*Photo: President Bola Tinubu*
Introduction:
When the Nigerian President signed into law the long-awaited Tax Reform Bills a couple of days ago, it marked a pivotal shift in the country’s fiscal direction. Promising harmonised taxes, streamlined collection systems, and pro-poor measures to stimulate growth, the reform package was hailed as bold and transformative. But the moment of legislative victory is only the beginning of a longer, more complex journey: implementation. Yes, it is a landmark moment, but a longer and tortuous journey ahead!
Behind the celebration lies a difficult truth. First, passing reform is hard; and second, executing it in a fragmented, bureaucratically entrenched system like Nigeria’s is far harder. The challenges ahead are not only administrative but also political, infrastructural, cultural, and economic. This article unpacks the real work that begins now—what these new laws mean for agencies, businesses, and citizens, and what needs to happen to ensure that Nigeria’s fiscal reform doesn’t stall at the starting line.
1. The New Tax Ecosystem: From Fragmentation to Consolidation
At the heart of the reform is the creation of the Nigeria Revenue Service (NRS), a single body charged with the collection of federally chargeable taxes. This move promises a simplification of the nation’s revenue architecture. However, it also signals a significant restructuring of existing institutions such as the Nigeria Customs Service, the Nigerian Upstream Petroleum Regulatory Commission, and various Ministries, Departments, and Agencies that have historically held tax collection powers.
These legacy institutions have operated with overlapping jurisdictions, resulting in inefficiencies, duplications, and often opaque financial practices. The transition to a unified collection system under the NRS requires more than just a change in mandate. It demands deep institutional reconfiguration, including legal realignment, workforce redeployment, IT system overhauls, and the harmonisation of existing processes. This will be a massive administrative task, requiring political will and coordinated execution.
2. Digitisation and Transparency: The Data Challenge
The new tax laws require complete digitisation and transparency in collection mechanisms. The vision is to integrate tax administration with national identity databases, including the National Identification Number (NIN), Bank Verification Numbers (BVN), and mobile phone records to ensure more comprehensive compliance.
While this approach aligns with global best practices, its practical implementation in Nigeria faces several challenges. Siloed data ecosystems within government institutions must be merged into interoperable platforms. Cybersecurity must be reinforced to protect sensitive financial and personal information. Moreover, public trust in data governance must be cultivated, especially in regions where institutional trust is low.
Digital infrastructure across Nigeria is also inconsistent. Urban centers may adapt quickly, but rural and underserved areas may lag behind, potentially widening the digital divide and undermining nationwide effectiveness.
3. Legal Harmonisation and Jurisdictional Tensions
The transfer of tax collection rights to the NRS disrupts long-standing arrangements and risks provoking resistance. The shift impacts agencies like the NCS and NUPRC, but also raises questions about federal and state tax jurisdictions, particularly in areas like Value Added Tax (VAT) distribution.
Some state governors have already voiced opposition, concerned that the reforms will concentrate revenue flows in more commercially vibrant southern states. At the federal level, institutions wary of losing autonomy may mount legal challenges. Navigating these tensions requires transparent negotiations, judicial clarity, and effective intergovernmental diplomacy. The federal government must provide reassurance and inclusive platforms to resolve disputes before they escalate.
4. Human Capacity and Institutional Readiness
Even with legislative and policy backing, implementation ultimately depends on human and institutional readiness. Nigeria’s tax administration suffers from limited skilled manpower, poor training, and a lack of technological know-how in many regions. Transitioning tax collection duties to the NRS without addressing these deficiencies could sabotage the reform from within.
The six-month planning window before the reforms take effect on January 1, 2026, must be utilised not just for publicity but for building institutional capacity. Agencies must conduct training needs assessments, develop implementation roadmaps, deploy digital tools, and reorient personnel to the new operating model. The NRS will need to introduce new standards of service delivery and accountability to inspire confidence in the new system.
5. Managing Stakeholder Expectations
There is a palpable sense of anticipation surrounding the reforms. Micro, small, and medium enterprises (MSMEs) expect relief from double taxation. International investors anticipate a more predictable fiscal landscape. However, past disappointments have made many stakeholders cautious.
To manage expectations and sustain confidence, the government must commit to consistent communication and tangible progress tracking. Business groups such as NECA, NASME, and MAN must be engaged not just as end-users but as partners in co-designing implementation mechanisms. Public perception will hinge not on announcements but on daily experiences of tax compliance.
6. Subnational Engagement: The Unfinished Battle
While federal tax consolidation is a key achievement, it does not address subnational taxation complexities. Many state governments have built parallel tax systems that often conflict with federal laws, leading to duplication, harassment of businesses, and uneven enforcement.
Successful implementation will require the NRS to work hand-in-hand with state internal revenue services. Clear guidelines must be developed to delineate roles, share data, and enforce compliance without duplication. The reform’s intent to remove multiple taxation must reflect in practice across Nigeria’s 36 states and the FCT.
States must also adopt compatible technologies and policy frameworks that enable seamless revenue sharing and collaborative enforcement. Without such alignment, the reform risks remaining a federal initiative with limited real-world impact.
7. Informality and Enforcement: The Final Frontier
Nigeria’s informal sector comprises more than half of the economy, yet contributes disproportionately less to national revenue. Addressing tax evasion and bringing more businesses into the tax net is critical to improving Nigeria’s tax-to-GDP ratio, currently around 10%.
The reform introduces mechanisms to tackle this, including digital tracking, data cross-referencing, and third-party verification. However, enforcement must be approached with sensitivity. Small businesses that operate informally often lack financial literacy, access to credit, or formal registration. Aggressive enforcement could discourage entrepreneurship or lead to systemic noncompliance.
Instead, the NRS should adopt a facilitative approach. Education campaigns, simplified tax filing systems, and phased onboarding processes will help the informal sector transition into the formal economy without fear or burden.
8. Importance of Communication and Civic Education
Public understanding of the new tax reforms is still low. Many citizens remain unaware of the reliefs and exemptions offered under the law, while others fear increased obligations. Misinformation could fuel resistance, undermine trust, and weaken compliance.
Therefore, communication must be prioritised. Campaigns should be multi-platform, multilingual, and accessible across literacy levels. Town hall meetings, radio shows, social media influencers, and local government partnerships must be leveraged to spread awareness. Success stories and testimonials from early adopters can also be powerful tools for social proof.
These efforts must go beyond technical updates to address public sentiment. Nigerians must understand not only how to comply, but why compliance benefits them and the country at large.
9. The Call for Institutional Accountability and Public Trust
Trust is the currency of taxation. For too long, Nigerians have viewed the tax system as corrupt, inefficient, and punitive. The NRS must change this narrative by leading with accountability.
This includes publishing timely and verifiable reports on tax collections, expenditures, and enforcement actions. Citizens must be able to see where their money is going. A tax ombudsman office should be created to address grievances quickly and transparently. Every contact point with the tax system should reflect professionalism, fairness, and respect.
By embodying these values, the NRS can transform taxation from an obligation into a shared civic responsibility.
10. Cross-Sector Opportunities: Beyond Tax Collection
The implications of the tax reforms go far beyond fiscal balance. If well-implemented, they can trigger broader transformations across multiple sectors. The energy sector has already recorded over $6 billion in new investments, thanks to fiscal clarity provided by the new tax regime. MSMEs are set to benefit from simplified compliance requirements and exemptions from PAYE and VAT, freeing up capital for reinvestment.
Digital identity verification linked to taxation can boost financial inclusion, especially for women and youth-led businesses. Harmonised tax policies can enhance Nigeria’s ease of doing business rankings, attract diaspora investments, and facilitate regional trade under the AfCFTA framework.
In the long run, these reforms may serve as a model for other African economies grappling with revenue shortfalls, inefficiencies, and uneven development.
Conclusion As I conclude this piece, this is the fact: “Execution is the True Reform, nothing more, nothing less”. The passage of Nigeria’s 2025 Tax Reform Bills is a historic achievement, but history will not remember the legislation—it will remember what was done with it. The difference between policy intent and developmental impact lies in execution.
The work ahead is substantial as it will test the capacity of institutions, the will of political actors, and the trust of the Nigerian people. But it also presents a once-in-a-generation opportunity to redefine governance, promote shared prosperity, and lay the foundations of a modern tax state.
Nigeria now stands at a critical juncture to redefine her revenue drive positively. If implementation is timely, inclusive, and transparent, this reform could become the cornerstone of a revitalised economy. But if delayed, politicised, or diluted, it risks becoming another ambitious reform lost in translation.
The road after reform is long, but with clarity of purpose and integrity of action, it is a road worth travelling.
*Prof. Sarumi is the Chief Strategic Officer, LMS DT Consulting, Faculty, Prowess University, US, and ICLED Business School, and writes from Lagos, Nigeria. He is also a consultant in TVET and indigenous education systems, affiliated with the Global Adaptive Apprenticeship Model (GAAM) research consortium. Tel. 234 803 304 1421, Email: leadershipmgtservice@gmail.com.
NISTF , ITF and other extraneous taxes should also be merged. They are killing and discouraging SMEs and not transparent.
There should be drastic reduction of taxes collected from SMEs if you want the nation to develop as in other climes.