By LANRE OGUNDIPE

Nigeria’s 2026 tax reform arrives not as an isolated policy choice but as a fiscal inevitability shaped by years of structural weakness in revenue generation, declining oil dependence, and the mounting pressure of debt obligations that now consume a troubling share of national earnings. The ambition behind the reform is therefore neither surprising nor, in itself, objectionable. No serious economy can function on a tax-to-GDP ratio that hovers between six and ten percent, far below continental and global averages, and still hope to sustain infrastructure, security, healthcare, and education at the scale required by its population. In that sense, the impulse to widen the tax base, modernise administration, and strengthen enforcement aligns with both economic logic and global practice. Yet policy validity does not automatically translate into public legitimacy, and it is precisely at this intersection that the current tax regime finds itself under strain, not because Nigerians reject taxation as a civic obligation, but because they remain unconvinced that the system demanding compliance is itself fair, coherent, and accountable.

The reform promises consolidation of fragmented tax laws and a transition toward digital administration, both of which are long overdue in a system historically plagued by inefficiency and leakages. It also signals an intention to capture value from emerging sectors, particularly within the digital economy, and to align Nigeria with global efforts aimed at taxing multinational profits more effectively. These are commendable directions, and if implemented with precision, they could significantly improve revenue performance. However, the strength of any tax system lies not merely in its design but in its perception, and perception in Nigeria has been shaped by a long history of opacity, uneven enforcement, and weak linkage between tax collection and public service delivery. Citizens do not assess tax policy in abstraction; they assess it against lived experience, and that experience has often failed to inspire confidence.

One of the most persistent structural challenges remains the problem of multiple taxation, a reality that continues to undermine the credibility of reform despite federal efforts at consolidation. Businesses, particularly small and medium enterprises, still navigate a maze of overlapping levies imposed by federal, state, and local authorities, often under different names but with similar economic impact. This fragmentation is not merely an administrative inconvenience; it represents a fundamental contradiction within the fiscal architecture. A system that seeks to broaden compliance cannot simultaneously tolerate duplication, as the latter increases the cost of formality and inadvertently incentivises evasion. Empirical observations within Nigeria’s business environment consistently show that where compliance becomes excessively burdensome, informality expands, thereby shrinking rather than enlarging the tax net.

Equally significant is the issue of distributional fairness, which sits at the heart of public resistance. Nigeria’s tax structure continues to rely heavily on the most visible segments of the economy formal sector workers and registered businesses, while large portions of economic activity remain either under-taxed or strategically shielded. Research on corporate behaviour within the country points to persistent patterns of tax aggressiveness, including profit shifting through related-party transactions, manipulation of transfer pricing, and the use of offshore structures to minimise liability. When such practices coexist with intensified scrutiny of smaller taxpayers, the result is not increased compliance but deepened resentment. Citizens do not demand exemption from obligation; they demand equity in its application.

The debate around capital gains taxation further illustrates a deeper communication failure that has complicated the reform’s reception. Claims that capital gains tax has been increased from ten percent to thirty percent have circulated widely, yet such assertions do not reflect the legal position. Nigeria’s capital gains tax remains at ten percent, although the scope of its application is being broadened, particularly in relation to digital assets and certain investment classes. The persistence of this misconception highlights a critical weakness: the absence of clear, accessible, and authoritative communication from policymakers. In taxation, ambiguity is costly. When citizens misunderstand the rules, compliance declines, and policy credibility suffers. Correcting such distortions is not a matter of public relations; it is a core component of effective fiscal governance.

The timing of the reform has also amplified its challenges. It comes at a moment when households and businesses are already contending with inflationary pressures, reduced purchasing power, and the aftershocks of subsidy removal and currency adjustments. Empirical evidence from comparable economies suggests that aggressive tax enforcement during periods of economic strain tends to suppress consumption, encourage informalisation, and ultimately weaken revenue outcomes. Timing, therefore, is not a neutral variable; it shapes both perception and effectiveness. A reform that might be technically sound can still falter if introduced without adequate sensitivity to prevailing economic conditions.

Compounding these concerns is the broader issue of institutional trust, particularly as it relates to the financial system. Persistent complaints about unexplained bank charges, delayed reversals, and opaque deductions have eroded confidence in formal financial channels, and by extension, in the broader fiscal ecosystem. When citizens perceive that financial institutions operate without sufficient accountability, and that regulatory oversight is either slow or invisible, their willingness to comply with tax obligations diminishes. The role of the Central Bank of Nigeria in reinforcing consumer protection and transparency is therefore not peripheral to tax reform; it is central to rebuilding the trust upon which compliance depends. Similarly, the effectiveness of the Federal Inland Revenue Service will be judged not only by revenue targets achieved but by the fairness, clarity, and consistency of its processes.

What emerges from this analysis is not a rejection of reform but a call for its recalibration. The path forward lies in aligning policy intent with public expectation through deliberate and evidence-based adjustments. Transparency must precede enforcement, with simplified guidance that clearly outlines obligations and rights. The longstanding issue of multiple taxation must be resolved through enforceable coordination across all tiers of government. Enforcement efforts must shift decisively toward large-scale evasion and corporate avoidance, demonstrating that the burden of taxation is shared equitably. Institutional accountability, particularly within the financial sector, must become visible and consistent, reinforcing the integrity of the system as a whole. Above all, there must be a tangible connection between taxes collected and public goods delivered, as citizens are far more likely to comply when they can see the direct impact of their contributions.

Nigeria’s challenge is therefore not the absence of tax laws but the absence of a tax system that commands trust. The 2026 reform has the potential to correct long-standing inefficiencies and place public finance on a more sustainable footing, but its success will depend on whether government recognises a fundamental empirical truth: revenue is not extracted, it is earned through legitimacy. Where trust exists, compliance follows; where it does not, even the most well-designed policies will struggle to achieve their objectives. In the final analysis, the credibility of the tax system will determine not only the success of the reform but the strength of the social contract upon which the Nigerian state ultimately depends.

•Ogundipe, Public Affairs Analyst, former President Nigeria and Africa Union of Journalists, writes from Abuja.

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