Nigeria Moves Closer to Tax Overhaul as Senate Approves Major Reforms

In a landmark move to overhaul its fiscal structure, Nigeria's Senate has approved four sweeping tax reform bills aimed at strengthening government revenue and modernizing tax administration. The bills, passed on Friday, mark a significant step in President Bola Tinubu's economic reform agenda, despite facing internal resistance from lawmakers and governors within his own All Progressives Congress (APC).

The reforms include a proposed increase in value-added tax (VAT) from 7.5% to 12.5% starting next year—an effort to raise the country's chronically low tax-to-GDP ratio, currently at just 10.8%. While the government argues the changes are essential to reduce budget deficits and reliance on borrowing, critics warn the tax hikes could deepen economic pain for millions of Nigerians already grappling with inflation and currency devaluation.

People walking along the street of Marina, Victoria Island, Lagos, Nigeria

One of the most notable aspects of the legislation is the restructuring of oil revenue oversight. Under the amendments, key fiscal responsibilities—such as royalty collection and petroleum profit taxes—will shift from existing institutions to a newly proposed Nigeria Revenue Service. However, other core provisions in the oil law remain intact, according to Senator Sani Musa, who led the Senate review of the bills.

With the lower House of Representatives having passed a similar version of the reforms in March, both chambers will now work to harmonize the legislation before presenting it to President Tinubu for final approval.

If enacted, the reforms would represent the most significant shake-up in Nigeria’s tax system in years, with potential ripple effects for public finance, investment, and the broader economy.