Nigeria’s Federal Inland Revenue Service (FIRS) has announced that food, education, shared transportation, and agriculture will be exempted from Value-Added Tax (VAT) under the country’s sweeping new tax reforms.
The FIRS Chairman, Zacch Adedeji, disclosed the changes in an interview marking his two years in office, describing the reforms as the most significant fiscal transformation since Nigeria’s independence. He credited President Bola Tinubu for fulfilling his campaign promise to simplify tax compliance and remove hurdles faced by businesses and citizens.
“With these new laws, food, education, transport, and agriculture will be VAT-free,” Adedeji said. “The President has fulfilled his promise to make businesses flourish by removing burdens and hurdles. This is the best thing that has happened to Nigeria’s fiscal ecosystem since 1960.”
Signed into law on June 26, 2025, by President Tinubu, the reforms consolidate multiple tax laws into a single code scheduled to take effect in January. The code reduces tax types to single digits, exempts businesses with turnover below ₦50m from tax, and adjusts personal income tax thresholds to protect low-income earners.
The quartet of laws—the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act—aims to broaden the tax base, improve compliance, and enhance transparency across all tiers of government.
Adedeji noted that Nigeria’s tax-to-GDP ratio has already risen from 10 per cent to 13.5 per cent in two years, with a target of 18 per cent by 2027. In August alone, the federation account disbursed a record ₦2tn, with nearly 70 per cent of monthly allocations now coming from taxes. He added that improved revenues have allowed 30 states to repay ₦1.85tn in debts within 18 months.
As part of the reforms, the FIRS will be renamed the Nigeria Revenue Service to reflect its broader mandate. “The word ‘federal’ gave the wrong impression that we only collect for the federal government,” Adedeji explained. “In reality, 90 per cent of VAT belongs to the states.”
He acknowledged the short-term pains caused by the reforms, likening them to “the pain of a woman in labour,” but stressed that government interventions—such as compressed natural gas buses and crude-for-naira support—are cushioning the effects, with fuel prices already showing signs of decline.
Adedeji assured Nigerians that the reforms would ultimately drive growth and stability. “When companies are doing well, expanding, and making profits, we will benefit from their growth. Our task is to remove hurdles in their way, and that is what the president has done with these new laws,” he said.
