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 per cent to 25 per cent, a move that sits at the heart of Nigeria’s newly consolidated tax reform framework. The disclosure was made by Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, during a media workshop on the new tax laws held on Friday.
According to Oyedele, the decision to lower the CIT rate is a deliberate policy choice aimed at stimulating economic growth rather than an attempt to introduce new taxes or impose additional burdens on businesses. He explained that 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 reduction from the current 30 per cent rate, he said, would mathematically translate to approximately ₦1.4 trillion in revenue that the government would effectively give up annually.
“If you do the maths, taking away five per cent out of 30 per cent translates to around ₦1.4 trillion. So this is government giving ₦1.4 trillion to businesses next year,” Oyedele said, framing the move as a form of indirect support to the private sector.
He stressed that the reforms are built on the principle that sustainable government revenue cannot be achieved by simply increasing tax rates, but by expanding the size of the economy. According to him, an economy that is growing creates jobs, supports profitable businesses, and ultimately broadens the tax base in a more sustainable way. In contrast, excessive taxation in a weak economy only discourages investment and deepens stagnation.
“The fastest and most sustainable way to generate revenue is to allow the economy to grow,” Oyedele explained. “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 that the new tax laws are designed to remove structural bottlenecks, lower the cost of doing business, and encourage compliance, rather than relying on higher rates to boost collections.
Beyond the reduction in corporate income tax, Oyedele noted that businesses are expected to gain additional benefits from significant changes to the Value Added Tax (VAT) regime, which will come into effect from January 2026. Under the revised framework, companies across multiple sectors will be able to claim input VAT credits on assets, overheads, and services—items that were previously excluded under the old law.
“You’ve never been able to claim any input credits for VAT because the law says you can’t,” he said. “From January next year, you become eligible to claim input credits. Like you will get money in your bank accounts.” These new credits will be in addition to existing input VAT claims on inventory, which will continue under the new system.
Oyedele illustrated the potential impact of the VAT changes using the example of bread production. 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, machinery, vehicles, and utilities. These unrecoverable VAT costs are often embedded in the final price of bread, making it more expensive for consumers.
Under the new framework, bread will be zero-rated rather than exempt. This allows producers to charge VAT at zero per cent while still claiming refunds on VAT paid on their inputs. According to Oyedele, this shift will lower production costs and, in theory, reduce prices for consumers. He added that the same zero-rating approach will apply to essential sectors such as food, education, and healthcare, which are critical to household welfare.
While acknowledging that the reforms will reduce government revenue in the short term, Oyedele insisted that the trade-off is intentional. The expectation, he said, is that improved business conditions, lower operating costs, and stronger economic growth will ultimately lead to higher and more sustainable tax revenues over time.
Nigeria is currently implementing one of its most comprehensive tax overhauls in decades, with the main 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 introduce far-reaching changes for both individuals and businesses. To ensure effective implementation, President Bola Tinubu has approved the establishment of the National Tax Policy Implementation Committee, which will be chaired by renowned tax expert Mr. Joseph Tegbe.