FG to lose N1.4trn annually as corporate tax cut takes effect in 2026

…. Analysts hail growth-led reforms

The Federal Government is set to forgo about N1.4 trillion in annual revenue from 2026 following its decision to reduce the Corporate Income Tax (CIT) rate from 30 per cent to 25 per cent, under Nigeria’s newly consolidated tax reform framework.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, disclosed this at the weekend during a media workshop on the new tax laws, stressing that the move is a deliberate policy choice aimed at stimulating economic growth, rather than creating new taxes.

Oyedele explained that data from the Federal Inland Revenue Service (FIRS) shows that corporate income tax collections stood at about N8.6 trillion in 2024.

A reduction of five percentage points from the current rate, he said, translates to roughly N1.4 trillion in revenue that the government will intentionally give up each year.

“If you do the math, taking away five percent out of 30 percent translates to around N1.4 trillion. So this is the government giving N1.4 trillion to businesses next year,” Oyedele said.

According to him, the reforms are anchored on the principle that sustainable government revenue can only be achieved through economic expansion, not by increasing tax rates.

“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 added.

Oyedele noted that the new tax laws intentionally avoid introducing new levies, focusing instead on removing structural bottlenecks, simplifying compliance, and reducing the cost of doing business in Nigeria.

Beyond the CIT reduction, Oyedele said businesses will benefit significantly from sweeping changes to the Value Added Tax (VAT) regime, which will take effect from January 1, 2026.

“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,” Oyedele said.

He illustrated the impact using bread production as an example. Currently, bread is VAT-exempt, meaning bakers do not charge VAT on sales but also cannot recover VAT paid on inputs such as sugar, butter, equipment, vehicles, and utilities. These unrecoverable VAT costs are often passed on to consumers through higher prices.

Under the new regime, bread will become VAT zero-rated rather than exempt, allowing bakers to charge VAT at zero percent while receiving full refunds on VAT paid on production inputs.

“What that means is the cost of producing bread will come down,” Oyedele explained.

Reacting to the reforms, tax and economic experts described the approach as a strategic shift from revenue chasing to growth-oriented taxation.

A Lagos-based tax consultant and former adviser to multinational firms said the CIT cut could improve Nigeria’s competitiveness as an investment destination.

“Reducing corporate tax sends a strong signal to investors that Nigeria is serious about easing the burden on businesses. While revenue may dip in the short term, improved compliance, business expansion, and new investments can offset these losses over time,” the expert said.

An economist also noted that the VAT reforms could improve business liquidity, particularly for manufacturers and service providers.

“Allowing input VAT recovery on assets and overheads is a game changer. It reduces hidden taxes, improves cash flow, and encourages capital investment, which ultimately supports job creation,” he said.

However, experts cautioned that the success of the reforms will depend largely on effective implementation, transparency in VAT refunds, and strong tax administration.

Nigeria is currently implementing a comprehensive tax overhaul, with the key provisions of four new tax reform Acts scheduled to take effect on January 1, 2026.

The reforms are designed to simplify the tax system, broaden the tax base, and create a more predictable environment for individuals and businesses.