One-Third of Nigerian Workers to Be Exempt From Personal Income Tax in 2026 – New Tax Rates Explained

The Federal Government has announced a major overhaul of Nigeria’s tax system that will exempt about one-third of the country’s workforce from paying personal income tax starting in 2026, marking a significant shift toward a more equitable and growth-focused fiscal policy.

Under the proposed reforms, workers earning ₦100,000 or less per month across both the public and private sectors will no longer be required to pay personal income tax. The policy is designed to increase disposable income for low-income earners, improve household purchasing power and cushion the impact of rising inflation and living costs.

Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said the exemption would affect roughly one in every three workers nationwide. He described the move as a deliberate effort to end what he termed the long-standing practice of taxing poverty in Nigeria.

According to Oyedele, many low-income Nigerians struggle to meet basic needs, yet remain subject to taxation under the current framework. He explained that the new policy prioritises economic inclusion by allowing vulnerable workers to retain more of their earnings rather than diverting scarce income to taxes.

The personal income tax exemption is part of a broader restructuring of Nigeria’s tax architecture, much of which, Oyedele noted, is rooted in outdated laws that no longer align with modern economic realities. He said several countries that once operated similar systems have since reformed them to encourage productivity, investment and sustainable growth.

In addition to relieving low-income earners, the reforms will also reduce the tax burden on middle-income workers. Individuals earning between ₦100,000 and approximately ₦2 million per month are expected to pay lower taxes under the revised structure, effectively increasing their take-home pay without the need for salary adjustments.

Oyedele rejected claims that Nigeria no longer has a middle class, acknowledging that while the segment has contracted, it remains vital to economic stability. He stressed that weakening the middle class would reduce consumption, savings and long-term economic expansion.

High-income earners will contribute a slightly higher share under the new tax regime. A top personal income tax rate of 25 per cent will apply only to individuals earning ₦120 million or more annually, a group estimated to represent about two per cent of Nigeria’s workforce. Oyedele said the adjustment is modest and targeted at restoring balance rather than discouraging success.

The reform agenda also addresses business taxation, an area widely seen as a barrier to investment and job creation. Oyedele noted that Nigeria ranks among countries with the heaviest tax burdens on businesses, despite its need to attract domestic and foreign capital.

To improve the investment climate, the Federal Government has reduced the corporate income tax rate from 30 per cent to 25 per cent. Small businesses with annual turnover below ₦100 million will now enjoy a zero per cent corporate tax rate, a move aimed at encouraging informal enterprises to formalise, expand operations and access financing.

The reforms further seek to eliminate multiple taxation and curb the activities of numerous tax-collecting agencies that have made compliance costly and confusing for businesses. Several existing tax laws will be repealed and replaced with a streamlined framework designed to improve transparency, efficiency and ease of doing business in Nigeria.

Oyedele also cautioned against misinformation surrounding the reforms, dismissing claims about new inheritance taxes and exaggerated fears of widespread tax increases. He urged Nigerians to rely on verified information and constructive engagement rather than speculation.

He said addressing inequality is central to the reform strategy, warning that taxing low-income earners in a highly unequal society fuels social tension and economic frustration. According to him, a fair tax system that supports growth will help businesses expand, create jobs and strengthen Nigeria’s long-term economic outlook.