Nigeria’s fiscal deficit is putting pressure on tax authorities to expand the country’s narrow revenue base, with freelancers, influencers and online vendors emerging as a new frontier in the government’s mobilisation drive.
With fiscal deficit projected to reach N23.85 trillion in the 2026 budget, and the newly reconstituted Nigeria Revenue Service (NRS) revenue target of N40.71 trillion for 2026, the revenue authorities are under pressure to raise collections without significantly increasing rates and improve compliance among self-employed earners.
“The digital economy has grown rapidly while remaining largely untaxed; this reform closes that gap and captures a fast-expanding revenue base without raising rates on traditional sectors”, said Onyinye Afolabi, a principal consultant at Techpoint finance
Nigeria has become one of Africa’s most active freelance markets, driven by high youth unemployment and widespread mobile internet penetration.
Read also: How treating trust gains as ordinary income spells higher taxes for Nigerian families
Data from World Population Review ranks Nigeria seventh globally in freelance earnings, with an estimated $0.2 billion annually. By comparison, the United States generates roughly $1.2 billion, while India records about $1.0 billion.
An analysis by World population estimate Nigeria accounts for more than 30 percent of Africa’s online freelance revenue, despite housing less than one-fifth of the continent’s population.
The rapid expansion of mobile internet access has enabled digital income generation beyond traditional employment centres, creating a new class of self-employed earners that largely operates outside conventional tax monitoring structures.
What changes under the new tax regime?
In an interview by Selar, Agbada S. Agbada, senior tax associate at a reputable firm in Lagos, explained what is necessary for digital creators.
Under the Nigeria Tax Act and the Nigeria Tax Administration Act, signed into law in June 2025 and effective January 2026, digital creators and online sellers will fall squarely within existing tax categories rather than a new, special tax.
Creators operating through limited liability companies will be subject to Companies Income Tax, while individuals will be liable under Personal Income Tax administered by their state of residence.
“Every taxable person is required to register and obtain a tax identification number,” Agbada said.
In addition to income tax, creators supplying taxable goods and services must register for Value Added Tax (VAT), charge VAT where applicable, and file monthly VAT returns. Stamp duties may also apply to certain electronic instruments.
The law defines a small company as one with a turnover not exceeding N50 million, though discrepancies in interpretation exist across related statutes. Small companies may be exempt from companies’ income tax, creating potential incentives for digital earners to formalise under corporate structures.
However, once turnover exceeds the threshold, profits become taxable at 30 percent.
Despite the scale of Nigeria’s online economy, experts say enforcement capacity remains limited.
“I do not think the tax authorities currently have the infrastructure to track and enforce compliance across millions of digital earners,” Agbada said. “In practice, they are likely to prioritise larger taxpayers.”
However, non-compliance carries significant risks. Failure to file or remit taxes can attract a 10 percent penalty on outstanding liabilities, plus compound interest linked to the Central Bank’s monetary policy rate.
So what does this mean for the economy?
The government stands to gain broader revenue capture from a rapidly expanding segment of the workforce, particularly as formal employment growth remains weak.
Even modest improvements in compliance among digital earners could generate billions of naira in additional revenue.
For states heavily reliant on PAYE from salaried workers, taxing self-employed digital professionals could help stabilise internally generated revenue.
But risks remain, aggressive enforcement without simplified filing systems may discourage entrepreneurship, especially among young Nigerians who turned to freelancing amid high unemployment.
There is also the risk of compliance fatigue if federal and state authorities impose overlapping demands on small-scale earners.
