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When the intent of taxation reset diverges from its execution 23 Feb 2026

Let me start by saying that I support the idea of tax reform. The Nigeria Tax Act of 2025, which some policymakers in Abuja are calling a "generational reset," is built on a principle that is not just sound but necessary. For decades, our tax system has been a masterclass in unfairness. It functioned as a machine for punishing people and businesses already struggling, while allowing the wealthy and well-connected to navigate freely. I support any reform aimed at correcting this deep-seated injustice.

The logic is impeccable. Our country runs on the energy of millions of its citizens, yet for too long, the state has asked them to shoulder the burden while extracting little from the few with the greatest capacity to pay. The new legislation acknowledges this perversity. Its foundational promise is to correct this imbalance: shielding small businesses and low-income earners, while bringing more formal and high-net-worth individuals into the tax net to fund our collective development. In theory, it shifts the philosophy from punitive extraction to progressive investment. It is a vision of a Nigeria where citizens can finally see a direct line between their contribution and tangible improvements in their communities.

But, and this is a monumental “but”, the Nigerian state has a notorious tendency for turning even the most beautiful theory into an ugly practical framework. The President Bola Ahmed Tinubu administration's approach to implementing this critical reform has been so riddled with confusion, poor communication, and contradiction that it risks becoming a textbook case of how to erode public trust and stoke inflation. While the theory speaks of relief, the practice, so far, is something else.

The first and most glaring failure is one of catastrophic communication. The reform did not arrive with a clear, nationwide education campaign. Instead, it came like a confusing letter in the mail. Across the country, tenants, including this writer, found themselves staring at notices demanding a sudden 10% withholding tax on rents above N2 million, with zero clarity on whether this applied to residential leases or only to commercial property. 

This is not policy; it's taxation by Chinese whispers. 

The government was asking for more money without first explaining the basic rules of its own new game. In a country where people are already deep in “Sapa Nation”, a Nigerian slang term used to humorously or ruefully describe a state of severe financial hardship or extreme poverty,
calculating every kobo for food and transport, such ambiguity is not just an oversight; it is a direct trigger for anxiety and resentment. It forces people to spend precious time and resources deciphering cryptic rules rather than engaging in productive work.

This confusion has a direct and immediate cost. For many residential tenants, rent is often the second-largest expense after food. A sudden, unexplained 10% charge is not absorbed; it is passed down the chain. Landlords pass it to tenants, businesses factor it into their operational costs, and these costs are inevitably baked into the price of goods and services. What the government frames as a technical compliance measure becomes, on the ground, another straw on the camel's back: an inflationary push that makes the "cost of a pot of jollof" climb even higher. This is the brutal reality of kitchen-table economics, where grand policies from Abuja translate into higher prices at Ketu Market.

The government's missteps extend beyond poor communication into the realm of baffling optics. At the very moment one agency of the government was championing a digital-first, "Made-in-Nigeria" approach to tax compliance, another was signing a memorandum with French authorities for technical assistance in data mining. At a time when our neighbours in the Sahel are fiercely debating sovereignty and external influence, this move was not just tone-deaf; it was impolitic. It fed the most damaging narrative possible: that this entire reform is not about building a self-reliant Nigeria for Nigerians, but about creating a more efficient, digitally enhanced extraction machine. It makes the state appear to be more interested in perfecting surveillance, rather than aiming to drive improvement in the delivery of public goods, such as security, power supply, and roads, to make businesses more viable and improve the welfare of the average citizen.

This top-down confusion ignores the structural layer of our economy, whereby individual and corporate citizens seemingly constitute a “parallel state”, as they have to supply public goods by themselves, or as they pay taxes to nonstate actors. Research has consistently shown that the vast majority of Nigerians already pay "taxes" daily, not to the Federal Inland Revenue Service (now the Nigeria Revenue Service), but to a shadow government of union touts and local council agents. The payments are arbitrary, enforced, and offer no public goods in return. 

So, when Abuja announces a "pro-poor" exemption for incomes under N800,000, the woman selling tomatoes in Ogbe Ogonogo Market understandably shrugs. Her daily harassment comes from the man collecting money for "tickets" issued by nonstate tax agents. The state is not introducing her to taxation; it is asking her to switch loyalty from a known, crude collector to a distant and historically absent one. The question "What has the state ever done for me?" is not rhetorical; it is the central, unanswered question of this entire taxation gamble.

The formal sector is also being paralysed by uncertainty and contradictory signals. While the Act wisely raises thresholds to exempt small companies, the simultaneous panic over the reintroduction of physical tax stamps and the complexities of mandatory e-invoicing create a compliance nightmare. As the Manufacturers Association of Nigeria warned, such bureaucratic burdens "could erode the gains of the Nigeria Tax Act 2025". This erratic, start-stop policymaking makes businesses and professionals, now squarely in the tax net, deeply sceptical. They begin to wonder if the goal is genuine simplification or merely the creation of new, more sophisticated avenues for control and revenue grabs.

The most important measure of functionality of this policy will not be in the quarterly reports of the Nigeria Revenue Service. It will be the lived experience of the ordinary Nigerian. It will be measured by whether the okada rider in Ekpoma feels secure enough to want to formally register his business, believing the state will protect him better than his "union." Functionality will be measured by whether the increased PAYE deduction from the salaries of the professional in Magodo translates into a smoother, safer commute to work, or a better-equipped local clinic for her family.

The lessons from other countries on our continent are clear. In Ghana and Kenya, organised public resistance forced governments to rethink and roll back unpopular tax measures. The Tinubu administration has chosen to plough ahead, perhaps calculating that Nigerians are too exhausted or fragmented to coalesce their various discontentments with the government. This is a dangerous gamble. The permission to tax is a fragile grant from the people, and history shows it can be revoked rapidly when pushed too far.

In the final analysis, I support the tax reform’s intent of a reset. But I cannot, in good conscience, support an execution that is so clumsy, so confusing, and so disconnected from the reality of the people it is meant to serve. The state has asked us to pay up. But until it can clearly explain the rules, prove it can manage the basics of governance, and demonstrate that this is a collective investment and not another grand ‘wayo’ (or scam), the people will remain concerned about emptying their pockets to the government.

Cheta Nwanze is the Founder of SBM Intelligence.