Abuja, Nigeria – The federal government of Nigeria has unveiled a sweeping tax reform targeting the country’s vast informal sector, introducing a digital framework aimed at eliminating coercive practices such as cash collections and roadside tax checkpoints.
The new presumptive tax regulations, signed in Abuja on Tuesday, cover artisans, small-scale operators, and informal businesses, including electricians, welders, vulcanizers, and other micro-entrepreneurs.
“The reforms aim to dismantle fragmented and informal tax practices that have long plagued the informal sector,” said Olusegun Adesokan, Executive Secretary of the Joint Revenue Board (JRB).
Under the guidelines, tax officials are prohibited from collecting money in cash or mounting checkpoints to demand payment. Instead, payments must be made via digital platforms, ensuring traceability, accountability, and transparency.
Exemptions and Simplified Tax Rates
Nano and small enterprises earning N12 million or less annually are exempt from the presumptive tax. Businesses exceeding that threshold will pay a modest 1% tax on turnover, a rate designed to encourage compliance without discouraging entrepreneurship.
The reforms also introduce a uniform structure for state and local government taxation of the informal sector, integrating operators into a national tax identification system for better coordination across all levels of government.
Transition from Policy to Implementation
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, described the regulations as a shift from policy approval to implementation.
“These reforms are built around transparency, fairness, and economic inclusion. Our goal is not to raise tax rates but to broaden participation in the system, allowing more Nigerians to contribute fairly to national development,” Edun said.
Informal Sector: The Backbone of Nigeria’s Economy
Joseph Tegbe, Chairman of the National Tax Policy Implementation Committee, emphasized that the informal sector accounts for over 80% of Nigeria’s workforce, yet contributes minimally to structured government revenue due to inconsistent enforcement and lack of transparency.
The framework replaces arbitrary tax collection with clear rules, digital payments, and coordinated oversight, while an ombudsman mechanism will handle complaints and ensure fairness in enforcement.
Officials say these reforms will gradually bring informal businesses into the formal economy, boost government revenue, and curb widespread corruption and harassment associated with previous tax practices.
