Nigeria’s economic playbook is being rewritten. With the introduction of the Nigeria Tax Administration (NTA) Act 2025, policymakers are charting a bold new course aimed at balancing fiscal responsibility with small-business empowerment.
The landmark legislation — described by experts as a “transformational reset” for the country’s tax landscape — is poised to ease pressure on Micro, Small, and Medium Enterprises (MSMEs) while improving fairness, compliance, and growth opportunities across key sectors.
A Redefined Tax Threshold for MSMEs
One of the most notable changes under the NTA Act is the raised qualification ceiling for small businesses, which expands the annual turnover limit for tax exemptions from ₦25 million to ₦50 million, with fixed assets capped at ₦250 million.
According to Sam Esuga, Partner and Tax Specialist at The New Practice (TNP), this shift represents a long-awaited recognition of inflation, currency realities, and the vital role MSMEs play in employment and innovation.
“The Act provides breathing space for smaller enterprises,” Esuga explained. “These businesses can now reinvest profits into scaling operations rather than losing them to administrative taxes. It’s a pragmatic approach that still keeps government revenue in focus.”
Agriculture and Value Chain Reliefs
The agricultural sector — often burdened by high input costs — is among the biggest beneficiaries. The NTA Act exempts tractors, fertilizers, seeds, veterinary drugs, and animal feed from Value Added Tax (VAT).
This, Esuga emphasized, could lower production costs, enhance rural livelihoods, and stabilize food prices. Smallholder farmers and agribusiness startups are also positioned to gain from a five-year tax holiday, a move designed to attract investment into food security and value addition.
Encouraging Production Through Input VAT Deductions
Manufacturers will also experience newfound flexibility under the law. Businesses can now offset VAT paid on machinery, raw materials, and fixed assets against their output VAT — a liquidity-friendly provision that must be claimed within five years.
By linking tax incentives directly to productive activities, the Act encourages reinvestment, modernization, and sustainable expansion, particularly in the manufacturing and processing sectors.
Inclusive Taxation for a Fairer Economy
Beyond business incentives, the NTA Act 2025 introduces a progressive personal income tax system designed to promote equity.
Under the new framework, the first ₦800,000 of annual income is entirely tax-free, while higher income bands face incremental rates up to 25% for those earning above ₦50 million annually.
Essential goods and services — including basic food items, school tuition, and textbooks — are now zero-rated for VAT, ensuring that tax reform does not deepen the cost-of-living burden for low-income households.
Even shared public transport has been exempted, a deliberate nod to Nigeria’s working class and daily commuters.
Formalizing the Informal Economy
A standout feature of the NTA Act is its effort to bring informal workers into the tax net without overwhelming them.
All taxable persons — including artisans, freelancers, and gig workers — are now required to register for a Tax Identification Number (TIN). In cases where formal income records are missing, authorities may use presumptive assessments to determine fair liability.
This approach, according to Esuga, not only expands the tax base but also builds documentation trails that could help informal workers access loans and government support programs.
Rent Relief and Social Compensation
To cushion urban households and small operators, the Act introduces a rent relief clause allowing taxpayers to deduct up to 20% of annual rent (capped at ₦500,000) when calculating taxable income.
It also exempts compensation up to ₦50 million from tax in cases of personal injury, wrongful dismissal, or defamation, aligning with principles of fairness and humane taxation.
Voices from the Business Community
Reactions from Nigeria’s enterprise ecosystem have been broadly positive, though measured.
Dr. Abdulrashid Yerima, President of the Nigerian Association of Small and Medium Enterprises (NASME), described the Act as “a decisive shift towards equity and enterprise resilience.”
He praised the upward review of small-business turnover thresholds — which some interpretations place as high as ₦100 million — and the removal of the controversial 0.5% turnover tax on loss-making firms.
“This aligns with global best practices in progressive taxation,” Yerima said. “It’s a step toward redistribution and competitiveness in a tough economic climate.”
However, he warned that with lending rates exceeding 37% and a volatile foreign exchange environment, the success of these reforms will depend on disciplined implementation and consistent enforcement.
SMEDAN and ASBON Weigh In
The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) backed the reforms, highlighting how they reduce the tax burden and streamline compliance.
Charles Odii, SMEDAN’s Director-General, explained that the Act consolidates multiple levies and eliminates overlapping charges that have historically stifled MSME growth.
Meanwhile, Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), raised a note of caution — particularly on illegal and multiple local government taxes that continue to affect SMEs.
“If local councils are not brought into compliance, these reforms risk being undermined at the grassroots,” he warned.
A Foundation for a Fairer Future
The NTA Act 2025 represents more than just a fiscal adjustment; it’s a strategic blueprint for inclusive growth.
By protecting small enterprises, formalizing the informal economy, and introducing fairness into personal taxation, Nigeria is signaling that its next phase of development will rest not only on oil revenues but on the creativity and resilience of its entrepreneurs.
If implemented with transparency and discipline, the Act could redefine Nigeria’s reputation — not just as Africa’s largest economy, but as one of its most business-friendly and socially balanced.
