Nigeria’s sweeping tax reforms, encapsulated in the newly enacted Nigeria Tax Act 2025, are intended to be a game-changer—yet, the ambitious plan has stalled business activity across the nation. Despite assurances from the Federal Government that the reforms will simplify taxation and exempt micro and low-income earners, a critical lack of clarity on implementation has plunged millions of SMEs into a costly holding pattern.
The reforms, hailed by the Presidential Fiscal Policy and Tax Reform Committee Chairman Taiwo Oyedele as pro-poor and designed to eliminate multiple taxation, have failed to translate into market confidence. Instead, businesses across Lagos, Kano, Port Harcourt, and Abuja are tightening cash flow, postponing investments, and delaying recruitment—even ahead of the crucial year-end spending season.
The Gap Between Intent and Execution
The new act represents the most significant tax overhaul in three decades, promising to consolidate dozens of federal laws, restructure income tax classifications, and exempt small businesses below certain turnover thresholds from Corporate Income Tax (CIT). The Federal Inland Revenue Service (FIRS, soon to be NRS) even asserts that only 5% of Nigerians will pay income tax under the new architecture.
However, for the SMEs that contribute 48% of Nigeria’s GDP and over 80% of employment, the transition feels opaque and rushed:
-
Information Void: Business owners report they have yet to see official guidelines, sector-specific documentation, or explanatory notes on how the new rules will be interpreted.
-
Capacity Constraints: Many lack updated accounting systems, Tax Identification Numbers (TINs), or the technical capacity to meet new reporting requirements.
The Macroeconomic Cost of Uncertainty
This uncertainty is directly causing an economic contraction at the grassroots level:
-
Retail/Wholesale: Retailers, like pipe dealer Udeze Chinyere in Lagos, are deliberately keeping inventory leaner than usual for Q1 2026, unwilling to tie down capital amidst “too many unknowns” regarding margins and supplier pricing.
-
Tech & Services: A Lagos-based fintech firm has paused the rollout of a new payments product planned for January, citing tax uncertainty surrounding digital revenues.
-
Manufacturing: Manufacturers, facing a complex interplay of tax compliance, supply chains, and forex exposure, are unwilling to lock in new contracts until they receive full clarity on how upstream supplier cost structures will change.
This widespread spending freeze poses a significant macroeconomic threat, stalling investment precisely when the economy needs stimulus.
Even among tax professionals, opinions are split. While advocates from the Chartered Institute of Taxation of Nigeria (CITN) praise the move toward simplicity, many consultants remain unable to advise clients confidently, reinforcing the atmosphere of risk aversion gripping the nation’s crucial small business sector. The urgent need now is not more promises, but immediate, detailed, and accessible implementation guidance.
