The Centre for the Promotion of Private Enterprise (CPPE) has stated that while Nigeria’s ongoing tax reform represents one of the most ambitious and conceptually sound fiscal restructuring efforts in recent decades, its ultimate success will depend on implementation strategy, timing and public trust rather than the strength of the legislation alone.
In a policy position released today, CPPE noted that the reform framework is progressive in intent—aimed at improving revenue mobilisation, enhancing equity, simplifying the tax system and aligning fiscal policy with economic diversification and growth objectives. However, CPPE cautioned that history shows that good policy design does not automatically translate into positive outcomes.
According to CPPE, without careful sequencing, political sensitivity and economic realism, even well-intentioned reforms risk triggering resistance, disrupting livelihoods and further weakening public confidence in government policy.
Tax Reform Is a Process, Not an Event
CPPE emphasised that tax reform should be approached as a continuous and adaptive process rather than a one-off event. The current reform is being implemented at a particularly delicate time, with the economy still grappling with elevated inflation, weakened purchasing power and the adjustment costs of fuel subsidy removal and foreign exchange reforms.
The Centre noted that households and businesses are experiencing reform fatigue, a situation compounded by Nigeria’s entry into a politically sensitive pre-election period. In this context, CPPE warned that expecting full and simultaneous compliance across all sectors is unrealistic and that an overly rigid, enforcement-driven approach could undermine reform credibility before its benefits are realised.
Commendable Pro-Welfare Provisions
Despite public controversy, CPPE acknowledged that the tax reform contains several commendable and pro-welfare elements. These include exemptions for low-income earners from personal income tax, VAT relief on basic goods and essential services such as education, healthcare, agriculture and cultural activities, and tax relief for small businesses through exemptions from company income tax and VAT.
The reform also introduces targeted incentives for priority and job-creating sectors, supporting Nigeria’s diversification agenda. In addition, the rationalisation of multiple taxes, repeal of obsolete laws and improved system coherence respond to long-standing private sector concerns and could enhance predictability and investor confidence if properly implemented.
Why Public Resistance Persists
CPPE explained that resistance to the reform is rooted not merely in communication gaps but in lived experience. For many Nigerians, past reforms have resulted in higher living costs and declining welfare, with limited evidence of corresponding improvements in public services.
A weak social contract, according to CPPE, continues to undermine confidence that additional tax revenues will be transparently and efficiently deployed. With businesses and households still recovering from recent macroeconomic shocks, tolerance for new compliance demands remains low, making trust as critical as technical design.
The Informal Sector Reality
The Centre stressed that Nigeria’s vast informal economy must be central to any serious tax reform discussion. With an estimated 40 million micro, small and nano enterprises—over 80 percent operating informally—the sector plays a critical role in employment and income generation.
Most informal operators lack structured record-keeping, are largely cash-based, operate on thin margins and have limited literacy, digital capacity and understanding of tax concepts such as Company Income Tax (CIT), Value Added Tax (VAT), Personal Income Tax (PIT) and withholding tax. CPPE warned that introducing mandatory filing requirements, strict record-keeping standards, penalties and presumptive taxation without careful sequencing risks criminalising informality rather than encouraging gradual formalisation.
Policy Flashpoints Driving Anxiety
CPPE identified several provisions that have heightened anxiety among businesses and households. These include mandatory reporting of quarterly bank transactions of ₦25 million and above, which could expose SMEs handling custodial or pass-through funds to undue scrutiny.
The proposed increase in capital gains tax from 10 percent to 30 percent has unsettled investors in the stock market and real estate sectors, while the ₦500,000 annual rent relief cap is misaligned with prevailing urban housing costs and could further squeeze middle-class disposable income. Concerns are also growing over the breadth of enforcement powers granted to tax authorities and the severity of penalties embedded in the laws.
Revenue Efficiency Should Guide Enforcement
CPPE strongly recommended a strategic, revenue-efficiency-driven implementation approach rather than blanket enforcement. Empirical evidence shows that a small proportion of taxpayers generate the majority of revenue, with about 20 percent of businesses accounting for nearly 90 percent of tax receipts and a similar proportion contributing over 80 percent of personal income tax.
Focusing enforcement on large corporations, established SMEs and high-net-worth individuals, CPPE argued, would yield significant revenue gains without destabilising livelihoods or deepening social resistance.
Formal First, Informal Later
In the short to medium term, CPPE advised tax authorities to prioritise the formal sector, where compliance capacity already exists. Integration of the informal sector should be gradual, supported by incentives, sustained tax education, simplified compliance tools and digital onboarding, with an emphasis on compliance-building rather than penalties.
Political Timing Is Critical
With 2026 approaching as a pre-election year, CPPE urged caution, warning that aggressive, broad-based enforcement could fuel social discontent, political backlash and potential policy reversal. Stability, trust-building and reform credibility, the Centre said, must take precedence over short-term enforcement optics.
Conclusion
CPPE concluded that while tax reform is essential for Nigeria’s fiscal sustainability, its success will ultimately depend on a phased, pragmatic and socially sensitive implementation strategy anchored on trust, economic realities and political timing.
“Tax reform must grow with the economy,” CPPE stated. “A carefully sequenced approach offers the most credible pathway to sustainable revenue growth, expanded compliance and long-term legitimacy.”
