Nigeria’s Tax Reforms Drive 49% Revenue Surge, Signaling Enhanced Fiscal Stability and Compliance
Nigeria has achieved a remarkable 49% increase in tax revenue for the first five months of 2026, a significant leap from 10.6 trillion naira to 15.8 trillion naira ($11.6 billion) compared to the same period in 2025. This substantial growth, detailed in data from the nation’s tax authority, significantly surpassed the government’s initial target of 11.6% and underscores the efficacy of recent tax system reforms.
The surge is primarily attributed to strategic tax system reforms implemented in 2025, alongside new fiscal measures targeting critical sectors such as oil and mining. According to analyses reviewed by Bloomberg, tax revenue from the oil sector alone saw an increase of over 20%, reaching 3.96 trillion naira. This uplift was bolstered by elevated crude oil prices, a consequence of geopolitical tensions in the Middle East.
Non-oil tax revenue also demonstrated robust performance, growing by 12.3% to 8.2 trillion naira. This expansion reflects a broad-based improvement in tax collection across diverse economic activities. Personal income tax collections, particularly following revisions to tax rates, contributed significantly to the remaining revenue. Notably, even excluding the impact of new tax introductions, the overall tax revenue experienced a healthy 15% increase, reaching 12.2 trillion naira.
These developments align with Nigeria’s broader fiscal strategy, initiated last year, to elevate the tax-to-GDP ratio to 18% by 2030, a notable increase from the current estimated 13%. This target remains a crucial objective, as Nigeria’s historically lower tax burden has constrained government revenues, necessitating borrowing for development projects and budget deficit financing. The current ratio also lags behind the sub-Saharan African average of 16% to 18%.
President Ahmed Bola Tinubu’s administration has actively pursued legislative changes to modernise the national tax framework and foster voluntary compliance. The enactment of four new laws aims to simplify tax regulations and enhance the automation of processes at the Federal Inland Revenue Service (FIRS).
These landmark reforms include the consolidation of over 50 disparate taxes into a single, streamlined tax code. Furthermore, the corporate income tax rate for large companies has been reduced from 30% to 25%. Harmonisation of tax collection rules nationwide is intended to mitigate administrative burdens and eliminate redundancies. Enhanced coordination between federal and state tax authorities is also a key feature, facilitated by the establishment of a tax ombudsman and a tribunal dedicated to dispute resolution and taxpayer protection.
The reform package also incorporates significant tax relief measures for both individuals and businesses. Individuals earning 800,000 naira or less annually are now exempt from income tax. A 20% deduction is available on rental income, and the tax-free threshold for severance payments has been raised to 50 million naira. Small businesses with annual revenues below 50 million naira are now fully exempt from corporate income tax. Additionally, mechanisms for VAT refunds on business inputs have been improved, signalling a more supportive fiscal environment for economic actors. These comprehensive reforms are poised to reshape Nigeria’s fiscal landscape, encouraging greater compliance and supporting sustainable economic growth.
