Tinubu’s Tax Leap and the Ghosts of Federalism, By Egiganya Jo-Madugu

Tinubu’s Tax Leap and the Ghosts of Federalism
By Egiganya Jo-Madugu

Nigeria has long struggled with an underperforming tax system, marred by inefficiency, outdated laws, low compliance, and a weak revenue base. Over time, several reform efforts have been introduced to strengthen the system and boost economic growth, but many failed to gain traction due to poor implementation and lack of political will.

Now, in what could be the boldest move yet, President Bola Ahmed Tinubu has signed into law four far-reaching tax reform bills: the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA).

Together, they aim to transform how taxes are collected, shared, and enforced across Nigeria. At the heart of these reforms is the ambition to raise Nigeria’s tax-to-GDP ratio from just over 10 percent to 18 percent by 2026.

This would not only bring the country closer to the African average of 16.5 percent, but also increase internal revenue to fund infrastructure, public services, and national development. A key highlight is the new Value Added Tax (VAT) sharing formula. Under it, 30 percent of VAT revenue will now be allocated based on consumption, 50 percent shared equally among all states, and 20 percent distributed according to population size.

This approach is meant to balance equity with performance, encouraging states to drive economic activity while also catering to less-developed areas. The reforms also introduce a single, simplified tax code that merges various levies into one system.

This is expected to ease compliance for businesses, eliminate confusion, and make tax payments more transparent and predictable. Perhaps the most structural change is the replacement of the Federal Inland Revenue Service (FIRS) with a new digital-first agency, the Nigeria Revenue Service (NRS).

The NRS is designed to reduce human interference, speed up transactions, and curb corruption. Complementing this is the Joint Revenue Board Act, which aims to streamline tax operations across federal, state, and local governments. To ease the burden on smaller players, the reforms adopt a progressive structure.

Small businesses earning under ₦50 million and individuals earning below ₦1 million per year will pay lower tax rates, helping them reinvest in jobs, savings, and business growth. Large corporations, meanwhile, will see a reduced tax rate from 30 percent to 25 percent, a move intended to boost investment and competitiveness.

Still, the reforms face stiff challenges. Nigeria’s history is filled with ambitious policies that failed due to weak enforcement. A recent example is the removal of fuel subsidies in 2023. Though widely praised on paper, the move sparked public backlash due to poor reinvestment and lack of transparency, eventually fuelling smuggling and economic hardship.

To avoid a repeat, the tax reforms must be matched by strong political will, proper oversight, and public accountability. Citizens need to see where their taxes go — in schools, hospitals, roads, and public services. If trust is broken again, the entire effort risks collapse.

Going digital also brings its own concerns. Cybersecurity, data privacy, and digital literacy among taxpayers will all be crucial. There are also questions around how well state and local governments will adapt, and whether poorer communities might be unfairly affected.

If these challenges are addressed, however, experts believe the reforms could add as much as 7.5 billion dollars to Nigeria’s revenue, strengthen local governance, and unlock long-term growth. This is not just a policy shift. It is an opportunity to reset how Nigeria funds its future.

The road ahead will not be easy, but with accountability, transparency, and sustained political commitment, the country might finally build the kind of tax system it deserves.

Egiganya Jo-Madugu is a 300-level Mass Communication student at Nile University, Abuja. She can be reached at: [email protected].