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EXPLAINED: Proposed tax bills, what they would mean for Nigerians

Published

1 year ago

December 4, 2024

EXPLAINED: Proposed tax bills, what they would mean for Nigerians

In August 2023, President Bola Ahmed Tinubu inaugurated the Presidential Committee on Fiscal Policy and Tax Reforms in Abuja. As nominally suggested, the committee has been working on reforming how taxes are administered, charged and remitted in Nigeria.

This committee’s activities have culminated in the proposal of the Tax Reform Bills which have caused a stir within policy circles and public debates in Nigeria. The bills include the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill.

In the following paragraphs, FIJ simplifies the key aspects of the bills that have become major talking points.

The topic of Value Added Tax (VAT) in the proposed Tax Reform Bills is a major talking point. VAT is an extra fee paid whenever one buys an item, a small slice added to the price that goes to the government to fund public services.

In Section 40 of the current VAT law in Nigeria, the government takes everything collected and splits it into three big pots. If N1,000,000 is collected in a year, N150,000 goes straight to the Federal Government (15%) and N350,000 (35%) is shared among the 774 local governments. The remaining N500,000 (50%) is shared among the states.

But here is where it gets interesting. The N500,000 is not split among states randomly. Half of it — N250,000 — is shared equally among all 36 states. So, every state gets about N6,944 regardless of how economically viable or large they are.

N150,000 (30%) is shared with the states based on their population. The states with larger populations get a larger cut of this N150,000. The last N100,000 goes to states based on derivation, a fancy word that means “Who brought in the money?” States that generate more VAT get a bigger portion of the amount.

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In the proposed tax reform bill, however, FG gets N100,000 (10%) and states have N550,000 (55%) to share. Most importantly, the derivation pot in the proposed reform is bigger. N330,000 (60%) out of the N550,000 will be shared with the 36 states based on how much VAT they generate.

On the more individual level, the current tax system only shares a 7.5% VAT on the goods and services Nigerians use. In the proposed bill, VAT charged on goods and services will go up from 7.5% to 10% first and then progressively to 15% by 2030.

In short, Nigerians will pay more VAT, and it will increase as the years go by.

However, core services such as rent, (public) transportation, health, food and education are exempted from VAT.

PERSONAL INCOME TAX CHANGES

Under the current tax system in Nigeria, people earning less than N300,000 annually don’t pay any tax. Those earning exactly N300,000 are taxed at 7% of their earnings, which amounts to N21,000. For individuals who earn between N300,000 and N600,000, the first N300,000 is taxed at 7% (N21,000), while the next N300,000 is taxed at 11% (N33,000), bringing the total tax to N54,000.

For incomes between N600,000 and N1.1 million, the first N600,000 is taxed as explained (N54,000), and the next N500,000 is taxed at 15%, adding another N75,000. This means you’ll pay a total of N129,000.

Those earning between N1.1 million and N2.7 million pay N129,000 on the first N1.1 million and 21% (N336,000) on the next N1.6 million, which brings their total tax to N465,000. For the people who earn more than N3.2 million, the first N3.2 million is taxed at N465,000, and anything above that is taxed at 24%.

Under the proposed reforms, the tax brackets change significantly. People earning up to N800,000 annually won’t pay any tax at all. For those earning between N800,000 and N3 million, the first N800,000 remains tax-free, while the next N2.2 million is taxed at 15%, amounting to N330,000.

For incomes between N3 million and N12 million, the first N3 million is taxed at N330,000, and the next N9 million is taxed at 18%, which adds N1,620,000, making the total tax N1,950,000.

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For those who earn between N12 million and N25 million, the first N12 million is taxed at N1,950,000, and the next N13 million is taxed at 21%, adding N2,730,000 and bringing the total tax to N4,680,000.

For those earning between N25 million and N50 million, the first N25 million is taxed at N4,680,000, and the next N25 million is taxed at 23%, adding N5,750,000 and bringing the total to N10,430,000. Finally, anyone earning above N50 million pays N10,430,000 on the first N50 million and 25% on anything above that.

Essentially, anyone earning below a million naira a year would not pay taxes under this structure. Also, those who earn a higher income will pay more.

CORPORATE INCOME TAXES CHANGES IN THE BILL

Under the current tax system, companies in Nigeria pay different rates of Corporate Income Tax (CIT) based on their size. Small companies with a total revenue of N25 million or less don’t pay any taxes.

Medium companies, earning between N25 million and N100 million, pay 20% (between N5 million and N20 million). Large companies, making over N100 million, pay the highest rate of 30%. For example, if a company makes N200 million in profits, it owes N60 million in taxes under the current rules.

The proposed reforms simplify this system and reduce rates for many companies. Small companies still won’t pay any taxes, but medium and large companies will pay the same rate.

In 2025, the rate will be 27.5% for both medium companies and larger ones. This will drop to 25% from 2026 onward. That same company making N200 million would pay N55 million in 2025 and N50 million in 2026.

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There’s also a new rule in the proposal to make sure big companies don’t get away with paying too little tax. If a company’s effective tax rate (what it actually pays after deductions) is less than 15%, it will have to pay extra to meet that minimum.

For instance, if such a company earns N20 billion and calculates its taxes at 12%, it would owe N2.4 billion. Under the new rule, it must add N600 million to meet the 15% minimum, bringing its total tax to N3 billion.

SCRAPPING FIRS AND UNIFYING TAXATION

The Nigeria Revenue Service Bill, proposed by the Presidential Tax Reform Committee, proposes replacing the Federal Inland Revenue Service (FIRS) with a new body called the Nigeria Revenue Service (NRS). In simple terms, the NRS will take over from FIRS but with more responsibilities.

One major change is the plan to centralise tax collection. Currently, some taxes are paid to state and local government agencies, but the NRS will handle all tax collection. It will also assist states and local governments in collecting their taxes and ensuring the funds are properly sent to them.

The bill also aims to simplify Nigeria’s complex tax laws. At the moment, taxes are governed by multiple acts, such as the Company Income Tax Act, VAT Act, and Petroleum Profits Tax Act. The proposed law will merge these into a single act, making taxes easier to understand and manage.

Businesses will no longer have to deal with different agencies for different taxes. Instead, the NRS will handle everything in one place, reducing any existing confusion for taxpayers.

The reforms also promise to introduce new tools to make the tax system fairer and more efficient. A Tax Appeal Tribunal will be set up to resolve disputes quickly and without the need for regular courts.

Meanwhile, a Tax Ombudsman will step in when taxpayers face issues like delays, errors or poor service. This office will investigate complaints and recommend solutions to ensure everyone is treated fairly.

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If the bill becomes law, the Joint Revenue Board will also be established to coordinate tax matters across all levels of government. Altogether, these changes promise a simpler, more streamlined tax system for businesses and individuals alike.

WHAT ARE DEVELOPMENT LEVIES AND WHAT HAPPENS TO THEM

The remittance of development levies is one of the major talking points in the Tax reform bill.

Critics like Borno State Governor Babagana Zulum have called the Federal Government out, for ‘planning to merge or scrap’ agencies like the National Information Technology Development Agency (NITDA), the National Agency for Science and Engineering Infrastructure (NASENI), and the Tertiary Education Trust Fund (TET Fund).

Under the current system, Nigerian companies are mandated to pay certain levies to these agencies. Legislations like the NITDA Act, the Finance Act and the TETFUND Act, enforce these levies.

In that system, firms 3% of the assessable profit for each year of assessment to fund education in Nigeria through TEFUND. Companies earning N100 million or more annually also contribute 1% of their pre-tax profits to the National Information Technology Development Fund to boost IT innovation.
Additionally, some industries, such as banking and telecommunications, would pay a newer 0.25% levy to fund science and engineering projects through NASENI.

The proposed bill simplifies this structure with just one development levy. Medium and large companies will contribute, but small businesses and foreign companies are exempt. From 2025 to 2026, the companies pay 4% of profits. This covers remittances to education, science and research, and innovation funds.

The levy drops to 3% between 2027 and 2029, and stays at 2% from 2030 onward. The collected funds will be split among key agencies if the new bill becomes law.

In the first year post-signing (2025-2026), The TET Fund gets the lion’s share — 50%. This share of the development levy will increase to nearly 67% by 2027. But after 2029, the TETFUND will phase out.

A new Student Education Loan Fund starts smaller at 25% in 2025–2026, grows to 33% in 2027, and takes over the entire levy by 2030. After 2026, funding for tech, innovation and engineering will stop.

EXPLAINED: Proposed tax bills, what they would mean for Nigerians

FIJ

Related Topics:Featured Nigerians Tax bills

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Ikeja Electric Apologises to Customers Over Power Disruptions

Published

4 hours ago

March 11, 2026

Trends Admin

Ikeja Electric Apologises to Customers Over Power Disruptions

Lagos, Nigeria — Nigeria’s leading electricity distribution company, Ikeja Electric, has apologised to customers within its network over the persistent power supply disruptions currently affecting many communities.

In a public notice issued on Tuesday, the company attributed the outages to gas supply constraints impacting electricity generation across the national power grid.

The notice explained that the gas shortage has resulted in a significant energy deficit on the grid, forcing distribution companies to implement increased load shedding across their feeders.

“We sincerely apologize for the ongoing power supply disruptions you are experiencing,” the company said in the statement addressed to customers.

According to the distribution company, the situation is beyond its immediate control as it stems from challenges affecting power generation nationwide. The firm added that it remains in continuous communication with relevant stakeholders in the power sector to resolve the issue and restore normal electricity generation levels.

The company assured customers that efforts are ongoing to stabilize the grid and improve supply as soon as the gas supply situation improves.

Ikeja Electric also appealed for patience and understanding from customers during what it described as a challenging period for the nation’s electricity supply chain.

“We truly appreciate your patience and understanding during this challenging period,” the management stated in the notice dated March 11, 2026.

Electricity consumers in Lagos and other areas served by Ikeja Electric have in recent days complained about prolonged blackouts and erratic supply, raising concerns about the stability of power distribution in the region.

Nigeria’s electricity sector has frequently faced generation challenges linked to gas shortages, infrastructure limitations, and grid instability, which often lead to widespread load shedding by distribution companies.

The latest development is expected to further intensify concerns among households and businesses already struggling with high energy costs and unreliable power supply.

Ikeja Electric Apologises to Customers Over Power Disruptions

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Terrorists Suffer Heavier Losses as Troops Intensify Operations Across Nigeria — Defence Minister

Published

7 hours ago

March 11, 2026

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Nigeria’s Defence Minister, Gen. Christopher Musa

Nigeria’s Minister of Defence, Gen. Christopher Musa (retd.)

Terrorists Suffer Heavier Losses as Troops Intensify Operations Across Nigeria — Defence Minister

Nigeria’s Minister of Defence, Gen. Christopher Musa (retd.), on Wednesday said terrorists and bandits operating across the country are suffering heavier losses than government troops as the Nigerian Armed Forces intensify military operations across several conflict zones.

The defence minister gave the assurance after a strategy meeting with service chiefs in Abuja, noting that the meeting reviewed the country’s counter-terrorism strategy across different operational theatres. According to him, the Armed Forces remain fully committed to restoring peace and security nationwide despite recent attacks on military formations in parts of the country.

“We had a quick, short meeting with members of the services to review our strategy in all our theatres within the country. We’re all aware of the issues on the ground, but I want to assure Nigerians that members of the armed forces are working tirelessly to ensure that Nigeria is safe and secure,” Musa said.

The minister acknowledged that the military had suffered casualties in some engagements but insisted that terrorist groups and bandits were recording heavier losses as troops intensify their operations. According to him, the Nigerian military is focusing on eliminating terrorist commanders, destroying their logistics networks, and dismantling operational bases across the country.

“We are aware that we have suffered some casualties, but I can tell you the terrorists and bandits are taking more. We’re taking more commanders out, we’re taking more of their assets out, and we will continue to do that,” he stated.

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Musa also warned that misinformation circulating on social media could undermine the morale of troops and distort public understanding of the security situation. He urged Nigerians not to be discouraged by unverified narratives about the war against terrorism, insisting that the Armed Forces remain firmly in control of ongoing operations.

“We know because of the issue of social media, there are a lot of falsehoods being spread. The Armed Forces are on top of their game and we are putting in every effort to ensure the country is secured,” he said.

The defence minister further appealed to media organisations to exercise caution in reporting security matters, particularly by avoiding the dissemination of terrorist propaganda materials, which he said are often used to promote extremist groups and demoralise security forces.

“Please do not allow your platforms to be used to spread terrorism. When you circulate their videos and messages, you allow them to shine and use them as propaganda against our troops,” he added.

Musa stressed that tackling insecurity in Nigeria requires a collective effort, urging citizens to support security agencies by providing credible intelligence and reporting suspicious activities in their communities.

“This challenge is a Nigerian challenge; it is not only the armed forces’ challenge. Other security agencies are also working in synergy with us,” he said.

He warned individuals who provide information, logistics or any form of assistance to terrorists that they would be treated as accomplices and face the same consequences as the criminals.

“A friend of a thief is always a thief. Those supporting these criminals with information or logistics will be dealt with the same way we deal with the terrorists,” Musa stated.

The minister also congratulated the Inspector-General of Police, Kayode Egbetokun, assuring him of the Armed Forces’ readiness to strengthen collaboration with the Nigeria Police Force and other security agencies to combat insecurity across the country.

He also thanked President Bola Ahmed Tinubu, the National Assembly and state governors for their continued support to the military, expressing confidence that Nigeria would ultimately overcome its security challenges.

“We want to assure Nigerians that they should remain confident and determined. When you see something going wrong, do not hesitate to report it. Action will be taken as quickly as possible,” he added.

The minister’s remarks come amid renewed attacks by insurgent groups linked to Boko Haram and the Islamic State West Africa Province (ISWAP), particularly in Borno State and surrounding areas.

In recent weeks, terrorists have launched coordinated assaults on several military bases, leading to the deaths of soldiers and commanding officers who paid the supreme price while confronting the attackers.

In one such incident in Katsina State, Captain Paul Hassan and two other soldiers were reportedly killed during an attack by terrorists.

Earlier, on March 3, fighters linked to Boko Haram and ISWAP invaded the resettled community of Ngoshe shortly after residents broke their fast during Ramadan. The insurgents reportedly overwhelmed the military formation with superior firepower, including rocket-propelled grenades, anti-aircraft machine guns and drones.

Security sources said the assault left at least 14 soldiers dead across the Ngoshe and Pulka military bases—nine in Ngoshe and five in Pulka, including a commanding officer.

Despite the attacks, military authorities say counter-terrorism operations have been intensified through coordinated air and ground offensives aimed at dismantling terrorist strongholds and restoring stability in affected regions.

Terrorists Suffer Heavier Losses as Troops Intensify Operations Across Nigeria — Defence Minister

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Oil prices rise again after Dangote reduces petrol by N100/litre

Published

12 hours ago

March 11, 2026

Trends Admin

Oil prices rise again after Dangote reduces petrol by N100/litre

Global crude oil prices rebounded sharply on Wednesday, rising by about five per cent after briefly dipping to $88 per barrel the previous day, as escalating tensions in the Middle East continued to unsettle energy markets.

Data from the international market showed that Brent crude climbed to $92.43 per barrel as of 10:56am WAT, representing a 5.27 per cent increase. The benchmark had surged above $100 per barrel earlier in the week amid intensifying hostilities in the region.

The main United States oil contract, West Texas Intermediate, also rose sharply, gaining 5.9 per cent to trade at $88.38 per barrel.

The volatility in global crude prices came a day after the Dangote Petroleum Refinery announced a reduction in the price of Premium Motor Spirit (PMS), also known as petrol, in Nigeria.

The refinery’s Chief Communications Officer, Anthony Chiejina, told Channels Television on Tuesday that the gantry price of petrol had been cut by ₦100, dropping from ₦1,175 per litre last week to ₦1,075 per litre.

According to him, petrol supplied through coastal distribution channels will now sell at ₦1,050 per litre.

In a statement explaining the adjustment, the refinery said the price reduction was driven by movements in global crude oil prices.

“As responsible corporate citizens operating in a high-governance code and ethical environment, we believe it is imperative to reduce the price of our products as a reflection of the decline in global crude oil prices,” the company said.

The refinery noted that its crude supply is priced using international benchmarks with an additional premium of between $3 and $6, while foreign exchange payments are made at prevailing market rates without subsidy.

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It added that even crude supplied under the naira-for-crude arrangement is benchmarked against global prices before being converted to naira using the current exchange rate.

The latest price cut marks the first reduction after three consecutive increases that had pushed petrol prices significantly higher in recent weeks.

Earlier, the Chief Executive Officer of the refinery, David Bird, said the facility was not insulated from global oil market shocks because its crude purchases are tied to international pricing benchmarks.

The refinery’s move came after crude prices briefly fell to about $90 per barrel on Tuesday — the first decline since the outbreak of the latest Middle East conflict involving the United States, Iran and Israel.

The war has heightened concerns about potential disruptions to global oil supply, triggering sharp swings in crude prices and contributing to rising fuel costs in several countries, including Nigeria.

Speaking on the conflict, Donald Trump said the military campaign was progressing faster than initially expected.

“I think the war is very complete, pretty much. They have no navy, no communications, and they’ve got no air force,” the US President told CBS News in a telephone interview.

Trump added that the United States was “very far ahead” of the initial wartime timeline of about four to five weeks and suggested the conflict could end soon.

“It’s going to be ended soon, and if it starts up again, they’ll be hit even harder,” he said.