The Federal Government is set to forgo an estimated ₦1.4 trillion in revenue in 2026 following its decision to reduce the corporate income tax (CIT) rate from 30 percent to 25 percent, a key plank of Nigeria’s newly consolidated tax reform framework.
Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, disclosed this on Friday during a media workshop on the new tax laws, noting that the move is a deliberate policy choice aimed at stimulating economic growth rather than raising new taxes.
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According to Oyedele, data from the Federal Inland Revenue Service (FIRS) shows that corporate income tax collections amounted to about ₦8.6 trillion in 2024. A five-percentage-point cut in the tax rate, he explained, would translate to roughly ₦1.4 trillion in revenue that the government will relinquish annually.
“If you do the maths, taking away 5 percent out of 30 percent comes to around ₦1.4 trillion. In effect, the government is giving ₦1.4 trillion back to businesses next year,” Oyedele said.
Growth, Not Higher Taxes
Oyedele stressed that the tax reforms are built on the conviction that sustainable government revenue can only be achieved through economic expansion, not by increasing tax rates. He argued that economic growth naturally broadens the tax base by creating jobs and supporting businesses, while excessive taxation risks deepening stagnation.
“The fastest and most sustainable way to generate revenue is to allow the economy to grow. If someone is unemployed, you can have the best personal income tax law in the world, but you still can’t collect tax from them,” he said.
He added that the new tax laws intentionally avoid introducing fresh levies, focusing instead on removing bottlenecks and lowering the cost of doing business in Nigeria.
VAT Reforms to Deliver Additional Relief
Beyond the reduction in corporate income tax, Oyedele said businesses will also benefit from significant changes to the Value Added Tax (VAT) regime, which will take effect from January 2026.
Under the new framework, companies across sectors will be able to claim input VAT credits on assets, overheads, and services and categories that were previously excluded under existing laws.
“You’ve never been able to claim these input VAT credits before because the law did not allow it. From January next year, you will be eligible to claim them, which means refunds into your bank accounts,” he said.
These new benefits will come in addition to existing input VAT credits on inventory, which are being retained.
To illustrate the impact, Oyedele cited bread production. 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. These unrecoverable costs are ultimately passed on to consumers through higher prices.
Under the new system, bread will be VAT zero-rated rather than exempt. This allows bakers to charge VAT at zero percent while reclaiming VAT paid on production inputs, thereby reducing production costs.
“What this means is that the cost of producing bread will come down,” Oyedele said.
He noted that the same zero-rating approach will apply to food, education, and healthcare sectors considered critical to household welfare.
Short-Term Revenue Trade-Off
While acknowledging that the reforms will reduce government revenue in the short term, Oyedele insisted that the sacrifice is intentional and necessary to unlock long-term economic growth and a broader tax base.
Recall that Nigeria is currently embarking on a comprehensive tax overhaul, with the core provisions of four new tax reform acts set to take effect on January 1, 2026. The reforms aim to simplify the tax system, broaden the tax base, and introduce major changes for individuals and businesses.
To oversee implementation, President Bola Tinubu has approved the creation of the National Tax Policy Implementation Committee (NTPIC). The committee will be chaired by Joseph Tegbe, a Fellow of the Institute of Chartered Accountants of Nigeria (FCA) and the Chartered Institute of Taxation of Nigeria (FCIT).
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