The federal government has unveiled a new presumptive tax regime targeting Nigeria’s vast informal economy while simultaneously banning cash collections by revenue agents, in a sweeping reform designed to formalise millions of enterprises and plug persistent revenue leakages. The policy, announced by the Presidential Fiscal Policy and Tax Reforms Committee, introduces simplified tax assessments for small businesses and market traders based on sectoral benchmarks rather than complex accounting records. The reform, which takes effect immediately, represents a fundamental shift in how the government engages with the informal sector that dominates Nigerian commerce.
The presumptive tax framework establishes standardised tax liabilities for businesses based on factors such as location, trade type, and estimated turnover, eliminating the discretionary assessments that have historically enabled rent-seeking by revenue agents. By banning cash collections, the government aims to channel all payments through digital platforms, creating transparent audit trails and reducing the opportunity for diversion. The policy applies to millions of informal operators who have historically operated outside the tax net, from market traders and transport workers to artisans and small-scale manufacturers.
However, the success of this ambitious reform hinges on overcoming a profound crisis of public confidence that threatens to undermine even the most technically sound fiscal policies. A recent report by SBM Intelligence on Nigeria’s tax reforms revealed that more than two-thirds of citizens completely distrust the government’s use of tax revenues, creating a foundational legitimacy problem for the Tinubu administration’s revenue mobilisation agenda.
The SBM analysis, titled “Taxing Patience,” warned that the reform’s ultimate success or failure will be determined not in legislative chambers but on the streets and in the markets, where citizens will decide if the state has earned the right to replace existing extractors. The report uncovers stark regional disparities in perceptions of the tax reforms. In Lagos, high awareness of the new laws corresponds with the strongest resistance, with half of respondents expressing negative views. In Bauchi, distrust peaks at nearly 80 percent, heavily influenced by geopolitical suspicion of partnerships with foreign tax authorities.
For the critical informal sector, the SBM report noted a particular challenge: many operators already pay daily levies to unions, market associations, and non-state actors. From this perspective, the state’s new taxes are seen not as a replacement for existing extractors but as an additional layer of burden. This perception directly threatens compliance among the very businesses the presumptive tax regime is designed to capture.
The SBM research offered a potential pathway forward, revealing that public resistance is not driven primarily by the scale of fiscal adjustment, which the report notes is modest at one to one-and-a-half percent of GDP. Instead, the willingness to comply is explicitly transactional. Three-quarters of citizens would increase their tax compliance if they could see visible improvements in essential services such as electricity, road infrastructure, and security.
This finding suggests that the presumptive tax regime cannot succeed in isolation. It must be accompanied by demonstrable improvements in public service delivery that convince citizens their contributions are producing tangible returns. The SBM analysis framed this as a potential “tax swap”: citizens may accept structured taxation only if the state delivers better services than the informal systems it seeks to replace.
The presidential tax committee has pushed back against narratives of burdensome taxation, emphasising that the reforms include significant relief measures for small businesses. Committee Chairman and new minister of state for finance, Taiwo Oyedele, has repeatedly stressed that only the top three percent of informal sector operators—those with the financial capacity to pay—will be subject to taxation under the new framework. Speaking at a PwC executive summit in Lagos, Oyedele explained that from available analysis, the bottom 97 percent have been legally exempted from paying taxes. “Let them breathe. When they grow, they will have the capacity to pay,” he stated.
Sam Abu, Regional Senior Partner at PwC’s West Market Area, underscored the importance of stakeholder collaboration in ensuring the reforms succeed. Speaking at the same summit, Abu urged all parties to engage with the reforms “with sincerity, integrity, and optimism”. His comments reflect the professional services sector’s recognition that technical policy design, no matter how sound, requires effective implementation and public buy-in to achieve its objectives.
Despite the government’s assurances, concerns persist about enforcement capacity and the potential for unintended consequences. The ban on cash collections, while essential for transparency, requires robust digital infrastructure that may not yet reach all informal operators, particularly in rural areas. The presumptive assessments, while simplified, must be perceived as fair to avoid triggering resistance from the very businesses the policy aims to formalise.
The SBM report warned that without immediate, tangible service delivery to rebuild the shattered social contract, this technically proficient fiscal overhaul risks becoming a socially divisive failure. The gamble, as the analysis frames it, is not on revenue collection but on restoring public trust.
For Nigeria’s economy, the stakes could hardly be higher. With a tax-to-GDP ratio that has historically lagged African peers, successfully integrating the informal sector into the formal tax net is essential for sustainable development. The presumptive tax regime represents a pragmatic attempt to address this challenge. Whether it succeeds will depend less on its technical design than on whether ordinary Nigerians come to believe that paying taxes serves their interests rather than simply enriching a distant and unaccountable state.
