The Pan-African Alliance of Small and Medium Industries (PAOSMI) says the newly enacted tax laws signed by President Bola Tinubu will help stimulate the growth of small and medium enterprises (SMEs) and attract local investment into Nigeria’s struggling economy.
Speaking in Abuja, PAOSMI Director-General, Dr. Henry Emejuo, said the tax overhaul marked a significant shift in Nigeria’s fiscal framework and would go a long way toward simplifying the tax system, improving compliance, and easing the burden on Micro, Small, and Medium Enterprises (MSMEs).
Emejuo welcomed key exemptions under the new tax code, noting that they would free up capital for reinvestment, expansion, and job creation, especially for struggling businesses.
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“The exemption of low-income earners and the raising of the tax exemption threshold for small companies from N25 million to N100 million in annual turnovers is a significant relief for many of our members. These companies are now exempted from Companies Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy. It is a game-changer,” Emejuo said.
He added that MSMEs with turnover below N50 million would no longer be required to present audited accounts to file their taxes, describing the measure as a “critical cost-saving reform.” The discontinuation of the 0.5 percent turnover tax for companies reporting losses also drew praise.
“While a minimum tax is retained, new exemptions have been introduced for small companies, startups, and businesses in primary agriculture,” Emejuo said. “This creates space for recovery and growth.”
System Overhaul and Investor Incentives
Beyond individual reliefs, the broader structure of Nigeria’s tax system is also undergoing reform. Over 60 different levies are being collapsed into fewer than 10. A new central federal tax agency, the Nigeria Revenue Service (NRS), is replacing the former Federal Inland Revenue Service (FIRS), aiming to streamline administration and curb abuse.
Emejuo also noted the introduction of the Economic Development Incentive (EDI), which replaces the pioneer status incentive and allows qualified companies to claim a 5 percent annual tax credit on capital expenditures for five years.
“This is a crucial relief, particularly for early-stage and struggling businesses. It creates space for them to recover and grow, which will ultimately contribute to the country’s economic resilience,” Emejuo said.
He also pointed out that the reforms bring Nigeria in line with regional peers such as Ghana and South Africa, especially in corporate tax rates, VAT structure, and efforts to improve the tax-to-GDP ratio.
“Nigeria’s tax-to-GDP ratio, which has long been one of the lowest globally at 13.5 percent, is projected to rise to 18 percent by 2026 through better efficiency and an expanded base. That is a realistic and necessary target,” Emejuo said.
The Challenge of Government’s Spending
While the reforms have been widely praised by business groups, a large number of Nigerians have expressed concern over the federal government’s long-standing reputation for mismanaging public funds.
Public reaction has centered not on the structure of the tax code but on what the government intends to do with the increased revenue. The reaction is based on the situation whereby many citizens live without access to basic infrastructure—such as running water, electricity, and drivable roads—while public officials live lavishly.
Recently, the Tinubu administration approved multibillion naira funds for luxury vehicles for lawmakers, renovating the official residences of the President and Vice President, and for SUVs and bulletproof vehicles for federal officials.
This spending spree drew harsh criticism at a time when many Nigerians are resorting to digging wells for water, buying fuel to power private generators, and crowdfunding for medical procedures.
Implementation Is Key
Emejuo acknowledged this gap in public confidence, warning that poor implementation and opaque spending could sabotage the potential of the reforms.
“These reforms, if implemented effectively, can significantly enhance Nigeria’s ease of doing business, reduce corruption through digital processes, and provide a more stable investment climate,” he said.
He urged the federal government to prioritize training for tax officials, improve digital systems for compliance, and educate business operators on the new tax codes.
“We urge the government to ensure that tax administrators are well-equipped and that business operators are properly educated on the new tax code. This is key to unlocking the full benefits of the reforms,” Emejuo said.
He reaffirmed PAOSMI’s readiness to support the rollout of the new system and advocate for policies that promote industrial growth and inclusive development.