On 26 June 2025, President Bola Ahmed Tinubu signed four major tax reform bills into law. Together, they form what is now referred to as the Nigeria Tax Reform Acts. Although the effective date has not been formally announced, public guidance indicates implementation will not begin earlier than 1 January 2026. For lenders and credit providers, this gives a narrow window to understand what is changing and adjust internal systems before enforcement begins.
These reforms are extensive. They consolidate over 60 different taxes into fewer than 10 clearly defined statutes. They revise personal income tax bands. They change company income tax thresholds. They introduce new minimum tax rules for large corporations and non resident entities. They overhaul VAT administration and mandate e invoicing. They rename the Federal Inland Revenue Service and redefine how tax authorities coordinate across federal and state levels.
For financial institutions, digital lenders, microfinance banks, and fintech credit providers, this is not background policy noise. It affects your borrowers, your cost structure, your compliance processes, your onboarding documentation, and your reporting obligations. It also affects your enterprise clients if you lend to SMEs or larger corporations.
This article breaks down the reforms in practical terms and answers the questions lenders are already asking.
What exactly was signed into law?
The President signed four separate but interlinked statutes:
- The Nigeria Tax Act
- The Nigeria Tax Administration Act
- The Nigeria Revenue Service Act
- The Joint Revenue Board Act
These laws collectively overhaul tax policy and tax administration in Nigeria. The Acts aim to drive economic growth, increase revenue generation, improve the business environment, and enhance coordination across levels of government.
The Federal Inland Revenue Service has been renamed the Nigeria Revenue Service. State Internal Revenue Services are granted autonomy in the management of their affairs. The framework also provides for joint audits and collaboration between federal and state authorities.
For lenders, this signals tighter integration of taxpayer data across jurisdictions and more structured enforcement.
What changes for Nigerians under the new Personal Income Tax regime?
The reforms introduce a more progressive personal income tax structure and adjust several thresholds that affect disposable income calculations.
New tax free threshold
Individuals earning ₦800,000 or less per annum are exempt from personal income tax. This exemption covers income and gains within that band. For lenders serving salary earners, this directly affects net income calculations for lower income borrowers. Affordability assessments may shift slightly upward for this segment. Higher income earners now fall into revised brackets, with marginal rates reaching up to 25%. This increases the effective tax burden at the upper end of the income scale.
2Rent relief deduction
Taxpayers can now claim a 20% deduction on annual rent, capped at ₦500,000, when computing chargeable income. If your underwriting models rely on net income after PAYE deductions, this adjustment should be reflected in salary based lending models once implementation begins.
Higher exemption for redundancy payments
The tax exemption threshold for compensation for loss of employment or injury has increased from ₦10 million to ₦50 million. For lenders managing risk tied to salaried employment, this provides a larger liquidity cushion for borrowers in redundancy scenarios.
Clearer definition of tax residence
The Acts now define resident and non resident individuals more precisely. Personal income tax applies to the worldwide income of resident individuals, with residence extending to those who maintain substantial economic or immediate family ties in Nigeria during a year of assessment. Employment income will be taxed in Nigeria if the individual is resident or performs duties in Nigeria without paying tax in their country of residence. For lenders serving diaspora professionals or cross border employees, this clarification improves certainty around income documentation and compliance exposure.
How are small businesses affected?
If your portfolio includes SMEs, the changes are substantial. Small companies are now exempt from Companies Income Tax, Capital Gains Tax, and the newly introduced Development Levy. The definition of a small company has expanded. A company qualifies if it has annual gross turnover of ₦100 million or below and total fixed assets not exceeding ₦250 million. The previous turnover threshold was ₦25 million. This significantly increases the number of companies that fall into the exempt category.
For lenders, this can improve post tax profitability and debt service capacity for qualifying SMEs. It also requires closer verification of turnover thresholds during credit assessment because crossing ₦100 million changes tax treatment.
Recommended read: Frequently asked questions on NIN
What is the Development Levy and who pays it?
The Development Levy replaces several legacy levies, including the Tertiary Education Tax, IT Levy, NASENI levy, and Police Trust Fund levy. Companies that do not qualify as small companies will pay 4% of their assessable profits as Development Levy. Assessable profits refer to tax profits before deducting tax depreciation and losses.
For medium and large borrowers, this changes effective tax burden and cash flow planning. From a lending perspective, your financial statement analysis must reflect this new consolidated levy instead of the previously fragmented charges.
What about large corporations and multinational groups?
The reforms introduce a Minimum Effective Tax Rate. Companies that are members of a multinational group with aggregate group turnover of EUR 750 million and above, or that have annual turnover of ₦50 billion and above, will be subject to a minimum effective tax rate of 15% of Net Income.
Net Income refers to profits before tax excluding franked investment income and unrealised gains or losses, with specific adjustments for life insurance companies. If subsidiaries within a multinational group pay below the minimum 15% rate, the Nigerian parent may pay a top up tax.
For lenders financing large conglomerates, this affects tax modelling, dividend flows, and retained earnings projections.
Are there changes to Capital Gains Tax?
Yes. The Capital Gains Tax rate for companies increases from 10% to 30%. This aligns CGT more closely with Companies Income Tax and reduces classification arbitrage between capital gains and trading income.
For individuals, capital gains will be taxed at the applicable progressive income tax rate. The Acts also introduce CGT on indirect transfers of shares in Nigerian companies. Where shares are disposed of in offshore intermediary holding companies, Nigeria CGT can be triggered, subject to treaty exemptions.
For lenders involved in acquisition financing, private equity backed transactions, or structured exits, these rules affect valuation assumptions and transaction structuring.
How are non resident companies affected?
The scope of taxable activities for non resident companies has expanded. The Nigeria Tax Act introduces force of attraction rules. Certain activities carried out by a non resident company or its related parties can be taxed as part of its permanent establishment in Nigeria, even if those activities are not physically conducted through that establishment.
Profits from Engineering, Procurement, and Construction contracts can be taxed in Nigeria even if some activities occur outside Nigeria or under separate contracts.
Non resident companies with a taxable presence will also be subject to minimum tax based on a percentage of EBIT to total income generated from Nigeria. In any case, tax payable cannot be less than the applicable withholding tax or 4% of the income. If you lend to foreign contractors operating in Nigeria, these provisions affect their projected tax exposure and therefore their repayment capacity.
What happens to Free Zone companies?
Free Zone entities retain full tax exemption on exports and on output that goes into goods or services eventually exported, or supplied to oil and gas companies.
However, proportionate taxes apply where more than 25% of sales are made into the customs territory. From 1 January 2028, full profits of Free Zone entities will be subject to tax if they make any sales to the customs territory. If you finance companies operating in Free Zones, you must monitor their revenue composition carefully over the next few years.
Recommended read: Frequently asked questions on starting a lending business in Nigeria
What changes for VAT?
The VAT rate remains at 7.5%. The administration framework has changed significantly.
Expanded zero rated items
The list of zero rated goods and services now includes basic food items, medical and pharmaceutical products, educational books and materials, electricity generation and transmission services, medical equipment and services, tuition fees, and exports excluding oil and gas exports. Businesses selling these goods and services can recover input VAT, despite applying a zero rate. This improves working capital efficiency for affected sectors.
Input VAT recovery on services and fixed assets
Nigeria now allows recovery of input VAT on purchases including services and fixed assets, provided the input VAT relates directly to VATable supplies. This affects capital expenditure planning for corporate borrowers and may improve project viability in certain sectors.
VAT fiscalisation and mandatory e-invoicing
The Acts codify VAT fiscalisation rules and mandate e invoicing. Companies must implement the fiscalisation system deployed by the tax authority. For digital lenders, this intersects directly with billing infrastructure and accounting systems. If you charge VAT on services, your invoicing architecture must integrate with the tax authority’s system. If you lend to SMEs, you should anticipate higher compliance expectations in their operations.
What is the Tax Ombuds office?
The Acts introduce a Tax Ombuds office. This office will liaise with tax authorities on behalf of taxpayers and act as an independent arbiter to review complaints relating to taxes, levies, and duties. For lenders facing disputed assessments or representing borrower interests in structured transactions, this provides an additional dispute resolution mechanism.
What about disclosure obligations and penalties?
Two areas require immediate attention.
Mandatory disclosure of tax planning arrangements
Companies must proactively notify tax authorities of tax planning transactions or schemes that provide a tax advantage. A tax advantage includes increased reliefs, reduced assessments, deferred payments, accelerated refunds, or avoided withholding obligations. If your institution engages in structured financing, cross border arrangements, or tax driven transaction planning, internal governance must align with these disclosure requirements.
Increased penalties
Penalties for non compliance have increased significantly. Failure to file returns now attracts ₦100,000 in the first month and ₦50,000 for each subsequent month. There are new penalties such as ₦5 million for awarding contracts to entities not registered for tax, and penalties for failure to grant access for deployment of technology. Compliance risk now carries heavier financial consequences, particularly in a digital reporting environment.
How is VAT revenue shared?
The Acts adjust the VAT sharing formula. The Federal Government’s share reduces from 15% to 10%, while states receive 55% and Local Government Areas receive 35%. State and local allocations are further divided by equal distribution, population, and place of consumption. For lenders operating across multiple states, this may influence state level enforcement posture and fiscal planning.
What practical steps should lenders take in 2026?
As 2026 shifts into its second quarter, lenders need to treat these reforms as an operational transition rather than a policy update. The first step is to sensitise the board and executive management on the financial and operational implications of the new laws so that capital allocation, product pricing, and compliance budgets reflect the coming changes.
From there, institutions should conduct a holistic impact assessment that reviews corporate structure, product design, borrower segments, and even supply chain exposure where relevant. Tax strategy must be revisited and aligned with commercial objectives, supported by a live tax risk register that captures exposures arising from minimum effective tax rules, mandatory disclosure obligations, and VAT fiscalisation requirements.
Compliance processes and accounting system logic will require updates to accommodate new rates, revised filing obligations, and expanded VAT recovery provisions. Lenders should also engage deliberately with stakeholders, including shareholders, employees, customers, vendors, and tax authorities, to manage expectations and ensure smooth adoption.
Finally, continuous monitoring of implementing regulations and official circulars will be necessary as the 2026 commencement date draws closer, since practical application will depend heavily on detailed guidance issued by the authorities.
