In developed economies, taxation remains a major non-oil revenue source, largely because citizens can see public services funded with their taxes. This visibility builds trust, encourages voluntary compliance and makes tax evasion a punishable offence.
In Nigeria, however, a long-standing trust deficit has made tax collection difficult. Many individuals and businesses are reluctant to pay, not necessarily due to lack of funds, but because of doubts about how tax revenues are used.
This challenge has been compounded by a tax structure that places a heavier burden on low-income earners and small businesses, while some large companies either pay less than expected or contest assessments through litigation.
For nano, micro and small businesses, multiple taxation and arbitrary levies have further strained operations in an already tough business environment.
That narrative may soon change.
With the current tax framework set to expire at the end of the year, Nigeria’s new tax regime is offering renewed hope for small businesses. The reforms, signed into law by President Bola Tinubu in June 2025 through four landmark bills, are expected to take effect from January 1, 2026. They aim to simplify tax administration, expand the tax net to include high-net-worth individuals and the digital economy, and significantly reduce the burden on small businesses.
Why it matters for SMEs
Small and medium enterprises are widely regarded as the engine of Nigeria’s economy, driving job creation, poverty reduction and grassroots economic growth. Yet many operate under harsh conditions, often providing their own electricity, water and infrastructure, while relying on personal savings to stay afloat.
Despite these challenges, SMEs have faced heavy and, in some cases, multiple taxation.
The Tax Reform Act 2025 seeks to reverse this trend. The new framework introduces graduated thresholds and simplified tax regimes designed to shield small businesses from excessive fiscal pressure. Notably, businesses with annual turnover below N100 million will be exempt from corporate income tax, offering critical breathing space for struggling enterprises.
Speaking recently in Lagos, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Professor Taiwo Oyedele, said micro-enterprises will be exempt from certain taxes, while small businesses will benefit from reduced rates and simplified filing processes.
According to him, the reforms reflect the realities of Nigeria’s business environment, where many enterprises operate with limited capital and informal structures. By lowering compliance costs, the policy encourages businesses to formalise without fear of punitive enforcement.
Formalisation, experts note, opens the door to access to credit, government procurement opportunities and structured business support, strengthening long-term business resilience and sustainable job creation.
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- Eko Fiesta 2025 to boost SMEs, youth enterprise in Lagos
Digital shift gathers pace
As the 2026 implementation date approaches, many Nigerian businesses are already adjusting to the new reality. A growing number are adopting e-invoicing systems in preparation for the reforms.
Data from Afri Invoice shows a noticeable increase in demand for digital invoicing solutions, as businesses rush to align with the Federal Inland Revenue Service’s new requirements. The shift is expected to transform how transactions are recorded and taxed nationwide.
Commenting on the trend, Afri Invoice founder and CEO, Mark Odenore, said many businesses will need to rethink their invoicing processes under the new tax laws.
“At this critical juncture, we are offering incentives to businesses that begin their digital invoicing journey early,” he said, noting that the company aims to ease the transition from manual invoicing to digital compliance.
For thousands of Nigerian SMEs, the reforms signal not just lower taxes, but a chance to operate in a fairer, more predictable fiscal environment one that could finally tilt the balance from survival to growth.
