Why Nigeria’s most ambitious fiscal reset now faces its hardest test
Nigeria’s sweeping tax reform agenda may be sound in design, ambitious in scope, and progressive in intent—but its ultimate success will be decided elsewhere: in execution, sequencing, and public trust.
That is the central warning emerging from Nigeria’s private sector policy community as implementation of the new tax regime gathers pace.
At the heart of the debate is a sobering truth of political economy: good laws do not guarantee good outcomes. History shows that reforms imposed too quickly, too rigidly, or without social buy-in often collapse under resistance—no matter how technically elegant they appear on paper.
Policy Design Is Not the Problem
From a structural standpoint, Nigeria’s tax reforms rank among the most comprehensive fiscal overhauls in decades. They attempt to correct long-standing distortions by:
- Rationalising overlapping taxes
- Repealing obsolete legislation
- Aligning incentives with diversification and job creation
- Offering relief to low-income earners and small businesses
- Exempting essential goods and services from VAT
On paper, the architecture is defensible—and in many areas, overdue.
But policy design is only the first mile.
Implementation Is the Real Battlefield
The real risk lies in how the reforms are rolled out.
Nigeria is attempting this reset at a fragile economic moment—one marked by:
- Elevated inflation
- Eroded purchasing power
- Lingering adjustment costs from fuel subsidy removal
- Ongoing FX liberalisation pressures
- Rising reform fatigue across households and firms
Layered onto this is a politically sensitive pre-election cycle, where economic anxiety is already high and tolerance for disruption is low.
In such an environment, expecting universal, immediate compliance is unrealistic—and potentially destabilising.
A rigid, enforcement-heavy rollout risks triggering resistance before the reforms’ benefits have time to materialise.
Why Trust Is the Missing Variable
Public skepticism is not ideological—it is experiential.
Many Nigerians associate past reforms with:
- Higher living costs
- Heavier compliance burdens
- Weak service delivery
- Limited transparency in revenue use
This fragile social contract continues to undermine confidence that additional tax revenues will translate into visible public value.
Without rebuilding trust, enforcement alone will not work.
The Informal Economy Reality Check
Nigeria’s informal economy is not a footnote—it is the system’s centre of gravity.
With an estimated:
- 40 million micro, small and nano enterprises
- Over 80% operating informally
- Accounting for more than 90% of total employment
Most informal operators lack:
- Structured records
- Digital tools
- Tax literacy
- Compliance capacity
A compliance-first approach risks criminalising informality rather than gradually integrating it.
Policy Flashpoints Businesses Are Watching Closely
Several provisions have already triggered anxiety across the business community, including:
- Mandatory reporting of bank transactions above ₦25 million
- Sharp increases in capital gains tax
- Rent relief caps misaligned with current market realities
- Expansive enforcement powers and stiff penalties
For high-turnover, low-margin businesses, these measures feel punitive rather than reformative.
A Smarter Revenue Strategy Exists
Empirical evidence is clear: tax revenue is highly concentrated.
Roughly:
- 20% of taxpayers generate nearly 90% of total tax receipts
This reality suggests a more effective strategy:
- Focus enforcement on large corporates, established SMEs, and high-net-worth individuals
- Prioritise revenue efficiency over blanket compliance drives
- Gradually integrate the informal sector through incentives, education, and simplified tools
This approach delivers revenue without destabilising livelihoods.
Why Sequencing Matters in 2026
With 2026 shaping up as a politically sensitive year, restraint is not weakness—it is strategy.
Credibility, stability, and trust-building must take precedence over short-term enforcement optics.
Tax reform is not an event. It is a process.
Handled with realism, flexibility, and empathy, it can anchor Nigeria’s fiscal sustainability for decades. Mishandled, it risks becoming another well-written policy undone by poor execution.
BRANDECONOMY INSIGHT
Tax reform succeeds when citizens believe three things:
- The burden is fair
- The timing is humane
- The proceeds will be well used
Miss any one—and resistance becomes inevitable.
