By Anita Dennis
Nigeria’s fiscal landscape is undergoing a profound shift, with taxes now accounting for nearly 70 percent of funds shared at monthly Federation Account Allocation Committee (FAAC) meetings.
This was disclosed by the Chairman of the Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji, as he marked his two years in office.
Dr. Adedeji described the surge in tax revenue as a cornerstone of the country’s growing fiscal stability, noting that stronger collections have enabled 30 states to repay N1.85 trillion in debts over the past 18 months. “Debt servicing costs that once consumed 90 percent of government revenue have now dropped to about 50 percent. External reserves have also grown on the back of stronger fiscal stability,” he said.
The FIRS boss credited the reforms of President Bola Tinubu’s administration for creating a tax environment that eases compliance. “The president has fulfilled his campaign promise to simplify tax compliance and remove hurdles faced by taxpayers,” he remarked.
Reforms Driving Change
According to him, the government’s tax reforms, described as the most comprehensive since independence, aim to reduce the burden on citizens while strengthening public finances. Key exemptions have been made in critical sectors such as food, education, shared transportation, and agriculture, which are now free from value-added tax (VAT).
The results, he explained, are already evident. Nigeria’s tax-to-GDP ratio has risen from 10 percent to 13.5 percent in just two years, with a target of 18 percent by 2027. “In August alone, the federation account disbursed a record N2 trillion,” he said.
While acknowledging challenges, Dr. Adedeji likened the process to “the pain of a woman in labour,” stressing that ongoing interventions are easing the transition. Among them are the rollout of compressed natural gas (CNG) buses to reduce transport costs and crude-for-naira support for local refiners, which are already affecting fuel prices.
Simplifying the Tax System
Dr. Adedeji highlighted how the new consolidated tax law, due to take effect in January, is streamlining Nigeria’s tax system. Taxpayers will now be segmented into small, medium, and large categories, with one-stop shops created to simplify filing and payments.
“We are service providers to taxpayers rather than just an enforcement agency,” he explained. “When companies are doing well, expanding, and making profits, we will benefit from their growth. Our task is to remove hurdles in their way, and that is what the president has done with these new laws.”
The consolidated framework reduces the number of tax types to single digits, exempts businesses with an annual turnover below N50 million, and adjusts personal income tax thresholds to protect low-income earners.
Structural Reforms and New Identity
Dr. Adedeji also addressed the recent rebranding of FIRS as the Nigeria Revenue Service (NRS). He explained that the word “federal” had given the false impression that the agency collected revenues only for the central government. “In reality, we collect VAT, of which 90 percent belongs to the states,” he clarified.
On the controversial petrol surcharge included in the new tax law, he assured that it would not apply automatically. “It will only take effect if activated by a ministerial order and published in the official gazette,” he noted.
Legislative Backing
The chairman pointed to the signing of four major tax bills into law on June 26, 2025, as a turning point. The Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act are all designed to broaden the tax base, improve compliance, and enhance transparency across government tiers.
Dr. Adedeji linked Nigeria’s fiscal turnaround to broader reforms under Tinubu, including the removal of fuel subsidy and the unification of exchange rates. “The health of the federation account has blossomed greatly, as there are no bogus subsidy claims to deplete the pool,” he said.
As taxes now drive the bulk of Nigeria’s monthly allocations, government officials argue that the reforms are laying the foundation for a more resilient economy, anchored not on oil, but on a diversified and transparent revenue base.
