In a bold move to reshape Nigeria’s tax landscape, the Federal Government has announced a sweeping exemption for low-income earners, shielding millions of Nigerians from personal income tax while shifting the fiscal burden toward the wealthiest citizens. The reforms, signed into law by President Bola Tinubu on Thursday, mark one of the most significant overhauls of Nigeria’s tax system in decades—a policy designed to alleviate poverty, stimulate economic growth, and curb rampant tax evasion.
Under the new regime, individuals earning N250,000 or less monthly—categorized as low-income—will no longer pay personal income tax. The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, explained that this threshold was determined based on a benchmark where two working adults earning a combined N250,000 support a family of five.
“If the earnings are about N250,000, they can take care of themselves. Of course, they won’t have luxury, but at least they won’t struggle. They are poor, and they shouldn’t pay taxes,”Oyedele declared during an interview on Channels Television’s Politics Today.
The exemption, set to take effect in January 2026, is part of a broader strategy to protect vulnerable households while restructuring Nigeria’s tax system to be more progressive—ensuring that the wealthy contribute more while the poor and middle class see relief.
While low-income earners get full exemption, middle-class Nigerians—those earning between N250,000 and N2 million monthly—will see reduced tax rates. However, the top tier—individuals earning N2 million and above per month, who make up less than 5% of the population—will face slightly higher taxes.
“We’ve eliminated taxes for the poor, reduced the burden on the middle class, and only slightly increased it for the wealthy. That’s what fairness looks like,” Oyedele asserted.
The policy reflects a global trend toward progressive taxation, where governments attempt to reduce inequality by ensuring that the rich pay a larger share relative to their income.
Beyond restructuring rates, the reforms aim to dramatically improve tax compliance—a critical issue in Nigeria, where only 30% of potential tax revenue is currently collected. Oyedele warned that the government now has the tools to track economic activity more effectively, thanks to data from: Bank Verification Numbers (BVN),Electricity bills, Property transactions bank accounts and phone records.
“If you under-report your income, we’ll find out,” he cautioned, signaling a crackdown on tax evasion.
Experts suggest that even halving Nigeria’s tax gap could significantly boost government revenue without imposing new burdens on ordinary citizens.
However, skeptics question whether the government can effectively implement these measures, given Nigeria’s history of tax collection inefficiencies. Others worry that elite resistance could undermine enforcement at the top.
For now, millions of low-income Nigerians can breathe a sigh of relief—knowing that, for the first time, their meager earnings will remain untouched by the taxman. But the real test will be whether this “fairness revolution” can deliver on its promises.
