Taxation
By Bolatito Omowale
About 98% of Nigerian workers will be exempted from paying Pay-As-You-Earn (PAYE) tax when the new tax laws take effect in January 2026. This move is part of a broader fiscal policy agenda aimed at enhancing Nigeria’s sovereign credit rating, lowering borrowing costs for government and businesses, and stimulating private-sector investment.
The exemption threshold is designed to benefit individuals earning the national minimum wage or slightly higher, who will be entirely exempt from PAYE tax. Those with monthly incomes up to ₦1.7 million will see a reduction in their PAYE taxes. This means that a large number of low-income earners will have more disposable income, which could boost consumer spending and economic activity.
High-net-worth individuals, on the other hand, will pay higher taxes, with a top tax rate of 25%. The corporate tax rate will also be reduced from 30% to 25%, aimed at stimulating business growth and investment. Companies with an annual turnover of N100 million or less will have a 0% corporate tax rate, providing relief to small businesses and promoting entrepreneurship.
Nano businesses, such as street vendors and artisans, will receive tax-exempt stickers to protect them from harassment by state and local government officials. This move is expected to promote informal sector growth and reduce the burden on small-scale entrepreneurs.
The tax reforms aim to reduce inequality by ensuring that those with greater means contribute more to the country’s development. The government hopes to promote economic growth by stimulating private-sector investment, lowering borrowing costs, and enhancing Nigeria’s sovereign credit rating. Additionally, the government is working to ensure transparency and prudence in government expenditure, so that tax revenues are used effectively and efficiently.
Overall, the tax reforms are expected to have a positive impact on the economy, promoting growth, reducing inequality, and improving the business environment. By exempting low-income earners from PAYE tax and providing relief to small businesses, the government hopes to boost economic activity and improve the standard of living for Nigerians.
