The Centre for the Promotion of Private Enterprise (CPPE) has cautioned that the success of Nigeria’s ongoing tax reform will depend less on its legislative provisions and more on how the reforms are implemented, warning that poor sequencing and aggressive enforcement could undermine public trust and economic stability.
In a statement signed by its Chief Executive Officer, Dr. Muda Yusuf, the CPPE described the tax reform as one of Nigeria’s most ambitious fiscal restructuring efforts in recent decades, noting that its objectives, improving revenue mobilisation, equity, and system efficiency, are conceptually sound and aligned with economic diversification goals.
However, the policy think tank stressed that effective implementation remains the critical challenge. According to CPPE, Nigeria’s fragile economic environment, marked by high inflation, weakened purchasing power, and the adjustment effects of fuel subsidy removal and foreign exchange reforms, has created reform fatigue among households and businesses.
“Tax reform is a process, not an event,” the CPPE said, warning that a rigid, enforcement-heavy approach could provoke resistance and erode confidence before the benefits of the reforms become evident, especially as the country approaches a politically sensitive pre-election period.
Commendable Provisions, Lingering Concerns
Despite the public debate surrounding the reforms, the CPPE acknowledged several pro-welfare elements, including the exemption of low-income earners from personal income tax and value-added tax (VAT) relief on basic goods and essential services such as education, healthcare, agriculture, and cultural activities. Small businesses are also expected to benefit from relief from company income tax and VAT obligations.
The organisation further noted that incentives for priority and job-creating sectors, alongside the rationalisation of multiple taxes and repeal of obsolete laws, could enhance predictability and investor confidence if properly executed.
Nonetheless, CPPE said public resistance to the reforms is rooted in past experiences where policy changes led to higher living costs without corresponding improvements in public services.
It argued that a weak social contract continues to undermine confidence in how additional tax revenues will be utilised.
Informal Sector a Major Challenge
The CPPE highlighted the scale of Nigeria’s informal economy as a central issue, estimating that over 40 million micro, small and nano enterprises, more than 80 per cent operating informally, form the backbone of employment and income generation.
According to the group, most informal operators lack structured record-keeping, digital capacity, and sufficient understanding of tax obligations.
It warned that new requirements on mandatory filing, record-keeping standards, penalties, and presumptive taxation could inadvertently criminalise informality rather than encourage gradual formalisation.
Flashpoints Raising Anxiety
Specific provisions of the reform have also heightened concerns among businesses and households. These include the mandatory reporting of quarterly bank transactions of ₦25 million and above, which CPPE said could expose high-turnover, low-margin businesses to undue scrutiny.
The proposed increase in capital gains tax from 10 per cent to 30 per cent has also unsettled investors in the stock market and real estate sectors, while the ₦500,000 annual rent relief cap was described as misaligned with current urban housing costs.
The CPPE further expressed concern over the wide enforcement powers and stringent penalties granted to tax authorities.
Call for Revenue-Efficient Enforcement
The CPPE urged tax authorities to adopt a revenue-efficiency approach, focusing enforcement on large corporations, established SMEs and high-net-worth individuals, which it said account for the bulk of tax revenues.
Citing empirical evidence, the group noted that about 20 per cent of businesses generate nearly 90 per cent of tax receipts.
It recommended prioritising the formal sector in the short to medium term, while integrating the informal sector gradually through incentives, tax education, simplified compliance tools and digital support.
Timing and Trust Critical
With 2026 expected to be a pre-election year, the CPPE warned that aggressive, broad-based enforcement could trigger social discontent and political backlash, potentially leading to policy reversals.
The organisation concluded that while tax reform is vital for Nigeria’s fiscal sustainability, a phased, pragmatic and socially sensitive implementation, anchored on trust, economic realities and political timing, offers the most credible path to sustainable revenue growth and long-term legitimacy.
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