New laws exempt households on N250k earnings from taxes

In a major fiscal policy shift aimed at easing the financial burden on low-income earners and boosting economic equity, President Bola Ahmed Tinubu has signed into law a comprehensive tax reform package that exempts Nigerian households earning ₦250,000 or less per month from paying taxes, effective January 1, 2026.

The announcement, made by the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, just hours after the presidential assent, marks what he described as a “historic milestone” for Nigeria’s tax system.

“This Thursday marks a significant milestone for the country,” Oyedele stated, while acknowledging the political and social resistance the reforms had faced. “At some point, it became politically risky for even Mr. President because it took on religious and regional dimensions, but he remained committed.”

Tax Exemption Threshold: Households earning N250,000 or less monthly will be exempt from paying personal income tax.

Small Business Relief: Businesses with annual turnover below ₦50 million will not be liable for income tax.

VAT Exemptions: Basic necessities such as food and healthcare will no longer attract value-added tax (VAT).

Progressive Taxing: Taxes will reduce for middle-income earners (₦1.8 million to ₦2 million/month), while those at the top income bracket will see slight increases.

Implementation Date: January 1, 2026, following a six-month transition period.

According to Oyedele, the reforms aim to protect the poor, stimulate growth, and simplify tax compliance. “This law won’t give you cash directly, but it ensures we do not tax poverty,” he said.

He explained that the committee adopted a localized definition of poverty based on average Nigerian family dynamics—typically five members with only two earning members. Based on this, the income line of ₦250,000 was drawn to define economic vulnerability.

“We have eliminated the tax burden for the poor, reduced it for the middle, and adjusted it upward for the top. If you earn below ₦250,000, you are considered poor and should not pay taxes,” he added.

The reforms also aim to raise Nigeria’s tax-to-GDP ratio from the current 10.3% to 18% by 2026 and plug a 70% gap in tax collection efficiency.

Together, they aim to simplify tax processes, eliminate redundancies, strengthen revenue generation, and ensure fairness in tax administration.

READ ALSO: Analysts react as Tinubu signs tax reform bill into law

Zacch Adedeji, Chairman of the newly renamed Nigeria Revenue Service (NRS)—formerly the Federal Inland Revenue Service (FIRS)—confirmed the effective date of January 1, 2026. He explained that the NRS will now be responsible not just for tax collection but also for non-tax revenue generation, aligning with global best practices.

“We were FIRS two hours ago. With the President’s assent, we are now NRS, with a broader mandate to collect both tax and non-tax revenues,” Adedeji said.

President Tinubu initially forwarded the bills to the National Assembly in October 2024, facing pushback from some northern governors who feared regional disadvantages. A consensus was eventually reached in January 2025 through the Nigeria Governors’ Forum, leading to an equitable VAT-sharing formula.

The House of Representatives passed the bills in March, followed by the Senate in May, before formal transmission to the President on June 18.

Speaking during the signing ceremony attended by key political and economic leaders, President Tinubu described the reforms as the “first major, pro-people tax cuts in a generation.”

“For too long, our tax system has been a patchwork—complex, inequitable, and burdensome. It has weighed down the vulnerable and shielded inefficiency. That era ends today,” he declared.

Tinubu emphasized that the reforms align with broader welfare initiatives, including the proposed new national minimum wage. He also noted that the reforms will restore investor confidence, reduce bureaucratic bottlenecks, and improve transparency in revenue administration.

Oyedele underscored that the committee’s next priority is implementation, which would involve collaboration with stakeholders from the private sector, civil society, professional bodies, and international partners.

“Writing the law is just the beginning,” he said. “Implementation is where the real work begins, and we are ready.”

The government plans a nationwide awareness campaign during the six-month transition window to ensure smooth rollout in 2026.