Effective January 1, 2026, Nigeria’s tax administration will operate under a new legal framework, the Nigeria Tax Act (2025). The legislation introduces sweeping changes that affect businesses across both the formal and informal sectors. One of its notable provisions is the requirement for a Tax Identification Number (TIN) as a prerequisite for participation in the country’s financial ecosystem.
This move is expected to narrow Nigeria’s financial inclusion gap by bringing millions of previously excluded individuals and enterprises into the tax net.
In this report, BusinessDay examines how the new tax laws are set to reshape operations in the informal sector.
According to Section 187, there will be zero per cent VAT on basic food items, medical and pharmaceutical products, and tuition fees for primary, secondary, and tertiary education. These are basic items that affect the common individuals on the streets who make up the base of Nigeria’s informal sector.
For smallholder farmers, VAT exemptions on tractors, ploughs, fertilisers, seeds, veterinary medicine, and animal feeds will help reduce input costs for them. These costs should trickle down to the final consumer with cheaper farm produce in the markets.
Based on provisions of Section 28 of the Act, all forms of income, trade, business, casual jobs, investing, and even digital asset gains will be recognised as taxable. For informal workers like artisans, market traders, ride-hailing drivers, freelance gig workers, and small-scale digital entrepreneurs, this means their incomes are now clearly within the tax net once records exist.
Many informal businesses do not keep proper accounts. The Act addresses this through a presumptive tax regime. According to Section 29 of the Act, if someone cannot provide reliable records, the tax authority will assess them using benchmarks.
Anyone who sells goods or services that are subject to tax must use the fiscalisation system introduced by the tax authority under the Act. The system that the FIRS has announced to be used is an e-invoicing system provided by e-Tranzact International.
On paper, players in the informal sector will be required to use electronic systems. However, in rural or low-income areas with limited internet access, the requirement feels impractical. Although there is an argument that the law will force businesses to keep digital records and report sales directly to the tax authority.
Income earned by companies engaged in agricultural activities, such as crop farming, livestock, aquaculture, forestry, and dairy production, will be exempt from tax for the first five years after the commencement of business, in line with the Thirteenth Schedule of the Act.
For many smallholder farmers and informal agribusiness operators, this provision offers a significant incentive to register and formalise their operations. Traditionally, informal players in agriculture avoid taxes because they operate outside the system. However, this exemption means that if they formalise, by registering as a company or cooperative, they can still enjoy five years of tax-free income, while gaining access to credit, government subsidies, and export opportunities.