In January, Nigeria launched its most aggressive tax overhaul in decades. Nearly a year later, taxes remain the biggest headache of businesses operating in Africa’s third-largest economy.
More than 70% of large firms surveyed in July by the Central Bank of Nigeria (CBN) identified high or multiple taxation as a major constraint. That was the second straight month that taxes topped the list, ahead of insecurity and high borrowing costs. Taxation had also remained among the three biggest challenges in the CBN’s surveys through much of the first half of the year.
Yet a major objective of the restructured tax rules was to simplify the system and tackle the duplication that have long plagued local businesses.
Smaller companies say they are having an even tougher time. Away from the federal tax system, they often deal with state and local authorities where levies can be unpredictable — and difficult to challenge.
Nigeria has spent years trying to bring order to a tax system that is fragmented across various levels of government. The latest reforms have changed much of the legal and administrative machinery. But legislation is only half the job.
Where the reforms landed
Nigeria’s latest tax reforms were part of a bigger push to raise government revenue. For years, the West African nation has run sizeable fiscal deficits while having one of the lowest tax-to-GDP ratios on the continent.
But the aim was not simply to raise tax rates. The reforms sought to increase revenue without placing a heavier burden on taxpayers already in the system.
For the most part, that meant changing how taxes are structured and collected, while making it easier for more businesses to comply.
One of the biggest changes was the Nigeria Tax Act, 2025. It folded more than a dozen laws into a single framework, covering company income tax (CIT), personal income tax (PIT), value-added tax (VAT), capital gains tax (CGT) and other major federal taxes. The idea was to cut duplication and nuisance laws, making the rulebook simpler to follow.
A separate Nigeria Tax Administration Act standardised the mechanics of registration, filing, assessment and enforcement. The government has also overhauled the institutions responsible for collecting revenue, replacing the Federal Inland Revenue Service with the Nigeria Revenue Service (NRS) and giving it a broader mandate over government revenue.
Digital tools are another big part of the push. Taxpayers can now register, file returns, make payments and manage tax records through online platforms, reducing some of the paperwork and friction involved in compliance.
Small businesses have so far been some of the biggest winners of the reforms—at least on paper.
Under the new system, companies with annual turnover of up to ₦100 million ($750,000) and fixed assets of no more than ₦250 million (~$189,000) are exempt from CIT, CGT and a 4% development levy.. By contrast. larger businesses remain within the tax net, helping shift more of the burden towards companies with greater capacity to pay.
Early revenue numbers suggest the reforms are beginning to deliver. Last week, the NRS said it collected ₦21.6 trillion ($16.35 billion) in the first half of 2026, up 49% from the same period last year. The service attributed the increase to the tax reforms, digitalisation and changes to oil-revenue remittances.
To put in better context, the latest haul is nearly twice the entire collection in 2023.
Yet for many businesses, the environment has not changed nearly as much. Multiple points of taxation, overlapping levies and arbitrary fees at subnational levels continue to stunt growth and eat into margins.
“It is only when business survive and grow that they can pay taxes, and it is when it is easier for businesses to comply that you see new people, new businesses coming to the tax net and broad payment in the tax payment,” says Femi Egbesola, president of the Association of Small Business Owners of Nigeria.
A problem built into the system
Much of Nigeria’s biggest tax problems have long been woven into its fiscal system.
The Nigerian Constitution splits revenue responsibilities across three tiers of government, each with its own ways of raising money. The result is a system in which businesses can face taxes, levies and regulatory charges from several levels of government.
One company may need a state tax clearance, a local business permit, an environmental approval or a signage permit to operate from the same premises. Each may come with a separate charge, sometimes collected by different agencies.
Part of the reason is that states have a strong incentive to keep expanding the revenue they raise themselves. Internally generated revenue (IGR) gives them a source of funds they can control, rather than relying entirely on transfers from the Federation Account.
BudgIT’s latest analysis shows that IGR across 34 states rose from ₦1.57 trillion ($1.19 billion) in 2022 to ₦4.15 trillion ($3.14 billion) in 2025. But the growth has remained heavily concentrated. Lagos alone generated ₦1.26 trillion ($953 million) in 2024, more than two-fifths of the combined IGR of the 35 states covered that year.
Usually, taxes make up the bulk of IGR. But where ministries, departments and agencies (MDAs) account for a large share, the search for revenue can reach beyond the tax authorities. Agencies can be assigned revenue targets of their own, giving regulators a reason to collect more from the businesses they oversee.
Ogun, a major industrial state in the South West, provides a good example. Manufacturers say they face demands for water-extraction fees, recycling licences, air-pollution compliance and other charges. Some factories have been threatened with closure or shut down over alleged non-compliance, disrupting production and putting jobs at risk.
Agbada S. Agbada, a tax lawyer, says the reforms have largely dealt with overlapping taxes at the federal level, but the problem below remains.
“At the sub-national levels, not much has changed. Many States still enforce multiple taxes and levies,” he argues.
In October 2025, the House of Representatives passed a constitutional amendment bill that seeks to spell out which level of government can impose which taxes and levies. It would also cap the number of taxes, levies and charges that can be imposed on income, consumption or property, while removing overlapping taxing powers and stopping the outsourcing of revenue collection.
But the proposal is yet to become law. As a constitutional amendment, it still has to clear the remaining stages at the National Assembly and win approval from at least 24 state Houses of Assembly.
Until that happens, the federal reforms can simplify the rules at the centre without doing much to change the number of government doors through which a business can still be asked to pay.
There is so much businesses can absorb
Nigeria’s tax problem would be easier to manage if businesses were operating in a cheaper, more reliable environment. They are not.
Electricity is an obvious example. About 82% of firms surveyed in Nigeria in 2025 reported experiencing power outages, according to World Bank data. Many respond by providing their own electricity, adding generators, fuel and maintenance to the cost of doing business.
The same pattern appears elsewhere. Poor roads and logistics raise the cost of moving goods. Expensive credit makes it harder to finance working capital or invest in new equipment. Exchange-rate swings can quickly increase the cost of imported machinery, raw materials and other inputs. Analysts say these pressures are collectively holding firms below their productive capacity.
“Remember it’s not just taxes that are giving us so much burden and actually reducing the growth of businesses in the country,” Egbesola said. “We also have energy costs, logistics and transportation costs, limited access to foreign exchange and so on.”
Passing those costs on to customers is not always possible. In a market where consumers are already under pressure, higher prices can mean weaker demand. Firms therefore have to absorb some of the increase through lower margins, delayed investment or smaller expansion plans.
That is what makes the tax question harder. Businesses are already paying more for some of the basic inputs they need to operate. A new tax or levy does not arrive on its own; it competes with those costs for the same limited pool of revenue.
The question, then, is not simply whether a business can pay another tax or levy. It is what gets squeezed when it does.
Moving from tax reform to relief
Nigeria has become increasingly adept at rewriting its tax rules. The four major tax reforms are now in force. New presumptive-tax rules are being rolled out, while 19 states have adopted the Model Taxes and Levies Act in an effort to bring more order to state and local charges.
On paper, that is meaningful progress. But a business does not experience a tax law on paper. It experiences the number of bills that arrive, the agencies it has to deal with and the cost of staying compliant.
“The real measure of success should be fewer taxes, simpler compliance, lower administrative costs and a more predictable business environment—not just new legislation,” says Okey Odu, a financial management consultant.
That is where implementation becomes important. Egbesola argues that the government could go further by creating a single digital platform through which businesses pay their federal, state and local obligations, with the money automatically distributed to the relevant authorities.
He also wants tax policy considered alongside the wider costs of running a business, from electricity and transport to finance and imported inputs. Cutting one cost will not transform an environment where the others remain high.
Nigeria has made a start on changing its tax laws. What businesses need now is to feel the difference in the cost and complexity of operating. Fewer charges, fewer collection points and more predictable obligations would do more to build confidence than another round of legislation.
