What Nigerians Should Expect as New Tax Reforms Take Effect in 2026

Nigeria’s economy is on the verge of a major fiscal transformation as new tax reforms are set to roll out in January 2026. According to the Executive Chairman of the Federal Inland Revenue Service (soon to be rebranded as the Nigeria Revenue Service), Zacch Adedeji, the new system will eliminate multiple taxes, simplify compliance, and exempt vital sectors such as food, education, shared transportation, and agriculture from Value Added Tax (VAT).

A New Era of Fiscal Policy

Speaking on his two-year leadership of the nation’s tax authority, Adedeji explained that the reforms are already reshaping Nigeria’s fiscal outlook. In August, the three tiers of government shared over ₦2 trillion in monthly allocations—the highest in history. Nearly 70% of this came from taxes collected by the agency, highlighting the impact of President Bola Tinubu’s economic policies.

He credited the administration’s tough decisions—such as removing fuel subsidies and unifying exchange rates—for stabilizing the federation account. “The President has kept his word to remove hurdles for businesses and create a more friendly investment environment. The consolidation of multiple tax laws into a single framework is the biggest shift in Nigeria’s fiscal system since independence,” Adedeji noted.

Relief for Businesses and Citizens

One of the most notable aspects of the new tax laws is the exemption of essential goods and services from VAT. This move is expected to directly benefit over 80% of Nigerians by reducing costs in education, food supply, agricultural products, and transportation.

Other provisions include:

• Small Business Relief: Enterprises with an annual turnover below ₦50 million will no longer pay tax.
• Personal Income Tax Adjustments: New thresholds will shield low-income earners from additional tax burdens.
• Streamlined Tax Categories: Taxpayers are grouped into small, medium, and large categories, with one-stop shops created to simplify payments and compliance.

“This reform is designed to tax prosperity, not poverty. Our role is to remove obstacles, so when businesses grow, the government benefits from their success,” Adedeji explained.

Stronger Revenue, Reduced Debt Burden

The reforms have already started producing results. Nigeria’s tax-to-GDP ratio has improved from 10% to 13.5% within two years, with a target of 18% by 2027—well above the African average of 15%.

Federal allocations to states have risen by almost 70%, enabling them to repay ₦1.85 trillion in debts within 18 months. Debt servicing, which previously consumed 90% of government revenue, now accounts for about 50%. At the same time, external reserves have climbed to $41 billion, signaling greater fiscal stability.

Rebranding FIRS to Nigeria Revenue Service

To reflect its expanded mandate, the Federal Inland Revenue Service will now be known as the Nigeria Revenue Service (NRS). Adedeji explained that the former name created the wrong impression that the agency only collected revenue for the federal government.

“In reality, 90% of VAT collections belong to the states. The new name better reflects our role as the central revenue authority for the entire federation,” he said.

Fuel Pricing, CNG Buses, and Economic Adjustments

While subsidy removal initially increased living costs, Adedeji likened it to “the pain of a woman in labour.” According to him, government interventions such as compressed natural gas (CNG) buses and crude-for-naira arrangements for local refiners are already helping reduce fuel prices and stabilize transportation costs.

He also clarified concerns about a possible 5% surcharge on petrol. The provision, originally included under the FERMA Act of 2007, will only take effect if activated through a ministerial order published in the official gazette. “There is no automatic implementation of this surcharge,” he assured.

The Bigger Picture

Beyond revenue collection, the reforms aim to make compliance easier, reduce evasion, and encourage voluntary tax payments. Adedeji stressed that the government will no longer operate as a tax enforcer but as a service provider to taxpayers.

“Tax evasion will now be costlier than compliance. Our goal is to ensure fairness, transparency, and a tax regime that supports long-term investment in Nigeria,” he said.

Nigeria’s Economic Future

With non-oil revenue outperforming oil and gas taxes for the first time in years, Nigeria is shifting towards a more diversified and resilient fiscal structure. Federal allocations, infrastructure development, education loans, and debt repayment are already benefiting from the reforms.

President Tinubu’s mantra, according to Adedeji, remains clear: “We are not here to tax poverty but prosperity. When businesses expand and make profits, government revenues grow as well.”