Nigeria’s tax reform is set to ease the burden on companies by eliminating input Value Added Tax (VAT) costs across value chains and reducing compliance hurdles, a shift that policymakers say will lower operating costs and stimulate growth in the private sector.
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said on Tuesday that the reforms were designed to ensure that businesses, rather than being weighed down by taxes, are given room to thrive, expand, and create jobs.
“Taxes are the consequences of economic activity. If I’m unemployed and I have no income, it doesn’t matter how sound your tax laws are. It’s meaningless how effective your tax administration is,” Oyedele said at the Nigerian Economic Society Group private sector forum.
According to Oyedele, Nigeria has for too long placed emphasis on revenue collection rather than economic expansion, a misalignment that has stifled private sector growth.
“Rather than focusing on my personal income tax and my VAT, let’s have a conversation on how I get a meaningful job that is decent, how I can be self-employed, and grow. And then tax reforms being a natural consequence of those economic activities,” the tax chief added.
One of the biggest gains of the reforms is the elimination of VAT on key inputs across sectors such as food, housing, education, transport, and health. Oyedele explained that while businesses in other countries, such as Ghana, can reclaim VAT on costs, Nigerian firms have for years borne this burden. The reform, he said, will now change that narrative.
“In Nigeria, whether you’re a manufacturer or a service provider, in pure cost on assets, you have to get the VAT. You go to Ghana, you get the VAT back,” he said.
By granting VAT recovery rights, companies’ cost bases will fall, and competitive pressures should eventually translate into lower prices for consumers.
“Whatever you do to businesses, they do to their customers,” Oyedele said. “Hopefully, they can share part of that savings with their customers by way of lower prices. But even if they don’t, we know in the medium to long term, the market will correct it.”
The reform blueprint treats the private sector as the engine of growth and the ultimate driver of sustainable tax revenues. Oyedele highlighted that SMEs and larger firms alike will have a lot more money to play in the capital and money markets, “thanks to the easing of tax bottlenecks.”
Nigeria’s tax-to-GDP ratio remains under 10 percent, among the lowest globally. Reforms that lower costs for firms could incentivise greater formalisation, widen the tax base, and make Nigeria more competitive for domestic and foreign investment.
Read also: Tax reform to address challenges in informal sector, increase compliance – Coker
Oyedele also stressed the importance of tackling structural bottlenecks such as illegal taxes, poor infrastructure, and high transportation costs that drive up inflation and erode business competitiveness.
He pointed out that the difference between rural and urban food prices in Nigeria is almost 500 basis points, a gap largely caused by man-made inefficiencies rather than natural constraints.
“The good news is, we stopped printing money. The next thing we need to do is to ensure that we reduce the costs for businesses,” he said, adding that lowering borrowing costs and ensuring policy coordination are also critical to sustaining reforms.
For corporations, the new regime scheduled to become operational next January promises reduced compliance headaches and a lighter tax burden.
For SMEs, it offers the prospect of cost savings that can be reinvested into growth and employment. For consumers, it raises the possibility of lower prices over time.
Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), agreed with Oyedele.
He noted that the majority of enterprises remain vulnerable to multiple and informal taxation. He emphasised that nano businesses, which make up 96.9 percent of the MSME space, are often overlooked in policy design.
“Most times, what we see is that MSMEs and stakeholders in the ecosystem are just end-users of government policies, and it doesn’t work that way,” said Egbesola. He warned that unless arbitrary levies at local levels are tackled, smaller firms could continue to lose scarce resources meant for reinvestment, weakening the impact of the reforms.
The administration hopes the tax overhaul will not only deliver relief for businesses but also restore investor confidence and accelerate economic diversification. By shifting focus away from multiple taxation and lowering compliance costs, the government is betting that the private sector will find fresh momentum to drive growth.
While immediate relief may vary across sectors, the long-term bet is that market forces will compel firms to pass on part of the savings, supporting competitiveness and easing inflationary pressures.
