The Federal Government will effectively give up about N1.4 trillion in revenue in 2026 by reducing the corporate income tax (CIT) rate from 30% to 25%, as part of its newly consolidated tax reform framework.
Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, disclosed this on Friday during a media workshop on the new tax laws, explaining that the move is deliberate and aimed at stimulating economic growth rather than introducing new taxes.
According to Oyedele, data from the Federal Inland Revenue Service (FIRS) shows that corporate income tax collections stood at about N8.6 trillion in 2024.
A five percentage-point reduction from the current 30% rate, he said, translates to roughly N1.4 trillion that the government will forgo annually.
“If you do the maths, taking away 5% out of 30% translates to around N1.4 trillion. So this is government giving N1.4 trillion to businesses next year,” Oyedele said.
Growth over new taxes
Oyedele said the tax reforms are anchored on the belief that sustainable government revenue can only come from economic expansion, not higher tax rates.
He argued that a growing economy naturally widens the tax base by creating jobs and supporting businesses, while excessive taxation only deepens economic stagnation.
“The fastest and most sustainable way to generate revenue is to allow the economy to grow. If I’m unemployed, you can have the best personal income tax law in the world, but you can’t collect tax from me,” he said.
According to him, the new tax laws intentionally avoid introducing new levies, instead focusing on removing bottlenecks and reducing the cost of doing business in Nigeria.
VAT input credits to unlock additional benefits
Beyond the CIT reduction, Oyedele said businesses will benefit even more from changes to the Value Added Tax (VAT) regime, which will take effect from January 2026.
Under the new law, he said companies across sectors, will be able to claim input VAT credits on assets, overheads, and services—categories that were previously excluded.
“You’ve never been able to claim any input credits for VAT because the law says you can’t. From January next year, you become eligible to claim input credits. Like you will get money in your bank accounts,” he said.
- This will be in addition to existing input VAT credits on inventory, which are being retained under the new law.
- Oyedele explained the impact of the VAT changes using bread as an example. Currently, bread is VAT-exempt, meaning bakers do not charge VAT on sales but cannot recover VAT paid on inputs such as sugar, butter, equipment, vehicles, and utilities.
- As a result, those hidden VAT costs are built into the price of bread, making it more expensive for consumers.
- Under the new framework, bread will become VAT zero-rated rather than exempt. This allows bakers to charge VAT at 0% while receiving full refunds on VAT paid on production inputs.
“What that means is the cost of producing bread will come down,” Oyedele said.
He noted that the same zero-rating principle now applies to food, education, and healthcare, sectors considered essential to household welfare.
Oyedele acknowledged that the reforms will reduce government revenue in the short term but insisted the trade-off is intentional.
What you should know
Nigeria is implementing a comprehensive tax overhaul, with the main provisions of four new tax reform acts (collectively referred to as “the Acts”) becoming effective on January 1, 2026.
- These reforms aim to simplify the tax system, broaden the tax base, and introduce significant changes for both individuals and businesses.
- To drive the implementation of these new laws, President Bola Tinubu has recently approved the establishment of the National Tax Policy Implementation Committee (NTPIC).
- The newly constituted committee, according to the statement, will be chaired by renowned tax expert Mr. Joseph Tegbe, a Fellow of both the Institute of Chartered Accountants of Nigeria (FCA) and the Chartered Institute of Taxation of Nigeria (FCIT).