Following the signing of the 2025 Tax Reform Acts by President Bola Ahmed Tinubu on June 26, 2025, Nigeria is set to implement a new tax regime effective January 1, 2026.
The four new Acts, the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act — are part of the government’s efforts to streamline the nation’s fiscal and tax systems.
These reforms aim to boost efficiency, improve revenue generation, and align Nigeria’s tax administration with global best practices.
Also, they are also expected to have direct and indirect effects on low-income households.
Here are key ways the new tax policy could impact them:
1. Increase in Cost of Goods and Services
With improved tax compliance and stricter collection processes, many businesses will begin remitting taxes that were previously avoided.
This could lead to increased operational costs, which businesses may pass on to consumers.
For low-income households already grappling with inflation and low purchasing power, this could mean higher prices for essential goods and services, including food, transport, and utilities.
2. Reduction in Disposable Income
As the new tax structure takes effect, individuals within the low-income bracket may face deductions from salaries and small-scale business earnings, particularly under the Pay-As-You-Earn (PAYE) or presumptive tax regimes.
This reduction in take-home pay could further strain households that already allocate most of their income to basic needs.
3. Job Losses and Informal Sector Pressure
Small and medium-sized enterprises (SMEs) employ a large portion of low-income earners, might struggle with increased tax compliance costs.
Some may be forced to downsize or shift operations into the informal economy to evade tax pressures
Also, this could lead to job losses and worsen Nigeria’s unemployment rate.
This places more financial pressure on already struggling households.
4. Improved Public Services (Potential Long-Term Benefit)
If properly implemented, the new tax framework could translate into better revenue collection and management, enabling the government to invest in infrastructure, education, healthcare, and social welfare programmes.
Over time, this could improve living standards and offer relief for low-income families, especially if revenues are transparently utilised for public benefit.
5. Expansion of the Social Safety Net
The government has hinted at plans to use the improved tax revenue system to strengthen social protection programmes for vulnerable citizens.
Also, this could include conditional cash transfers, subsidies, and small business grants targeted at low-income earners.
If effectively implemented, these measures could cushion the initial economic shock of the new tax regime.
6. Encouragement of Tax Inclusion and Formalisation
The new Acts aim to simplify tax procedures.
Furthermore, this makes it easier for small business owners, artisans, and market traders to register and pay taxes.
This introduces a sense of fiscal responsibility.
Also, it could encourage financial inclusion by linking informal sector workers to digital systems and government benefits.
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However, compliance costs might initially discourage participation until awareness and support mechanisms are strengthened.
