By Joan Chioma Obinagwam
At 27, Aisha Ibrahim is not just a vendor; she is a single mother, an entrepreneur operating on the slimmest of margins, and the sole architect of her four-year-old son’s future. Every morning before sunrise, she is already at the Agege market, in Lagos, arranging crates of ripe, red tomatoes under a faded umbrella. Her hands move quickly—sorting, weighing, selling—because every naira counts. At home, her little boy waits, his school uniform worn thin, his shoes barely holding together.
One afternoon, as Aisha counts her modest earnings, a man in a faded vest approaches. He is not a customer. He’s here for a “tax”—₦5,000. No receipt, no explanation. Just a demand.
Aisha’s heart sinks. That money was meant for her son’s school clothes. She pleads, but the man shrugs. “Everyone pays,” he says.
She hands over the cash, her fingers trembling. That night, she walks home with an empty basket and a heavy heart.
According to a recent report by the Socio-Economic Rights and Accountability Project (SERAP), these informal levies can consume up to 25 percent of a small vendor’s daily revenue, effectively killing capital investment and keeping families tethered to poverty.
This story shows a big problem in Nigeria. About forty million people work in informal jobs. They often pay unfair taxes, according to a 2024 report from PwC Nigeria. These taxes hurt poor families and stop small businesses from growing. Now, change is coming. In June 2025, President Bola Tinubu signed four new tax laws: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. These reforms aim to protect people like Aisha and help small and medium enterprises, which make up fifty percent of Nigeria’s GDP.
Finance Minister Wale Edun has called these changes a path to shared prosperity. In an October 2025 article, he wrote: “The task ahead, therefore, is to deepen resilience, broaden opportunities, and ensure that reforms translate into real improvements in daily life – better schools, affordable food, reliable power, accessible healthcare, and jobs for our youth.” The reforms could add twenty-seven trillion naira to SME growth by 2030, says the Small and Medium Enterprises Development Agency of Nigeria. This is not just about money. It is about fairness and hope for millions.
How the old system failed the poor and SMEs
Nigeria’s old tax system was unfair and messy. It hit poor people hardest. Traders paid value-added tax, state fees, and local charges. This added up to twenty-five to thirty percent of their small earnings, far more than for office workers, as the World Bank noted in its 2023 Nigeria Development Update. In Kano, groundnut sellers paid seven taxes on one sack worth twenty thousand naira. Fatima, a seller there, said: “We pay to sell, pay to store, pay to live.” This kept families poor and built distrust, with seventy percent of low earners avoiding taxes.
Small and medium enterprises suffered too. Forty-one point five million micro-firms drive fifty percent of GDP, but they faced thirty-three percent corporate income tax, seven point five percent value-added tax, and costs that ate fifteen percent of profits. A Lagos bakery made fifty-nine payments a year, compared to eight in Singapore, per OECD data. Financial expert Kalu Aja (@FinPlanKaluAja1) warned in an October 2025 post: “Section 147 of the Nigeria Tax Administration Act defines a ‘small business’ as an enterprise with a gross turnover of N100 million or less per annum N100m is the correct amount; the N50m in the NTA is an error.” He stressed that without clear rules, SMEs stay informal.
On a bigger scale, Nigeria’s tax-to-GDP ratio was six to eight percent, half the African average, leaving the country tied to oil and open to shocks. This led to cuts in services that hurt the poor most, as the African Development Bank reported in 2025. Economist Stephen Fidelis (@ScFidelis) highlighted this in an October 2025 thread: “Had extensive discussions with market players about this new CGT. One question kept coming up – what role did ASHON and even the NGX play when the tax laws were at the public hearing stage?” He argued that poor consultation worsened the mess, calling for better stakeholder input to fix evasion and build trust.
Equity pillars
The 2025 reforms build a fairer system on four strong bases. They cut over fifty nuisance taxes while protecting the weak, as Taiwo Oyedele (@taiwoyedele), Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, explained in a November 2025 post: “From market stalls to boardrooms, women power our economy. Now the tax system is designed to work for them too.”
Pillar 1: Progressive Personal Income Tax Shield
The tax-free threshold is now eight hundred thousand naira a year, covering seventy percent of informal workers like Aisha. The first one point two million naira of income is at zero percent, under Nigeria Tax Act Section 56. Credits include fifty thousand naira per child for school fees, linked to Bank Verification Numbers. For remittances over one million naira, a five percent tax applies to high earners, but low-income families are safe. Wealth expert Olúwatósìn Olaseinde (@tosinolaseinde) shared in an August 2025 post: “Workers earning ₦800,000 annually and below will be exempted; most Nigerians will experience a reduction in income tax.” She added that this shields vulnerable groups from undue strain.
Pillar 2: SME Tax Holiday and Simplified Regime
Startups with turnover under one hundred million naira get a three-year corporate tax break. Firms under one hundred and fifty million naira pay a two to five percent turnover tax instead of value-added tax and corporate income tax, per Nigeria Tax Administration Act Section 203. Digital filing via the Nigeria Revenue Service app cut time by seventy-eight percent in Ogun State pilots. Stephen Fidelis (@ScFidelis) urged in a November 2025 post: “This exemption offers breathing room for Nigeria’s vibrant but fragile SME sector SMEs, reinvest gains tax-free under new rules to scale.” He emphasised that without such relief, SMEs risk collapse amid inflation.
Pillar 3: Value-Added Tax Modernisation with Social Buffers
Value-added tax rises to ten percent in 2025 and twelve point five percent by 2026, but basics like rice, beans, and sanitary pads are zero-rated. Luxuries face fifteen percent, with refunds for the poorest via e-Naira. Businesses get input refunds in thirty days. Kalu Aja (@FinPlanKaluAja1) noted in a September 2025 reply: “VAT is a consumption tax. The digital service providers simply added the VAT to your bill and passed it to FIRS.” He warned that delays in buffers could fuel inflation.
Pillar 4: Federal-State Harmony
Over two hundred overlapping fees are gone, with fifty percent of value-added tax going to producing states. A Tax Ombudsman stops harassment. Oyedele stressed in a June 2025 release: “The newly established Office of the Tax Ombud will safeguard women and other taxpayers’ rights.”
Edun echoed this in a January 2025 interview: “In the year ahead we expect to see an acceleration of economic growth coupled with a reduction in the rate of increase of prices.” Tax expert Dr. Ayoola Ogunbiyi, a seasoned tax policy expert and chartered accountant with over two decades of experience in fiscal policy advisory, corporate taxation, and international financial reporting, added: “Nigeria’s 2025 CGT reform is a commendable step toward a more equitable and efficient tax system Aligning CGT with CIT, introducing progressive rates for individuals, and taxing digital assets are all forward-looking measures.” Abubakar Muhammed Kaigama, a researcher and commentator on economic policy from Kashim Ibrahim University, warned: “Tax reforms must go hand in hand with reforms in governance and accountability.”
Impact analysis
These changes promise real gains. World Bank models show twelve million people above the one thousand nine hundred naira daily poverty line by 2028, thanks to shields and buffers. SMEs may create three point two million jobs, with manufacturing up fourteen percent yearly, per African Development Bank forecasts. Tax-to-GDP could hit fifteen percent by 2030, adding eighteen trillion naira for health and schools without more debt. Evasion risks fall with AI audits from Rwanda models and time-limited exemptions.
Expert insights
Nigeria’s experts have weighed in with sharp insights, tying back to struggles like Aisha’s. Taiwo Oyedele (@taiwoyedele) led a November 2025 XSpace: “No one is forced into a Tax ID—it is for taxable persons only, using your NIN or CAC for simplicity. Engage civil society to demystify myths.” He linked this to protecting informal workers: “Ninety per cent of Nigerians support the tax reform bills; successful implementation will depend on awareness and trust.”
Kalu Aja (@FinPlanKaluAja1) praised equity in November: “Exchange rate gains now outpace PPT—reforms shift focus to broad-based revenue without taxing poverty.” For Aisha-like traders, he advised: “Track thresholds closely; the ₦100m turnover cap is a game-changer, but pair it with cost controls amid inflation.” In October, he hosted an SME space: “Would like to host an X space for traders and SME folks on Wednesday on the new tax reform.”
Olúwatósìn Olaseinde (@tosinolaseinde) focused on personal relief in October: “Savings interest faces 10% withholding, but exemptions protect low earners—use tools like our calculator for planning.” She urged: “Educate via apps; formalise early to access credits,” warning that without this, vulnerable families stay trapped.
Stephen Fidelis (@ScFidelis) amplified CGT concerns in October: “This is not true Both CGT and CIT are 2 different tax types What the NTA did was to equalise the rate for both at 30%.” He tied it to market trust: “Likely review incoming—vital for stock market recovery Reforms like this build trust in formalisation.” In November, he pushed: “SMEs, reinvest gains tax-free under new rules to scale,” but flagged: “One question kept coming up—what role did ASHON play?” His deep dives reveal gaps in consultation that echo Aisha’s harassment fears.
Esther Yewande (@estys_capital) advised in October: “New code clarifies gifts vs. income—SMEs, document ‘dashes’ to kin to avoid pitfalls Build compliance buffers; reforms favour growth over gotchas.” She connected to daily hustles: “Turn compliance into competitive edge.”
Reacting, Wale Edun said: “We have heard you on Capital Gains Tax Considering the call for the reconsideration we will meet again to come out with appropriate measures that will be good for investors and for Nigeria before implementation.” Dr. Ayoola Ogunbiyi added: “Aligning CGT with CIT introducing progressive rates are all forward-looking measures.” Abubakar Muhammed Kaigama warned: “Tax reforms must go hand in hand with reforms in governance and accountability.”
These voices blend hope with caution, urging education to shield the vulnerable.
Loopholes
Even strong reforms have weak spots. Trust is low after years of graft; sixty percent fear elites will grab funds, per PwC’s 2025 analysis. As @IG_nomdeplume posted in November: “Tax reform will succeed only when the economy is enabled to breathe—growth must precede extraction.”
Enforcement varies; weak audits may push SMEs informal, warns a December 2024 Guardian piece. The value-added tax rise could spark inflation if refunds lag—exemptions cover seventy percent, but seasonal traders like Aisha slip through. Oil states may fight derivation cuts, per BusinessDay’s November 2024 view.
Mid-SMEs (one hundred to one hundred and fifty million naira) face sudden full taxes without bridges, says Andersen’s May 2025 study. Rural digital gaps widen divides. Capital gains tax on offshore deals may scare foreign cash if treaties lag, as Fidelis flagged: “Likely review incoming—vital for stock market recovery.”
A major gap is the lack of awareness and understanding of the tax laws, leaving many taxpayers confused and hesitant to comply. This stems from the complexity of the new provisions, such as the tiered exemptions and digital filing requirements, which have overwhelmed informal workers and small business owners. For instance, in an August 2025 X post, Pastor Okezie J. Atañi (@Onsogbu) highlighted the rollout’s implications, prompting replies like Jide Akin (@HeavenPreacher), who noted: “I find it hard to understand why people cry for paying Taxes in Nigeria. It’s effortlessly remitted elsewhere.” Similar complaints flood discussions, with users expressing frustration over unclear thresholds and refund processes, exacerbating evasion and undermining the reforms’ intent to protect the vulnerable.
Comments under Oyedele’s posts highlight fears. Abdallah Chafe (@sir_chafe, Abdallah Chafe) wrote in November: “The tax reform should start with accounting and reforming how the government spends What has changed now? Then later we can look at this Capital Gain Tax CGT.” Nejeeb Bello Oyarese (@NejeebBello, Nejeeb Bello Oyarese) asked: “So the Government of Nigeria plans to retain this 239% Flight Tax Did you miss it in your tax reforms?” Anthony Destiny (@AnthonyChidie11, Anthony Destiny) vented: “Oga just stop deceiving yourself Have you asked yourself that when you wanted to tax, how much is in our account?” These echo KPMG’s warning: revenue may stall at twelve percent of GDP.
Bridging the divide
Experts offer fixes to strengthen these laws. Launch digital literacy drives: telco partnerships for free app training, targeting eighty percent informal coverage by 2027, as Olaseinde suggests. Subsidise rural internet.
For SMEs, add six-month registration amnesties and cheap advice via SMEDAN, per PwC 2025. Rebates for green shifts, like Ghana’s forty percent compliance boost.
Boost openness: blockchain spending trackers, as Oyedele proposed. Fund the Ombudsman independently.
Phase value-added tax with audits, per Aja: “Pair hikes with subsidies for vulnerable quintiles.” Align capital gains tax with treaties, says EY January 2025.
To address the critical gap in awareness and understanding, Taiwo Oyedele and his team at the Presidential Fiscal Policy and Tax Reforms Committee are taking proactive steps through targeted outreach. They have launched the “Excellence in Tax Reporting” initiative, engaging journalists and influencers in dedicated sessions to simplify complex provisions and amplify accurate information across media platforms. Complementing this, train-the-trainer programmes equip community leaders, accountants, and union representatives with the tools to cascade knowledge locally. Additionally, a series of seminars, workshops, and town halls—held in major cities and rural hubs—bring stakeholders together for interactive clarifications on exemptions, refunds, and filing. These engagements with key players, including SME associations, market unions, and civil society groups, aim to demystify the reforms, foster compliance, and ensure that vulnerable groups like Aisha can access their shields without confusion.
Multi-stakeholder checks: quarterly National Economic Council reviews with SME voices. Yewande advises: “Document everything—turn compliance into competitive edge.” Deloitte sees eighteen percent tax-to-GDP by 2032. Edun vows: “These positive signals reinforce our commitment to staying the course.”
Overcoming the spoilers
Navigating the political terrain of these reforms demands explicit strategies to neutralise opposition and secure buy-in from all levels of government and society. At the forefront is resistance from state governors, who worry that the new value-added tax derivation formula—allocating fifty percent of revenues to producing states—will erode their fiscal autonomy and traditional income streams from overlapping levies. To counter this, the reforms include targeted incentives, such as offering governors fifteen percent of newly generated value-added tax revenues earmarked for infrastructure bonds under their direct control. This not only sweetens the deal but ties state-level projects—like road repairs in Lagos or irrigation in Kano—to the broader national revenue pool, ensuring tangible benefits that governors can showcase to their constituents.
On the informal front, where Aisha and millions like her operate, buy-in requires grassroots mobilisation to combat entrenched extortion by local agents. The Joint Revenue Board Establishment Act explicitly mandates BVN-linked registration drives, rolled out through community radio broadcasts in Hausa, Yoruba, Igbo, and Pidgin English, coupled with free mobile clinics for digital onboarding. To make enforcement bite, nationwide SMS and app-based hotlines will allow real-time reporting of harassment, with the Tax Ombudsman empowered to investigate and penalise offenders swiftly—potentially fining rogue collectors up to five times the extorted amount and mandating refunds within 48 hours.
Corruption remains the elephant in the room, with historical leakages eroding public faith. Here, the reforms draw on Estonia’s digital blueprint: a blockchain audit trail for all SME tax refunds and credits, ensuring immutable records that citizens can verify via public dashboards. This transparency extends to revenue allocation, where quarterly reports will detail how funds flow to social programmes, directly linking Aisha’s child credit to visible improvements like better market sanitation. By addressing these spoilers head-on—through incentives, enforcement, and tech-driven accountability—the political economy shifts from zero-sum battles to collaborative growth, turning potential saboteurs into champions of the reform agenda.
Lessons from peer nations
Drawing explicit lessons from peer nations sharpens Nigeria’s path, highlighting proven tactics to adapt rather than reinvent. Rwanda stands as a beacon for SME empowerment: since 2010, its zero percent corporate income tax regime for micro-firms with turnover below fifty million Rwandan francs has catalysed a staggering four hundred percent surge in SME formalisation over five years, per World Bank data. Nigeria’s three-year tax holiday for startups under one hundred million naira mirrors this, but success hinges on Rwanda’s seamless tech integration—such as the Irembo digital platform, which handles ninety percent of business registrations online. To replicate, Nigeria’s Nigeria Revenue Service must prioritise API linkages with banks and telecoms, ensuring rural entrepreneurs like those in Kaduna can file via USSD codes, not just apps, to avoid digital exclusion.
Kenya offers a masterclass in compliance efficiency through its iTax portal, launched in 2014, which slashed administrative costs by sixty percent and boosted revenue collection by twenty-five percent in three years, according to OECD evaluations. The portal’s one-stop-shop for filings, payments, and refunds—integrated with mobile money like M-Pesa—directly informs Nigeria’s app-based regime, which already cut Ogun State compliance time by seventy-eight percent in pilots. Yet, Kenya’s edge lies in its aggressive user education: annual SMS reminders and helplines reduced errors by forty percent. Nigeria should adopt this by embedding similar nudges in the e-Naira ecosystem, explicitly targeting informal traders to prevent the evasion spikes seen in early Kenyan rollouts.
In contrast, Ghana’s 2015 tax exemptions for small firms, while ambitious, faltered due to over-complexity, leading to forty percent revenue leakage from poor monitoring, as flagged by the African Development Bank. Exemptions covered too many categories without sunset clauses, breeding abuse. Nigeria must steer clear by ring-fencing its buffers—limiting zero-rated items to verified essentials and mandating annual audits for turnover tax qualifiers, as BusinessDay recommends. These benchmarks are not abstract; they provide a roadmap: Rwanda for inclusion, Kenya for efficiency, Ghana as a cautionary tale. By explicitly tailoring these—say, piloting Rwanda-style hubs in Enugu and Kenya-inspired nudges in Lagos—Nigeria can accelerate its reforms from promise to performance, ensuring SMEs and the vulnerable thrive without the pitfalls that plagued others.
Call to action: Reform agenda
The time for half-measures is over. Nigeria must act decisively and collectively to turn these reforms into lasting reality. First, the National Assembly should prioritise and pass any remaining implementation bills by the end of the first quarter of 2026, with clear timelines for state-level harmonisation. Second, the Federal Government must launch pilot programmes in at least six states—covering each geopolitical zone—by July 2026, starting with Lagos, Kano, Rivers, Enugu, Kaduna, and Ogun, to test digital tools and gather real-time feedback. Third, civil society organisations, SME associations, and market unions must establish independent monitoring units equipped with SMS and app-based hotlines to report extortion or delays in refunds, ensuring accountability at the local level. Fourth, President Tinubu and Finance Minister Edun should spearhead a nationwide campaign branded “Tax Justice for the Hustler,” inspired by Kenya’s successful 2013 model, using radio, television, town halls, and social media in Hausa, Yoruba, Igbo, Pidgin, and English to educate citizens and build trust. Finally, every stakeholder—from governors to traders—must commit to quarterly progress reviews at the National Economic Council, publishing transparent scorecards on revenue use and poverty impacts. Only through these explicit, coordinated steps can Nigeria transform policy into prosperity for Aisha and millions like her. Edun has set the tone: “S&P upgrade confirms Nigeria’s tough reforms are gaining traction, foundations we are building today will support inclusive and sustainable growth.” The nation must seize this moment—delay is not an option.
As policymakers and stakeholders debate economic reforms and sustainability, which encapsulates the latest tax reforms, stories like Aisha’s serve as a stark reminder: beneath the statistics are real lives—full of hope, hardship, and resilience. Addressing these hidden taxes is not just about easing the burden on traders; it is about empowering the backbone of Nigeria’s economy to thrive beyond the market stalls. For Aisha, and countless others, meaningful change could mean the difference between survival and a chance at prosperity.
Editor’s Note: Aisha Ibrahim is a fictional character created to illustrate the lived realities of informal market traders in Nigeria. Her story is representative and intended to enhance understanding of systemic challenges. Any resemblance to real persons is purely coincidental.
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