What Tinubu’s Tax Reform Means for You

President Bola Tinubu has introduced a new tax reform that is set to change how Nigerians earn, spend, and contribute to government revenue. The law comes after months of planning and debate, aims to simplify Nigeria’s chaotic tax structure, ease pressure on low-income earners, and ensure the wealthy pay a fairer share.

If you think taxes don’t concern you, think again. Whether you’re a salary earner, a student, a small business owner, or a regular person recharging airtime, these changes will likely affect your daily life.

Why Nigeria’s tax system needed an upgrade

For years, Nigeria’s tax system has been broken. There were over 60 types of taxes floating around, but only a few were actively collected. 

The process was messy, inefficient, and often unfair with small businesses and informal workers bearing the brunt while many wealthy individuals and large companies found ways to escape payment.

International reports, like one from the IMF, highlighted how poor Nigeria’s tax collection was with a tax-to-GDP ratio as low as 9.4% in 2023. In comparison, countries like South Africa had figures three times higher. While reforms started improving that number in 2024, a deeper structural fix was needed.

This new law is the government’s attempt to fix the leaks, expand the tax base, and create a more balanced system that can fund national development without relying heavily on oil revenue.

The new personal income tax rates: Who pays what?

The reform introduces a progressive income tax structure meaning those who earn more will pay more, and those who earn very little will pay nothing at all.

Here’s the breakdown:

Earning less than ₦800,000/year – You’re exempt from paying tax.

₦800,000 – ₦3 million – 15% tax

₦3 million – ₦12 million – 18% tax

₦12 million – ₦25 million – 21% tax

₦25 million – ₦50 million – 23% tax

Above ₦50 million – 25% tax

This structure is meant to ease the burden on lower-income earners. However, it’s worth noting that the ₦800,000 exemption threshold is still lower than the ₦70,000 monthly minimum wage, meaning some low-income workers will still be taxed.

What this means for you — Real-life scenarios

Let’s say you earn ₦5 million annually. Here’s how your tax will be calculated:

First ₦800k – 0%

Next ₦2.2 million – 15%

Final ₦2 million – 18%

Your total tax comes out to around ₦690,000 — roughly 14% of your income.

This is a big win for small businesses

One of the most celebrated parts of the reform is the complete tax exemption for small businesses. If you run a modest hustle, a salon, a printing shop, an online store, or freelance services and your earnings fall under the threshold, you no longer need to worry about income tax.

This move is intended to support entrepreneurship and ease pressure on everyday hustlers who drive the informal economy. The exact earnings limit for what qualifies as “small business” hasn’t been publicly defined yet, but the exemption is clearly aimed at micro and small-scale ventures.

Corporate tax adjustments

Medium and large companies haven’t been left out either. Starting in 2026, the standard Company Income Tax rate will drop from 30% to 25%. This is meant to encourage reinvestment and job creation by letting companies keep a little more of their profits.

One tax authority to simplify the process

In a major restructuring move, the Federal Inland Revenue Service (FIRS) has been renamed the Nigeria Revenue Service (NRS). More importantly, it now has broader authority.

The NRS will now be in charge of collecting revenue not just for the federal government, but also from agencies like Customs, NIMASA, NUPRC, and the ports. The idea is to centralize and simplify the tax collection process fewer hands in the pot, and less confusion for taxpayers.

Is VAT staying same?

While there were discussions to increase Value Added Tax (VAT) from 7.5% to 12.5%, those plans have been shelved for now. The rate stays at 7.5%, but how that VAT is distributed has changed.

Previously, VAT was shared based on broad factors like population. Now, 30% of VAT revenue will go directly to the states that generated it. This is designed to reward productive states and encourage local economic development. Lagos, for example, stands to benefit significantly.

No VAT on Essentials

The reform keeps basic needs VAT-free including:

Staple food items

School fees

Electricity

Medicines

Healthcare services

So, you won’t see extra charges on these essentials.

New levies on airtime and betting

Two areas where everyday Nigerians may feel a pinch:

5% tax on gaming and lottery, placing a bet now comes with an added cost.

5% tax on telecom services, your airtime and data will now include a small government cut.

These are called excise duties, and they are part of the government’s strategy to widen its tax net without directly taxing income.

Development levy – Funding the future

The new law also introduces a Development Levy of 2% to 4%, depending on your income level. This money will be channeled into national projects through agencies like:

NELFUND (student loan support)

TETFund (education funding)

NITDA (technology innovation)

NASENI (science and engineering development)

This isn’t a tax you’ll feel immediately, but it’s an important part of the long-term plan to build infrastructure and human capital.

When does this all take effect?

Now: New income tax rules, small business exemptions, and the new NRS begin operation.

2026: Lower corporate tax kicks in.

Ongoing: Development levy implementation and system upgrades.

Summary: Who Gains What?

Students, part-timers, and informal workers: You’re likely exempt or lightly taxed.

Middle-income earners: Expect slightly reduced tax pressure.

High earners: You’ll pay more — up to 25% on the highest bracket.

Small businesses: Major relief — no income tax.

Large companies: Lower corporate tax coming soon.

Everyone: Airtime, data, and betting now have added tax costs.

What you should know 

This reform is a big deal. It attempts to modernize Nigeria’s outdated tax system, offer relief where it’s needed most, and push for accountability in tax collection. For once, the government seems to be recognizing that growth begins at the grassroots with small businesses, struggling workers, and underserved communities.

Still, a law is only as good as its execution. Whether these changes bring real relief or just more red tape will depend on how the NRS and government agencies manage things moving forward.

But for now, one thing is clear: the rules of taxation in Nigeria have changed and you should pay attention.