Nigeria’s landmark tax reform bills, currently awaiting final approval from the Senate, are expected to deliver significant relief to millions of workers by increasing disposable income, reducing living costs, and safeguarding low-income earners.
The reforms, championed by the Presidential Committee on Fiscal Policy and Tax Reforms, have already passed the House of Representatives and are poised to reshape the nation’s fiscal landscape.
Dr. Taiwo Oyedele, Chairman of the committee, highlighted the bills as a game-changer for Nigeria’s workforce. In a statement, he emphasized that the proposed changes would exempt workers earning up to N1.3 million annually—equivalent to approximately N100,000 monthly—from Pay As You Earn (PAYE) tax.
This measure is projected to directly benefit at least 35% of employees in both the public and private sectors, allowing them to retain more of their earnings amid rising economic pressures.
For higher earners, the reforms introduce tiered relief. Individuals making up to N20 million annually (around N1.7 million monthly) will face reduced PAYE rates, impacting an additional 60% of the employed population.
Armed forces personnel will receive full exemptions from PAYE, underscoring the government’s commitment to supporting national security efforts. “These reforms are targeted at improving the well-being of Nigerian workers and reducing the burden of inflation,” Oyedele said, adding that the changes would alleviate cost-of-living pressures and foster greater financial stability.
A key aspect of the bills involves eliminating Value Added Tax (VAT) on essential goods and services, which account for over 80% of household consumption and nearly 100% for low-income families.
Items such as food, healthcare, education, rent, transport, renewable energy, compressed natural gas (CNG), baby products, sanitary items, and fuel will be VAT-free. This move is anticipated to ease the financial strain on families grappling with inflationary trends.
Beyond direct tax exemptions, the reforms include provisions for additional relief measures. Low-income earners will benefit from tax breaks on wage awards and transport subsidies, while red tape that has historically delayed salary reviews will be eliminated.
A cap on taxable benefits-in-kind—such as housing or vehicle allowances—ensures that employees keep a larger share of their compensation packages.
Housing affordability is another focal point. The bills propose exemptions from VAT and stamp duty on rent and real estate transactions valued below N1 million, making homeownership and rentals more accessible for average Nigerians.
To encourage economic growth, the reforms offer incentives for employers to hire more workers, including tax eased for companies engaging in international remote work. This positions Nigeria as an attractive destination for global talent, potentially spurring job creation and innovation.
Oyedele urged organized labor groups, including the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), to back the initiatives. “These measures are in the best interest of Nigerian workers,” he stated, calling for collaborative support to ensure swift implementation.
Originally presented by the Executive in October 2024, the comprehensive tax bills have undergone rigorous debate and completed their third reading in the House of Representatives. They now await Senate concurrence before being sent for presidential assent.
Once enacted, experts predict the reforms will not only enhance individual financial security but also reposition the Nigerian economy for broader resilience. By expanding employment opportunities and promoting a fairer tax system, the changes aim to build a more inclusive future for all citizens.