Nigeria’s tax reforms, which took effect January 1, 2026, exempt 97% of small and medium-sized enterprises (SMEs) with turnover below N50 million from corporate income tax, VAT registration, and withholding tax.
This followed months of resistance and public debate.
Many critics believe that changes affecting the remaining 3%, mainly large importers, manufacturers, and corporate players, could still push expenses down the chain, indirectly burdening smaller businesses and consumers.
Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has repeatedly said the reforms are pro-growth and inclusive.
According to him, large firms are expected to experience net tax reductions over time, not heavier burdens.
Still, Nigeria’s economic structure complicates that assurance. A small group of large firms tops manufacturing, imports, logistics and supply chains. When costs rise at the top, they rarely stay there.
Below are five reasons SMEs and households may still feel the effects of the reforms, despite informal exemptions.
1. Control of Supply Chains:
The top 3% control key imports and manufacturing, sourcing raw materials and goods that the small-scale business owners rely on. The higher operational costs that these leading firms will pay could raise input prices, forcing the SMEs to pay more for goods and services despite their exemptions.
2. Increase in Cost of Production:
Manufacturers facing tax reforms compliance levy adjustments will pass the expenses to the retailers and the end-users to maintain profitability.
This elevates production costs across industries, indirectly taxing downstream small-scale business operators that absorb higher wholesale prices without direct price relief mechanisms.
3. Higher Import and Clearance Cost:
Some of the top 3% whom are not exempted from the new tax policy are Importers. With the new policy in place, they will potentially pay more customs duties to clear their goods.
The net increases in duties or levies could inflate landed costs of imported goods, contributing to broader price hikes that affect the SMEs, and also higher household expenditures for the end users.
4. Potential Rise in Flight Tickets and Transport Costs:
The Aviation operators warn that reinstated VAT on aircraft parts, leases, and tickets previously waived could spike operational costs, pushing domestic fares significantly higher. This was re-echoed by Allen Onyema, the CEO of Air Peace, a leading indigenous flight operator in Nigeria.
The higher cost of air travel and logistics expenses ripple through, raising the transport costs for goods and indirectly impacting the SMEs, thereby leading to higher living expenses.
5. Higher Cost-of-Living Expenditures:
The large firms are expected to bear the targeted tax reforms amid the ongoing economic reforms by the Nigerian government; short-term pass-through to non-essential goods and services is likely.
The essential goods remain VAT-zero-rated for protection and in order to control inflation, but luxury and intermediate segments may see a price increase, squeezing household budgets for the middle income and the rich homes, and the demand for such goods will be impacted by higher costs and lower demand.
Taiwo Oyedele highlights that the input VAT credits (potentially N3.4 trillion reclaimable) and levy harmonisation to lower long-term burdens, especially in aviation, where airlines become VAT-neutral.
The tax reform critics, including airline executives, fear short-term disruptions of the striving aviation sector.
The tax laws are four in total, two of which were implemented on June 26, 2025. The implemented ones are the Nigerian Revenue Service Establishment Act and the Joint Revenue Service Establishment Act, while the Nigerian Tax Act and the Nigerian Tax Administration Act officially take off today.
The success of these fiscal reforms hinges on mitigating these indirect effects for true shared prosperity.
This opinion is informed by remarks made by Taiwo Oyedele during a recent press briefing following his meeting with President Bola Tinubu in Lagos.
