President Tinubu exchanging pleasantries with Chairman of the Presidential Committee on Tax Policy and Fiscal Reforms, Taiwo Oyedele, right.
New Tax Law: Households Earning Below ₦250,000 Exempted from 2026
With the signing of the new tax law by President Bola Tinubu on Thursday, the burden on low-income Nigerians has been eased.
Indeed, the tax law, inbuilt with a sweeping reform, exempts households earning ₦250,000 or less annually from paying taxes, effective January 1, 2026.
The new legislation, hailed as a major shift in Nigeria’s fiscal policy, also removes Value Added Tax (VAT) on essential goods like food and healthcare while granting small businesses with turnovers below ₦50 million full income tax relief.
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, described the law as a hard-won victory, acknowledging the political resistance it faced.
“Even when it became heated, with regional and religious undertones, an average leader would have backed down,” he said, commending Tinubu’s resolve.
Apart from exempting individuals in households earning ₦250,000 or less per year, the tax law also provides that essential items like food and medicine will no longer attract VAT; companies with turnovers under ₦50 million are exempted from income tax; middle-income earners (₦1.8m–₦2m monthly) will see reduced rates, while top earners face slightly higher taxes.
Oyedele explained that the reforms aim to lift Nigeria’s tax-to-GDP ratio from 10.3% to 18% by 2026 while ensuring fairness.
“We are not taxing poverty. If you earn below ₦250,000, you keep your money—you don’t even have enough,” he stated.
The Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service (FIRS), will oversee the rollout, with a six-month transition period for public sensitization.
The reforms also unify Nigeria’s fragmented tax system, targeting inefficiencies and tax evasion.
Zacch Adedeji, NRS Chairman, confirmed the expanded mandate of the agency, which will now also focus on non-tax revenue streams.
“This is not just about collection but efficiency and accountability,” he said.
The bill initially faced pushback from northern governors over perceived regional imbalances, but a compromise was reached in January 2025 through a revised VAT-sharing formula.
The National Assembly passed the bills in March (House) and May (Senate) before Tinubu’s final approval.
At the signing ceremony, attended by Senate President Godswill Akpabio, Finance Minister Wale Edun, and several governors, Tinubu called the reforms “pro-people” and transformative.
“For too long, our tax system has been complex, unfair, and burdensome. This law brings targeted relief to those who need it most,” he declared.
The reforms align with other economic measures, including the new minimum wage, marking a significant step in Tinubu’s broader economic agenda.
With this law, Nigeria aims to balance equity and revenue growth—shielding the poor, easing middle-class burdens, and tightening compliance for high earners. Success, however, hinges on effective enforcement in the coming years.
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