Oyedele Commended SMEs Tax Exemption, States New Tax Laws Benefits
By Fidelia Okafor
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has commended the exemption of the Small and Medium Scale businesses from the New Tax reform laws with effect from January, 2026.
Nigeria’s long and often contentious journey toward a fair, efficient and growth-oriented tax system appears to have reached a decisive milestone with the ongoing tax reforms.
Speaking at a one-day workshop organised by the Federal Inland Revenue Service (FIRS), soon to transition into the Nigeria Revenue Service (NRS), in Lagos, Taiwo Oyedele, described the reforms as a historic turning point in how the country raises and manages public revenue.
Addressing journalists at the event, Oyedele framed that the changes not merely as technical adjustments to tax laws, but as a fundamental reset designed to rebuild trust between government, citizens and businesses.
For decades, Nigeria’s tax system has been criticised for its complexity, inequity and opacity. Multiple taxes, overlapping authorities, arbitrary assessments and poorly targeted incentives created an environment that discouraged compliance and stifled investment. Citizens and businesses alike called for a simpler, fairer and more transparent framework—one that supports economic growth while ensuring that everyone contributes their fair share.
According to Oyedele, the 2025 reforms answer that call. They are anchored on three core pillars: fairness and equity, growth and competitiveness, and simplification and efficiency. Together, these pillars aim to align Nigeria’s tax regime with global best practice while remaining sensitive to the country’s unique economic realities.
At the heart of the reforms is a deliberate effort to put people first. Oyedele emphasised that the new tax laws are pro-masses, designed to protect low-income earners and reduce the cost of living for ordinary Nigerians. Minimum wage earners are now fully exempted from personal income tax, a move expected to increase disposable income for millions of workers at the bottom of the income ladder.
In addition, Value Added Tax (VAT) has been removed from basic necessities such as staple food items, education, healthcare, shared road transport and rent. The implication, Oyedele noted, is that families will enjoy lower costs for school fees and medical bills, while workers earning the national minimum wage will no longer see their modest earnings eroded by income tax.
Beyond households, the reforms place strong emphasis on unlocking business growth. Describing the new framework as pro-business, Oyedele explained that it lowers the cost of starting and running enterprises while removing bureaucratic bottlenecks that have long made tax compliance burdensome.
One of the most significant changes is the ability for businesses to claim input VAT on assets and services, a reform that directly improves cash flow. Clearer rules on expense deductibility, faster tax refunds and measures to curb arbitrary tax assessments are also expected to enhance certainty and confidence.
Notably, the minimum tax based on turnover often criticised for penalising struggling firms, has been scrapped, while exit and reorganisation rules have been clarified to support corporate restructuring. A manufacturing firm investing in new equipment or a start-up acquiring critical software can now recover VAT paid on those purchases, freeing up resources for expansion and innovation.
The reforms also seek to energise Nigeria’s capital markets and improve access to finance. Oyedele explained that clarity and efficiency are essential for investor confidence, and the new laws reflect this understanding. Withholding tax on bonus shares has been eliminated, capital gains tax exemption thresholds have been raised, and reinvestment exemptions introduced alongside deductions for capital losses.
In a move welcomed by subnational governments, state government bonds are now tax-exempt, joining federal government bonds in that category. Small investors, meanwhile, stand to benefit from lower effective tax rates on capital gains, while withholding tax on fixed-income investments is now treated as final tax for individuals and non-residents.
By way of illustration, Oyedele noted that an investor selling shares worth N120 million with a gain of N8 million would now be exempt from capital gains tax, a change expected to encourage more Nigerians to save and invest in domestic companies.
Another critical objective of the reforms is correcting long-standing economic distortions. Nigeria’s previous incentive regime was often described as a patchwork of poorly targeted concessions that bred inefficiency and unfairness.
Under the new system, incentives have been rationalised and made more transparent. Priority sectors now benefit from investment-based tax credits tied to minimum investment thresholds, ensuring that incentives reward real economic activity rather than mere tax planning. Free trade zone regimes have been streamlined to create a level playing field between companies operating within and outside such zones.
Importantly, businesses are now allowed to settle taxes related to foreign currency transactions in naira, a measure aimed at easing pressure on the foreign exchange market. Oyedele cited the example of an agribusiness investing in processing facilities that can now enjoy predictable incentives, while a fintech firm paying for imported software can meet its tax obligations in naira instead of sourcing scarce foreign exchange.
Progressivity is another defining feature of the 2025 tax reforms. Oyedele said the new framework strengthens Nigeria’s commitment to a progressive tax system in which the burden is distributed according to ability to pay. A new zero percent income tax band has been introduced, alongside capped taxation of benefits in kind, rent reliefs and reduced effective tax rates for middle-income earners.
These measures are designed to protect the vulnerable and the middle class, while high-income earners are expected to contribute more through an increased top marginal rate. Under the new structure, a mid-level professional earning N5 million annually would enjoy a lower effective tax rate, whereas a top executive earning N8 million would see a modest increase in tax contribution, reinforcing the principle of equity.
Encouraging formalisation among small businesses is another major thrust of the reforms. Oyedele described small enterprises as the backbone of the Nigerian economy, yet noted that many remain outside the formal tax net due to fear of high taxes and administrative complexity.
To address this, qualifying small companies now enjoy a zero percent corporate income tax rate, exemptions from VAT and withholding tax obligations, and PAYE exemptions for their typically low-income employees. A bakery incorporated as a company with annual turnover below N100 million, for example, would pay no corporate tax and would not charge VAT, yet would still benefit from legal recognition and improved access to credit as a formalised entity.
Ensuring tax equity across the economy is also a key goal. The new framework addresses double taxation, prevents double non-taxation and creates a level playing field between traditional and digital businesses.
Oyedele stressed that equal taxpayers should be treated equally, while unequal taxpayers should be treated differently in line with their circumstances. This principle ensures, for instance, that a local brick-and-mortar shop and an online marketplace selling the same products are subject to the same tax rules, fostering fair competition in an increasingly digital economy.
The reforms also take a tougher stance against tax evasion and aggressive avoidance, practices that drain public resources and undermine trust in the system.
According to Oyedele, loopholes have been closed, global anti-avoidance measures adopted, and stricter penalties introduced for non-compliance. Enhanced tax intelligence tools such as e-invoicing, fiscalisation and stronger transfer pricing rules make evasion riskier and more costly. A multinational enterprise attempting to shift profits abroad through artificial charges, for instance, now faces the risk of disallowed deductions and the imposition of a top-up tax to ensure a minimum effective rate of 15 percent.
Improved tax administration and governance underpin all these changes. The establishment of the Nigeria Revenue Service, alongside a strengthened Joint Revenue Board and state tax agencies, introduces clearer accountability and reporting obligations. Taxpayer rights are reinforced through the creation of the Office of the Tax Ombud, providing an independent channel for redress.
A new legal framework for whistleblowing and public reporting of tax incentives is also designed to expose abuse and corruption. Dispute resolution mechanisms have been enhanced through an expanded scope for the Tax Appeal Tribunal, offering taxpayers greater confidence in the fairness of the system. As Oyedele noted, a small trader who feels unfairly treated by a tax officer can now seek redress through the Tax Ombud, a significant shift toward accountability.
Finally, the reforms address the long-standing problem of multiple and overlapping taxes. By reducing the number of taxes, streamlining audits and harmonising taxpayer identification and collection across all levels of government, the new system promises greater simplicity and predictability. A logistics company operating across several states, for example, will now face fewer levies and coordinated audits rather than conflicting demands from multiple authorities.
Taken together, the 2025 tax reforms represent a bold attempt to reshape Nigeria’s fiscal landscape. As Oyedele told journalists in Lagos, the changes are not just about raising revenue, but about building a system that supports people, empowers businesses and strengthens the economy. If effectively implemented, the reforms could mark the beginning of a new social contract—one in which taxation is seen not as a burden imposed arbitrarily, but as a fair contribution to Nigeria’s shared progress.
