Nigeria’s tax reform is bold ambitious and long overdue. On paper it reads like a model fiscal reset designed to widen the tax base boost revenue improve fairness and align public finance with economic growth. In practice however its fate will not be decided by legislation alone.
It will be decided by how, when and who the government chooses to enforce it against.
That is the core warning from the Chief Executive Officer Centre for the Promotion of Private Enterprise CPPE, Dr Muda Yusuf.
A Good Policy Can Still Go Wrong
Nigeria has learned this lesson before. Strong policy frameworks have repeatedly collapsed under weak implementation political impatience and economic misjudgment. Tax reform is especially vulnerable because it touches income survival and trust all at once.
This reform is landing at a fragile moment. Inflation remains elevated purchasing power is weak and households are still reeling from fuel subsidy removal and FX reforms. Businesses especially MSMEs are experiencing reform fatigue.
In this environment aggressive tax enforcement risks turning a sound reform into a social flashpoint.
Tax Reform Is Not a Switch It Is a Journey
Tax reform is not an event. It is a process that must respond to economic reality feedback and public confidence.
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Expecting instant compliance across a stressed economy is unrealistic. A rigid enforcement first posture could damage livelihoods harden resistance and delegitimise the reform before its benefits become visible.
Sequencing matters. Sensitivity matters. Timing matters.
What the Reform Gets Right And Why That Is Being Missed
Lost in the controversy are several genuinely pro welfare elements.
Low income earners are exempted from personal income tax. VAT relief on essentials such as food education healthcare agriculture and cultural activities provides real social cushioning. Small businesses benefit from exemptions from company income tax and VAT reducing compliance pressure.
The reform also rationalises multiple taxes repeals obsolete laws and aligns incentives with job creation and diversification. These are long standing private sector demands.
The problem is not the intent. It is the execution risk.
Why Nigerians Are Pushing Back
Public resistance is not ignorance. It is experience.
Past reforms promised shared sacrifice and delivered higher costs with little improvement in public services. The social contract remains weak and many Nigerians doubt that new tax revenues will be transparently used.
When trust is low tolerance is low. Without visible accountability compliance becomes coercion.
The Informal Sector Elephant in the Room
Nigeria’s informal sector is not marginal. It is the economy.
Over 40 million micro small and nano businesses operate largely outside formal structures. Most are cash based thinly capitalised and lack record keeping digital tools or tax literacy.
Yet the reform introduces mandatory filings penalties presumptive taxes and strict compliance rules. Without careful phasing this risks criminalising survival rather than encouraging formalisation.
You cannot tax what you have not first helped to structure.
Flashpoints Fueling Fear
Certain provisions have amplified anxiety.
Mandatory reporting of bank transactions above ₦25 million alarms SMEs handling pass through funds. High turnover low margin businesses fear unnecessary scrutiny.
The proposed jump in capital gains tax from 10 percent to 30 percent has unsettled investors in equities and real estate. The N500,000 rent relief cap is out of touch with urban housing realities.
Add wide enforcement powers and stiff penalties and the fear becomes rational.
Why Enforcement Should Follow Revenue Logic Not Force
Data is clear. A small number of taxpayers generate most revenue.
About 20 percent of businesses account for nearly 90 percent of tax receipts. Roughly 20 percent of taxpayers contribute over 80 percent of personal income tax.
Targeting large corporates established SMEs and high net worth individuals will raise revenue faster with less social disruption. Blanket enforcement will do the opposite.
Formal First Informal Later
CPPE’s position is simple.
Start with where capacity exists. Deepen compliance in the formal sector. Integrate the informal sector gradually through incentives education simplified systems and digital onboarding.
Build compliance before you punish non compliance.
That is how sustainable tax systems grow.
Why Political Timing Could Make or Break the Reform
With 2026 approaching as a pre election year heavy handed enforcement could trigger backlash policy reversal and instability.
Trust building must come before tax chasing. Credibility must come before coercion.
The Bottom Line
Nigeria needs tax reform. But reform without trust is extraction not development.
A phased pragmatic and people aware implementation anchored on economic reality and political timing is the only path to sustainable revenue growth.
Get the strategy right and the reform succeeds.
Get the timing wrong and it collapses under its own weight.
