The Nigerian Federal Government has unveiled sweeping tax reforms that it claims will significantly enhance workers’ welfare, providing tax relief to millions of citizens and making life more affordable. The proposed changes, which have garnered mixed reactions from key stakeholders, aim to revitalize the country’s economy, stimulate job creation, and offer substantial financial relief to workers—especially those in low and middle-income brackets.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, laid out the details of the reform bills in a statement made to the press. He stressed that the tax proposals are designed not only to ease the financial burdens on Nigerian workers but also to streamline the country’s fiscal policies in a way that encourages economic growth.
“By reforming the tax system, we are looking at a system that supports the economic recovery and well-being of Nigerians, particularly workers. This reform will significantly increase disposable income and make essential services more affordable for a majority of Nigerian families,” Oyedele remarked.
Key Reforms for Workers’ Welfare
At the heart of the tax reform is a policy that will exempt workers earning up to N1 million annually (approximately N83,000 per month) from the Pay-As-You-Earn (PAYE) tax, which is expected to benefit nearly a third of the country’s workforce. This move, Oyedele explained, is intended to ease the strain on the lowest-paid workers, many of whom have been grappling with high living costs exacerbated by inflation and economic instability.
For workers in the middle-income bracket, the bills propose a reduced PAYE tax rate for those earning up to N20 million annually (around N1.7 million per month). This initiative would impact about 60 percent of Nigerian workers, providing significant tax relief to those earning more than the minimum wage but not yet in the high-income category.
“We are focused on creating a fairer tax system. The new laws will ensure that workers, especially the low- and middle-income earners, get the relief they desperately need,” Oyedele said.
Moreover, the tax reforms also promise tax exemptions for active members of the armed forces who are engaged in security operations. This, Oyedele noted, will recognize the significant risks these personnel take in safeguarding the country.
Reducing the Cost of Living Through VAT Exemptions
To further ease the financial pressure on Nigerian households, the tax bills also propose a complete removal of Value Added Tax (VAT) on essential goods and services, including food, healthcare, and education. These three sectors alone account for nearly 60 percent of total household consumption in Nigeria, making this exemption crucial for the majority of Nigerian families.
Items that represent a significant portion of family expenses, such as transportation, renewable energy (like solar power), compressed natural gas (CNG), and essential sanitary products (including baby items and sanitary towels) would also be VAT-exempt, according to Oyedele’s announcement.
“We are ensuring that essentials like food, medicine, and education will be affordable for all Nigerians. This is a direct response to the rising cost of living, and it will help to keep the basic needs of life within reach for every Nigerian family,” he added.
For low-income earners, who typically spend a large percentage of their income on these basic goods, the impact of these exemptions could be transformative. The reforms are expected to benefit up to 82 percent of household expenditures, making life more affordable and helping to fight poverty in the country.
Incentives for Employment and Housing
The new tax reforms don’t just aim to reduce costs—they also provide incentives aimed at job creation and affordable housing.
According to Oyedele, the tax bills will introduce various provisions designed to stimulate employment. One such measure includes offering tax benefits for employers who hire more workers, particularly in the private sector. Additionally, the government plans to offer tax exemptions to Small and Medium Enterprises (SMEs), which form the backbone of Nigeria’s economy.
“SMEs are key to job creation, and the tax reforms will allow them to flourish by reducing the tax burden,” said Oyedele. “These businesses will be incentivized to hire more workers, leading to more employment opportunities across the country.”
For those looking to buy homes or pay rent, the tax bills also propose significant relief. VAT exemptions will be applied to rent and property acquisition, helping Nigerians who are struggling to afford decent housing. Additionally, stamp duties on rents below N10 million will be waived, making housing more accessible to the average worker.
“These housing measures will not only ease the burden of rent but will also help in promoting homeownership among Nigerians,” Oyedele emphasized.
The Debate with Labour Unions
While the reforms have received praise from various sectors, they have also sparked concerns among the country’s largest labor union, the Nigeria Labour Congress (NLC). The NLC, led by Joe Ajaero, has expressed reservations about the bill, particularly in terms of its potential to affect public sector workers’ earnings and benefits.
However, Oyedele has called for collaboration, urging the NLC to engage in discussions aimed at refining the bills to ensure they serve the best interests of workers.
“We understand that no policy is perfect, and we are open to further dialogue. The reform process is not set in stone. Our goal is to ensure that the reforms work for everyone, especially Nigerian workers. We believe the NLC will join hands with us in refining these proposals,” said Oyedele.
Acknowledging that the bills might undergo several revisions as they pass through the legislative process, Oyedele assured that the tax reforms in their current form are “the most pro-worker in the history of Nigeria.” He added that further consultations with stakeholders, including labor unions and civil society, would help fine-tune the proposals.
