government,” Adedeji explained. “In reality, we collect VAT, of which 90 per cent belongs to the states.”
Adedeji also credited Tinubu’s broader economic measures — including fuel subsidy removal and exchange rate unification — for stabilising the federation account.
“There are no bogus subsidy claims depleting the pool, and the account has blossomed greatly,” he said.
While acknowledging the short-term hardship caused by the reforms, Adedeji likened it to “the pain of a woman in labour,” insisting that government interventions such as compressed natural gas buses and crude-for-naira support for local refiners are cushioning the effects, with fuel prices already showing signs of decline.
He explained that the consolidated tax law also strengthens compliance and reduces evasion by restructuring FIRS operations. Taxpayers are now grouped into small, medium, and large categories, with one-stop shops created for filing and payments. “We are service providers to taxpayers rather than just an enforcement agency,” he said.
On concerns about a petrol surcharge in the new law, Adedeji clarified that it would not apply automatically.
“It will only take effect if activated by a ministerial order and published in the official gazette,” he noted.
Urging Nigerians to embrace the reforms, Adedeji concluded: “When companies are doing well, expanding, and making profits, the nation benefits from their growth. Our task is to remove hurdles in their way, and that is exactly what the President has achieved with these new laws.”
