The Centre for the Promotion of Private Enterprise has cautioned that Nigeria’s ongoing tax reform efforts risk harming the informal sector if they are poorly designed or improperly sequenced.

The warning was contained in a statement issued on Sunday and signed by the organisation’s Chief Executive Officer, Dr Muda Yusuf.

CPPE said the concern arises as the government intensifies moves to broaden the tax base, boost revenue, and improve compliance across the economy.

Dr. Yusuf said that while tax reform is necessary, the dominance of the informal sector in Nigeria’s economy requires a careful and inclusive approach to avoid undermining livelihoods and stifling business growth.

CPPE added that any credible discussion on tax reform must take into account the size and significance of the country’s informal economy.

Dr Yusuf noted that Nigeria is home to an estimated 40 million micro, small and nano enterprises, more than 80 per cent of which operate informally.

He cited the latest National Bureau of Statistics Labour Force Survey, which shows that over 90 per cent of jobs are in the informal economy, underscoring its critical role in employment and income generation.

“Most informal operators lack structured record-keeping systems and have limited understanding of tax concepts such as Tax Filing obligations, Company Income Tax [CIT], Value Added Tax [VAT], Personal Income Tax [PIT], Withholding Tax etc,” he noted.

“Businesses are largely cash-based, operate on thin margins, and often lack the literacy and digital capacity required for compliance. They also lack the capacity to digest the technical and somewhat complex issues around taxation.”

CPPE said its concerns stem mainly from provisions in the new tax framework that impose mandatory filing obligations, set specific record-keeping standards, introduce penalties for non-compliance, and apply presumptive taxation where proper records are lacking.

Yusuf warned that if these measures are not carefully sequenced, they could deter voluntary formalisation and instead drive informal businesses deeper underground.

He also pointed to rising unease among small and medium-sized enterprises over the requirement for banks to mandatorily report quarterly transactions of N25 million and above to tax authorities.

“The proposed increase in capital gains tax from 10 per cent to 30 per cent—despite assurances around thresholds—has unsettled investors in the stock market and real estate at a time when confidence remains fragile,” CPPE said.

In December, President Bola Tinubu reiterated the Federal Government’s resolve to proceed with the implementation of the new tax laws as planned, despite growing calls for a pause.

He said the reforms, which began taking effect from June 26, 2025, and January 1, 2026, are central to rebuilding Nigeria’s fiscal framework and would not be halted.