LAGOS, Nigeria — Nigeria’s sweeping tax reform, set to take effect in January 2026, will eliminate input Value Added Tax (VAT) costs across key sectors, aiming to reduce operating expenses and spur private sector growth. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, announced the changes at a Nigerian Economic Society Group forum, emphasizing that the reforms prioritize economic expansion over mere revenue collection.
The reform targets sectors like food, housing, education, transport, and health, allowing businesses to recover VAT on inputs—a practice already common in countries like Ghana but long absent in Nigeria. Oyedele noted that this shift will lower costs for companies, enabling them to reinvest savings, create jobs, and potentially reduce consumer prices. “Whatever you do to businesses, they do to their customers,” he said, highlighting the potential for market-driven price corrections.
Small and medium enterprises (SMEs), which face heavy burdens from multiple and informal taxes, stand to benefit significantly. Femi Egbesola, President of the Association of Small Business Owners of Nigeria, stressed that nano businesses, comprising 96.9% of the MSME sector, are often ignored in policy design. He warned that unchecked local levies could undermine the reforms’ impact if not addressed.
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Nigeria’s tax-to-GDP ratio, currently below 10%, is among the world’s lowest. By easing compliance hurdles and structural inefficiencies like illegal taxes and high transportation costs, the government aims to formalize more businesses, broaden the tax base, and attract investment. Oyedele underscored the need to tackle inflation-driving bottlenecks, noting a 500-basis-point price gap between rural and urban food markets due to inefficiencies.
The administration hopes these changes will restore investor confidence and drive economic diversification. While immediate relief may vary, the long-term goal is to empower the private sector to fuel sustainable growth and ease inflationary pressures through competitive pricing.
