Key Points

• The new tax laws merge multiple levies into one system to simplify compliance from 2026.

• Low-income earners and small businesses pay nothing, while higher earners and large firms pay more.

• Bank transfers are not taxed automatically. Only unexplained income becomes taxable after filing.

Nigeria is about to enter a different tax era. On January 1, 2026, four major tax laws signed by President Bola Tinubu last June take full effect, reshaping how individuals and businesses are taxed and how government raises money beyond oil.

The laws are the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act.

Together, they collapse dozens of overlapping taxes into a single framework and hand enforcement to a restructured Nigeria Revenue Service, formerly the Federal Inland Revenue Service.

The government’s argument is simple. Nigeria collects too little tax, depends too much on oil, and keeps borrowing to fill the gap.

The new system, officials insist, is meant to be broader, clearer, and fairer. Still, confusion has spread fast online, with claims that all bank transfers will be taxed or that the government plans to seize people’s savings. None of that is true.

Here’s what the new regime actually does, why it matters, and what Nigerians should expect next.

Why the reforms happened

Nigeria’s tax-to-GDP ratio sits around 13.5 percent, one of the lowest among comparable economies.

Oil still accounts for roughly 70 percent of government revenue, according to 2024 figures from the National Bureau of Statistics. When oil prices dip, budgets unravel.

In 2025 alone, the government borrowed about N11 trillion, yet capital projects still stalled due to revenue shortfalls.

The tax reforms are meant to reduce that cycle. By streamlining taxes and widening the base, the Finance Ministry projects non-oil revenue could reach 40 percent of GDP by 2030.

Other oil-producing countries offer a contrast. Norway, for example, taxes income heavily, saves aggressively, and funds public services largely from tax receipts rather than oil rents. Nigeria has never built that culture at scale.

Personal income tax. Who pays and who doesn’t

Under the new system, personal income tax becomes more clearly progressive.

Anyone earning N800,000 or less per year, roughly N66,000 a month, pays no income tax at all. That exemption covers many low-income earners and informal workers.

Above that threshold, rates rise gradually. Income between N800,001 and N3 million is taxed at 15 percent. The top rate of 25 percent applies only to income above N50 million.

A worker on the new minimum wage of N70,000 a month earns N840,000 a year. Only N40,000 of that is taxable, which comes to about N6,000 in tax for the entire year. Someone earning N100 million annually would pay roughly N24 million.

Taxable income now includes salaries, rent, interest, and gains from digital assets like cryptocurrency.

Interest also covers foreign exchange gains and bond premiums, which were previously treated differently.

The old consolidated relief allowance is gone. In its place, taxpayers can deduct 20 percent of annual rent paid, capped at N500,000, as long as they can show proof. Pension contributions, life insurance premiums, and capital allowances remain non-taxable.

Bank transfers and the panic online

Despite widespread claims, ordinary bank transfers are not automatically taxed.

What the law allows is for unexplained inflows to be treated as income if a taxpayer cannot show where the money came from.

If you correctly identify and report gifts, loans, and transfers between your own accounts when you file, they are not taxable.

Starting in 2026, you will need a Tax Identification Number to open a new bank account, buy insurance, or trade stocks.

This connects financial activity to tax records, but it doesn’t give tax authorities the right to take over accounts whenever they want. According to the law, account confiscation can only happen after audits, notices, objections, and appeals.

What changes for businesses

Companies now fall into clearer categories.

Small businesses with annual turnover below N100 million and assets under N250 million pay no company income tax.

Medium-sized firms, earning between N100 million and N1 billion, face rates between 15 and 20 percent. Large companies above N1 billion turnover pay 30 percent.

Agricultural startups receive a five-year tax holiday.

Several levies have also been merged into a single 4 percent Development Levy for medium and large firms.

This replaces charges like the Tertiary Education Tax, NITDA Levy, NASENI Levy, and the Police Trust Fund Levy. The goal is fewer forms, fewer agencies, and less duplication.

Value Added Tax stays at 7.5 percent. Basic items such as food, medicine, education, and transport are zero-rated.

A major shift is that businesses can now reclaim input VAT on services and fixed assets, which was previously disallowed.

Stamp duty and electronic transfers

Stamp duty still applies to many legal documents, including land agreements and contracts. Under the new law, the former N50 electronic money transfer charge is formally classified as stamp duty.

It applies only to transfers of N10,000 and above, and the sender pays, not the receiver. Salary payments and transfers between accounts owned by the same person, matched by BVN or NIN, are exempt.

Unstamped documents remain inadmissible in civil court, which makes compliance more than a technical issue.

Filing, penalties, and enforcement

Everyone must file tax returns each year, even those who owe nothing. Companies must file by March 31. Individuals have until June 30. Filing is done through Nigeria Revenue Service portals.

Late filing attracts a N100,000 fine, plus N50,000 for each additional month. Failure to pay tax brings a 10 percent penalty plus interest tied to the Central Bank’s monetary policy rate, currently 27 percent.

Tax evasion can lead to criminal charges and asset seizure, but only after due process. The new laws also allow data sharing across government agencies to close loopholes.

What still needs work

Confusion remains widespread. Much of it stems from poor public communication. Taiwo Oyedele, who chaired the tax reform committee, has spoken often, but broader outreach has lagged.

Clear explanations in plain language, town halls, radio programs in local languages, and simple online tax calculators could make a real difference. Without that, even well-designed laws risk resistance.

The bigger picture

The reforms are structured to ease pressure on low-income earners and small businesses while collecting more from those with higher capacity.

Done right, they could help fund roads, schools, hospitals, and social services without endless borrowing.

Tax, in the end, is about more than revenue. It creates a clearer link between citizens and government. When people pay, they also demand results.

That expectation, not fear or misinformation, is what will decide whether Nigeria’s new tax system succeeds.