IDNN Economy Desk
Clarification in the Storm
As Nigerians reeled from revelations that Tinubu’s new tax laws would target even sex workers and social media influencers, the Federal Inland Revenue Service (FIRS) stepped in with reassurance: food, education, agriculture and shared transportation will remain VAT-free.
With these new laws, food, education, transport, and agriculture will be VAT-free. The President has fulfilled his promise to make businesses flourish by removing burdens and hurdles.”
Executive Chairman Zacch Adedeji, in an anniversary interview, declared the reforms the “biggest fiscal transformation since independence.” He credited President Tinubu for simplifying compliance, consolidating tax laws, and removing hurdles that suffocated small businesses.
“Best Thing Since 1960”
Adedeji told Nigerians the reforms mark a historic shift: “With these new laws, food, education, transport, and agriculture will be VAT-free. The President has fulfilled his promise to make businesses flourish by removing burdens and hurdles.”
The overhaul consolidates dozens of tax codes into a single law, reduces the number of taxes to single digits, and introduces protections for small businesses. Firms with turnover below ₦50m will no longer pay company tax.
Ripple Effect: Relief or Mirage?
For ordinary Nigerians struggling with inflation, exempting staples from VAT offers some breathing space. School fees, food items, and farm produce will not attract the additional 7.5% levy.
But economists warn exemptions may not blunt wider pain:
- Subsidy removal and forex reforms have already driven prices up.
- Implementation gaps may see traders pass “phantom VAT” to consumers.
- Enforcement capacity remains weak, risking abuse in informal markets.
Debt Relief and Growth Drive
The government argues the reforms are yielding results:
- Nigeria’s tax-to-GDP ratio has jumped from 10% to 13.5% in two years.
- Target: 18% by 2027.
- Disbursement to states hit a record ₦2 trillion in August, with nearly 70% of federal allocation now from taxes rather than oil.
Adedeji said improved collections helped 30 states repay ₦1.85 trillion in debts, while debt servicing costs fell from 90% of revenue to about 50%
Global Lessons
Nigeria is borrowing from models in Kenya and Rwanda where broad-based taxes coupled with key exemptions help balance growth and equity. But unlike those systems, Nigeria faces higher inflation, weaker enforcement, and public suspicion of government’s fiscal discipline.
Citizens Caught Between Pain and Promise
The reforms have been likened to “labour pains” by Adedeji. “Short-term suffering, long-term gain,” he argued. Yet many Nigerians doubt whether relief will come, pointing to rising food costs, unpaid salaries, and failing public services.
Impact Snapshot
- Consumers: Basic food, schools, farms shielded from VAT.
- Businesses: Small firms gain tax relief under ₦50m threshold.
- Government: Record allocations boost federal–state relations.
- Investors: Broader tax net seen as improving fiscal sustainability.
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