OPINION… Beyond Big Business: What Nigeria’s New Tax Law Means for SMEs

In June 2025, President Bola Tinubu assented to four new tax bills following an extensive consultation and diverse national debates that kicked into the expediency of the process, amid challenges bedevilling the nation since the current administration assumed office.

The bills: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill, were enacted after being passed by the National Assembly, the country’s legislative arm. Described as ‘historical’, the presidency noted that the bills “are expected to significantly transform tax administration in the country, leading to increased revenue generation, improved business environment, and a boost in domestic and foreign investments.”

In broader terms, the bills are also believed to strengthen Nigeria’s fragmented tax laws into a unified statute and establish a uniform legal and operational framework for tax administration across federal, state, and local governments.

Taxation in Nigeria, just like any country across the globe, plays a vital role in the development of the economy and constitutes a major revenue source for the government. Yet, before the reforms introduced by the Tinubu-led administration, the tax and revenue generation process had always been marked by overlapping levies, duplicated regulatory burdens, low accountability, and inefficiency. 

To make matters worse, the FIRS (now NRS), Nigeria’s apex tax administration agency, was plagued with administrative inefficiencies, thereby undermining taxpayer’s trust. Taxation systems, such as the Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the new Development Levy, consequently posed threats to SMEs. And because new startups typically lack the capacity to navigate this maze, these small enterprises, especially those with annual turnover less than ₦100 million and fixed assets below ₦250 million, bore disproportionate burdens, with Nigeria’s tax-to-GDP ratio continuing to linger among the lowest globally. This reality stifled growth and discouraged formalisation of small enterprises in Nigeria, but is this new law a game-changer?  

A scrutiny of the sole aim of the new Nigerian Tax Reform Acts comprising the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Act (NRSA), and Joint Revenue Board Act (JRBA) shows that it is promising. 

This shift, if successfully effective across tiers, has the potential to allow early-stage firms to survive a growth cycle and contribute to the nation’s economy. 

Globally, SMEs are generally regarded as drivers of change: the engine of economic growth and equitable development in developing economies like Nigeria. They are labour intensive, capital saving and capable of helping create new jobs and reducing the incidence of poverty. However, most small businesses in Nigeria collapse within their first five years of existence, while a smaller percentage vanish into extinction between the sixth and tenth year. Sadly, only about five to ten per cent survive and thrive to maturity. 

Apart from lack of funding, poor infrastructure and coordination, complex registration and licensing, multiple taxation constitute major challenges that stiff the SMEs from thriving. Owners of these small businesses have to pay multiple levels of taxation, including federal, state, and local government levies, subsequently discouraging continuation and eventual death.

As this tax reform exempts businesses with turnovers below ₦100 million and fixed assets under ₦250 million from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy, SMEs can reinvest their cash flow back into areas like talent recruitment; product marketing, thereby strengthening sustainability instead of giving a huge portion of their revenue to taxes. 

Recently, Taiwo Oyedele, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, disclosed that a whopping 97% of informal sector operators will no longer pay taxes in Nigeria with the new shift. Speaking at the PwC’s Executive Summit on Nigeria’s Tax Reform, with the theme “The New Tax Era: What Nigeria’s Tax Reform Means to Individuals and Businesses.” 

According to him, the committee “have legally exempted the bottom 97 per cent from paying taxes” after this realisation so that they will be able to grow. 

From the standpoint of common sense, this is good news as most of the small enterprises are categorised in the informal sector due to a lack of funding, overregulation, business registration bottlenecks, among other barriers. Besides, most of them lack formal contracts, worker benefits, and social protection. So, it is expected that going forward, there will be more entrepreneurial expansion as more new companies have less to worry about.  

Similarly, these tax reliefs will propel SMEs to consider formalisation, opening access to critical financial and support services that informal businesses are often excluded from. Many small businesses eschew registration because of the associated tax liabilities. Most of the grants sponsored by government agencies usually require registration with the Corporate Affairs Commission (CAC), tax compliance and audited financial records, but the tax liabilities forced many SMEs to turn their back against this support program. 

In addition, tax-compliant SMEs are quick to gain a positive credit history with the FIRS and banks thus making it easy to get an improved credit rating and garner confidence with venture capitalists, angel investors and development finance institutions (DFIs). 

The new tax law, though controversial and not without flaws, is a commendable policy shift from what has been a growth-impeding status quo, threatening the survival of small and medium businesses in Nigeria. By promptly addressing some of the big bottlenecks which revolve around governmental control, like registration, formalisation and tax scare, the government has not only looked beyond the big business, but also provided new ground for business opportunities and ideas to thrive —thereby solving problems of unemployment and stimulating big things that are yet to come. 

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Rahaman Abiola is the Editor-in-Chief of LEGIT.ng and a 2025 fellow of Ominira Economic Advancement Initiative.

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