Experts: why states must reform tax systems
State governments have been urged to reform their tax systems to complement Federal Government’s 2025 Tax Law Reform. The new framework is designed to boost investment, reduce the burden on
- ’New law targets growth, relief for citizens’
State governments have been urged to reform their tax systems to complement Federal Government’s 2025 Tax Law Reform.
The new framework is designed to boost investment, reduce the burden on citizens and strengthen Nigeria’s fiscal structure, experts have said.
The call was made at a public lecture organised by Eko Club: “Fiscal Federalism and the 2025 Tax Law Reform,” at the club’s 2026 Business Luncheon in Surulere, Lagos.
President, Adedeji Lawal, said the lecture was organised as part of the club’s commitment to promoting informed dialogue on critical issues.
“Two things are certain: death and tax. Nigerians have not been paying the appropriate tax, and the nation has failed to fully develop non-oil revenue sources, particularly tax. The 2025 Tax Act is meant to bridge this gap,” Lawal said.
He noted that the club’s Business Luncheon, which began as informal discussions among members, has evolved into a platform for professionals, industry leaders and experts to share ideas and solutions to national challenges.
Lawal described the programme as part of the club’s corporate social responsibility, aimed at helping members and the public understand provisions and implications of the new tax law.
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Senior Advocate of Nigeria and Dean of Faculty of Law at University of Lagos, Prof. Abiola Sanni, warned that federal reforms alone cannot address Nigeria’s fiscal challenges without corresponding action from states and councils.
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“This is a federal tax reform. It does not address what is happening at the state and local government levels. States must take ownership, reform local taxation, and strengthen institutions to achieve effective fiscal federalism,” Sanni said.
He stressed that many issues affecting citizens, particularly local taxes and informal sector levies, fall within state and local government jurisdiction.
“The objective is to highlight the limits of federal tax reform and to call on states to also engage in their reforms. Many of the issues affecting citizens are state and local matters that require legislative and institutional action,” he added.
Sanni said fiscal federalism requires clear allocation of functions and revenue powers among the three tiers of government, warning that excessive centralisation weakens local administration and public service delivery.
He noted that the erosion of council autonomy has forced authorities to rely on informal levies, often burdening citizens while critical services as waste management and community development suffer.
Describing the reform as a major shift, Sanni said it consolidates multiple tax laws into four principal statutes, reduces number of taxes and introduces relief for low-income earners and small businesses, while focusing taxation on those with greater ability to pay.
He noted improvements in tax administration, including simplified procedures, reduced rates, clearer deductions and technology-driven tracking of withholding taxes to prevent loss.
Lauding the reform, Sanni said it is not a perfect solution, calling for sustained dialogue and constitutional adjustments to build a fair, efficient and people-centred tax system.
Panelists at the lecture explained that the ongoing tax reform is primarily aimed at stimulating investment, promoting economic expansion and easing the burden on citizens, rather than merely increasing government revenue.
They noted that the new framework has abolished minimum tax for companies that do not make profit, stressing that taxation should be based on earnings.
According to them, the reform seeks to “tax the fruits, not the seed,” a move expected to encourage entrepreneurship and business sustainability.
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The panelists explained that the reform introduces incentives such as tax credits of up to five per cent on qualifying investment expenditure, alongside capital allowances, to boost productivity and support business growth.
They added that the framework also aligns Nigeria’s tax system with global standards, particularly within the digital economy, and could expand opportunities for Nigerians working remotely for foreign companies.
On the impact on individuals, the speakers said the reform would significantly reduce the tax burden on many Nigerians and increase disposable income.
Citing available data, they noted that about 55 per cent of taxpayers would no longer pay tax under the new regime, while 43 per cent would pay less, describing the reform as one focused on economic growth, protection of vulnerable groups and improved compliance.
They added that increased household income would likely stimulate consumer spending, support job creation and strengthen overall economic activity.
The panelists also addressed concerns over centralisation, clarifying that the reform does not transfer revenue ownership from states and local governments, even where collection mechanisms are streamlined.
They emphasised that strong local revenue systems remain essential for effective grassroots governance, improved service delivery and sustainable development.
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A member of the Eko Club executive said the reform was a necessary step to address gaps in the existing system and improve citizens’ welfare.
“Anything that affects human life will, at one point or another, be subjected to reform based on inadequacies noticed in the present system. That is what is being addressed,” he said.
He added that the lecture was organised to educate the public on the purpose and benefits of the reform beyond revenue generation.
“The expected outcome is for the public to be more educated on the purpose of this tax law reform, which, apart from assisting economic growth, is also meant to make life better for citizens,” he said.
On when Nigerians would begin to see the benefits, he said the impact would be immediate, particularly for low-income earners.
“There is a relief provision stating that anyone earning less than ₦800,000 will not pay tax. People within that income bracket will begin to notice the effects right away,” he added, urging taxpayers to continue filing returns and support the reform.
Stakeholders at the lecture agreed that while the reform may not be perfect, it represents a significant step toward a more efficient, investment-friendly and equitable tax system capable of strengthening Nigeria’s fiscal future.
The panelists include Chairman of the Revenue Service, Dr. Zacch Adedeji; Chairman of the Lagos State Internal Revenue Service (LIRS), Mr. Ayodele Subair; and the Special Adviser to the Lagos State Governor on Taxation and Revenue, Mr Abdulkabir Ogungbo and Faculty of Law, Lagos State University, Mr Azeez Adeleke.
