Nigeria’s new tax law, effective from January 2026, aims to simplify Nigeria’s tax system and protect low-income earners. However, despite being well-structured on paper, many market women, farmers, and small traders struggle to understand how the reforms affect them, creating a serious tax education gap that must be addressed for the reform to succeed.
Nigeria’s tax system has just gone through a major reform with the introduction of four new tax laws, including the Nigeria Tax Act (NTA) 2025, which takes effect from January 1, 2026.
On paper, these laws are detailed, structured, and professionally written. They clearly define who pays tax, how much to pay, and which level of government is responsible. From a technical point of view, the reform is well thought out.
But on the ground, there is a serious gap.
Market women, farmers, artisans, POS agents, transport workers, and many small traders are finding it difficult to interpret these laws for themselves. The issue is no longer whether the law is explained—it is who can actually understand it without help.
What Nigeria’s New Tax Law Is Trying to Achieve
The main goal of the new tax law is to organize Nigeria’s tax system and make it fairer.
Nigeria operates a tiered tax structure. The federal, state, and local governments each have their own tax responsibilities. The reform tries to clearly separate these roles, reduce overlap, and improve coordination.
It also aims to widen the tax net without placing pressure on low-income earners, while ensuring that businesses and individuals who earn more contribute their fair share.
Experts and reform committees involved in drafting the laws also worked with tax educators to help simplify the system. However, the challenge is that this simplified explanation has not yet reached many people at the grassroots.
How the Major Taxes Work, And Why People Are Confused
Under the new system, Personal Income Tax (PIT) applies to individuals who earn income from salaries, businesses, or investments. If a person earns ₦800,000 or less in a year, they do not pay income tax. Above that level, tax increases gradually up to 25%. For most Nigerians, this tax is handled by their State Internal Revenue Service, not the federal government.
To a tax professional, this is clear. To a market woman or a farmer, it raises questions like:
“Does my daily sales count as income?”
“If I don’t earn the same amount every month, how do I calculate this?”
The same confusion exists with Companies Income Tax (CIT). Small businesses earning ₦100 million or less per year are exempt, while bigger companies pay tax on their profits. But many small business owners do not keep formal records, so they are unsure how government determines turnover or profit.
Value Added Tax (VAT) is charged at 7.5% on most goods and services, but small businesses earning less than ₦25 million annually are exempt from charging VAT. Again, the rule is clear, but the interpretation is not. Many traders still ask whether VAT is their responsibility or the buyer’s, and whether they are already paying it indirectly.
Capital Gains Tax, Withholding Tax, and the new Development Levy are even harder for ordinary Nigerians to understand, especially when explained using technical terms like “assessable profits” or “disposal of assets.”
Structural Changes That People Don’t Fully Understand
One major reform is the replacement of FIRS with the Nigeria Revenue Service (NRS), which now handles most federal taxes. A Joint Revenue Board has also been created to coordinate taxes across federal and state levels.
The law also mandates the use of a Taxpayer Identification Number (TIN) and encourages digital tax filing.
From a policy perspective, this improves transparency and reduces leakages. From the perspective of a farmer in a rural area or a trader without digital access, it raises concerns about access, registration, and fear of penalties for mistakes.
This is where the gap becomes clear: the system is improving faster than people’s understanding of it.
Why the Education Gap Is a Serious Risk
When people do not understand tax laws, three things happen.
First, many people delay compliance, not because they want to evade tax, but because they are unsure.
Second, misinformation spreads quickly, creating fear and resistance.
Third, enforcement begins to feel harsh, even when the law is fair.
A good tax reform is not judged only by how well it is written, but by how well the people affected can understand and apply it.
What Must Happen Next for the Reform to Succeed
The committees and experts behind Nigeria’s tax reform have done important work, and their efforts deserve recognition. However, the next phase must focus heavily on grassroots education.
Tax education must move beyond websites and policy documents. It needs to reach markets, farms, motor parks, cooperatives, and small business clusters, in language people already use and understand.
Until ordinary Nigerians can confidently explain what the new tax law means for their own daily income, the reform remains incomplete.
The law may be ready.
The people are not yet there.
Bridging that gap is now the most important task.
