A significant overhaul of Nigeria's tax system has officially taken effect, bringing substantial relief to millions of workers across the country. The new tax law, which commenced on January 1, 2026, introduces sweeping changes designed primarily to ease the financial burden on low and middle-income earners.
Major Relief for Low-Income Government Employees
The cornerstone of the reform is a substantial increase in the tax-free threshold. Under the new provisions, the first ₦800,000 of an individual's annual income is now completely exempt from tax. This means government workers and other employees earning ₦800,000 or less per year—approximately ₦66,667 monthly—will pay no tax on their income or gains.
Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, confirmed that this measure effectively exempts between 97 and 98 per cent of Nigerian workers from the Pay-As-You-Earn (PAYE) system. For incomes exceeding the ₦800,000 threshold, a progressive tax structure will apply, with rates climbing in bands up to a maximum of 25 per cent for annual earnings above ₦50 million.
Broader Economic Reforms and Corporate Tax Cuts
The reforms extend beyond individual relief to stimulate business growth. A key change is the reduction of the corporate tax rate from 30 per cent to 25 per cent. According to Oyedele, these measures are part of a comprehensive strategy to create a fairer and more efficient tax system that encourages compliance and supports inclusive economic growth.
He emphasised that the committee engaged extensively with every sector of the economy, using data from the National Bureau of Statistics (NBS) to tailor the reforms. The initial public controversy surrounding the proposals, he noted, ultimately served to increase awareness and engagement, with public discussion sessions filling beyond capacity.
Governance, Accountability, and Future Outlook
The reforms are also aimed at strengthening governance around revenue generation. Oyedele explained that improved tax collection and accountability in spending are expected to enhance Nigeria's sovereign credit ratings. This, in turn, should lead to sufficient revenue for government operations and lower borrowing costs for both the public and private sectors.
Government workers have been advised to ensure their financial documentation, including updated PAYE tables and deductions for pension, National Housing Fund (NHF), health insurance (NHIS), and mortgage relief, are in order following the law's enactment.
The Federal Government, which generated approximately ₦3.36 trillion in revenue last year, views these reforms as being in the nation's "enlightened self-interest," designed to shield those near the poverty line and build a more resilient economy.
