Under Nigeria’s freshly enacted tax regime, the Lagos State Internal Revenue Service (LIRS) reports that nearly all workers will see a lighter tax burden with most paying less than before or nothing at all. According to an analysis of more than 1.49 million anonymised tax records, about 54.5% will pay zero tax, and approximately 43.9% will pay less than under the previous system, leaving only a small minority (1.6%) paying more.
The new structure, which took effect with broader national tax reforms rolling out in January 2026, is designed to be fairer, promote economic growth, and make tax compliance easier for workers and small businesses alike.
At its core, the law raises the threshold at which personal income becomes taxable, so that low-income earners are shielded from levies altogether. It also introduces more progressive brackets for higher earners and aligns capital gains taxation with personal and corporate tax rates to level the playing field.
“The new tax law is pro-poor, small business and middle class, while remaining neutral at the top,” said a top LIRS official, stressing that the framework was the most fundamental fiscal overhaul since Nigeria’s independence.
“For the first time, Nigeria has a tax framework designed to protect the most vulnerable individuals and enterprises while still supporting large businesses.”
An important feature is the exemption for those earning N800,000 or less annually, which includes protecting anyone at or below the national minimum wage from taxation, even if the wage rises in the future.
The reforms also address capital gains tax, ending a situation where profits from selling shares or property were taxed at a low flat rate regardless of the type of income. Under the new regime, capital gains are taxed in line with other income, depending on the taxpayer’s status.
LIRS has urged taxpayers to file their 2024 annual returns by the January 31 deadline, warning that delays could overwhelm the electronic system.
Economically, the reform is expected to increase disposable income for most workers, spur consumer spending, and incentivise business investment, contributing to broader growth. By reducing taxes on low and middle-income earners and updating rates for higher incomes and capital gains, the government aims to widen the tax base, boost compliance, and create a more conducive environment for economic expansion.
Economists believe the tax overhaul could spur domestic consumption and formal sector growth by increasing take-home pay for the majority of workers. With more disposable income, households may boost spending, driving demand across sectors, potentially lifting economic output. Higher compliance and a broader base might also strengthen long-term revenue stability.
