Nigeria’s tax landscape is undergoing a historic overhaul, with the Federal Inland Revenue Service exempting food, education, shared transportation, and agriculture from value-added tax.
The reforms, described as the most significant fiscal transformation since independence, aim to ease the burden on citizens and businesses while improving government revenue collection.
The Executive Chairman of FIRS, Zacch Adedeji, revealed the changes in an interview marking his two years in office. “With these new laws, food, education, transport, and agriculture will be VAT-free,” Adedeji declared. “The President has fulfilled his promise to make businesses flourish by removing all burdens and hurdles. This is the best thing that has happened to Nigeria’s fiscal ecosystem since 1960.”
The reforms consolidate multiple tax laws into a single code, scheduled to take effect in January. The new code reduces the number of tax types to single digits, introduces a simpler framework for individuals and businesses, and provides relief for smaller enterprises. Businesses with annual turnover below N50m will no longer pay tax, while thresholds for personal income tax have been adjusted to protect low-income earners.
President Bola Tinubu signed four major bills into law on June 26, 2025, including the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. These reforms aim to broaden the tax base, improve compliance, and enhance transparency across all tiers of government.
According to Adedeji, the reforms are already yielding results. Nigeria’s tax-to-GDP ratio has risen from 10% to 13.5% in just two years, with a target of 18% by 2027. Improved revenue has helped 30 states repay ₦1.85tn in debts within the past 18 months, while debt servicing costs have dropped to about 50%.
The FIRS will be renamed the Nigeria Revenue Service to reflect its role as the central tax authority for all tiers of government. Adedeji explained that the word “federal” gave the wrong impression that the agency only collects taxes for the federal government.
He credited Tinubu’s broader economic decisions, including fuel subsidy removal and exchange rate unification, with strengthening the federation account.
