Nigeria's financial crisis is no secret. This is not due to laws, policy papers or lack of technical expertise. It is the result of a political compromise that has allowed wealth and power to remain comfortably beyond the reach of tax authorities for decades. On January 01, 2026, that agreement was challenged, at least on paper, by the activation of four sweeping tax laws designed to redraw the boundaries of who pays, who collects, and who is accountable. Whether this moment will mark the birth of a modern revenue state or just another round of administrative theater will depend less on the grandeur of the legislation and more on whether Nigeria is finally ready to tax its own elite.
Nigeria's tax-to-GDP ratio has long been an international embarrassment. At less than 15 percent, it sits well below the levels needed to finance infrastructure, education, health care, or even basic state capacity. Successive governments have blamed informality, weak administration and a narrow tax base for this. These problems are real. But they are not at the root of Nigeria's financial failure. The real problem is that Nigeria's tax system was never designed to withstand power.
Also read: Nigeria's tax revolution has begun – but accuracy, not ambition, will determine its success
For decades, taxation in Nigeria has operated on a simple, cruel logic: those who are easiest to tax are taxed the most. Salaried employees face PAYE. Consumers pay VAT and excise duty. Small businesses are hampered by a variety of fees. Meanwhile, politically connected corporations, import cartels, oil traders, telecommunications giants, and financial institutions negotiate, delay, underreport, or avoid. The result is not just less revenue; It is a tax system that deepens inequality and erodes legitimacy.
Viewed through this lens, the 2025–2026 reforms raise an even more troubling question about whether the laws are well-drafted: Do these laws change who pays?
Consolidating Nigeria's tax laws into one code has been presented as a technical achievement, and it is. Simplification reduces compliance costs and makes administration easier. But clarity alone does not constitute justice. A beautifully streamlined tax code that still allows powerful actors to escape would make exploitation much more efficient.
“Then again, Nigeria's tax reform is not really about tax. It is about whether the Nigerian state is prepared to discipline its own elite.”
Similarly, the transformation of the Federal Inland Revenue Service into the Nigeria Revenue Service looks like institutional progress. Centralization, data integration and expanded mandates can strengthen enforcement. But institutions are not neutral. In countries where revenue agencies remain politically protected and professionally insulated, they become instruments of impartiality. In countries where political elites can intervene, they become instruments of selective punishment.
Nigeria's history gives little cause for optimism. From customs duties to oil royalties to company income tax, enforcement has always been hardest on those without political cover. Unless the new Nigeria Revenue Service is freed from political interference and elite capture, it risks becoming more powerful, but not more just.
This is why many of the debates currently dominating elite policy circles are dangerously wrong. Analysts focus on drafting ambiguities, subtleties of capital gains indexation and withholding tax. These are not minor issues, but not decisive either. India, Brazil and Indonesia operate with far more complex and ambiguous tax laws than Nigeria and yet collect far more revenue. What they, and Nigeria, lack is the political will to make the powerful pay.
Consider capital gains taxes. Yes, taxing nominal profits in an inflationary economy is economically imperfect. But Nigeria's investment problem is not primarily driven by capital gains. This is driven by currency instability, capital controls, insecurity and weak contract enforcement. Fixing the capital gains design without fixing these will not unlock the investment.
However, what will unlock revenue is far more inconvenient: breaking the culture of conversational compliance. There is no tax regulation in Nigeria today; It is a bargaining process. Large companies hire consultants to negotiate liabilities. Politicians intervene on behalf of allies. Loans are settled at a discount. The fine has been waived. This system does not fail accidentally. It fails by design.
The joint Board of Revenue and Tax Ombudsman structures created by the new laws could, in theory, introduce accountability and coordination. But institutions matter only when they have strength. If the Ombud cannot challenge powerful agencies, if the Tax Appeals Tribunal is slow or captured, and if data is not shared across levels of government, these bodies will add new layers to an already bloated bureaucracy.
Digitalization offers Nigeria the greatest opportunity to break this pattern. Countries that have successfully increased tax compliance did not do so by improving legal language; They did this by closing the information gap. When bank data, customs records, company registries and payroll systems are integrated, theft becomes harder and discretion is reduced. Technology, not rhetoric, is the real improvement.
Also read: Nigeria's tax reforms: Separating facts from fear matters
Technology will also fail if it is not protected politically. A unified tax database that can be closed to the powerful is worse than useless; It becomes a weapon of selective enforcement.
Then again, Nigeria's tax reform is not really about tax. It is about whether the Nigerian state is prepared to discipline its own elite.
If these reforms merely increase the burden on workers, consumers, and small businesses and leave politically connected capital untouched, they will deepen skepticism and resistance. Tax morale cannot be built on injustice. People do not refuse to pay taxes because they are immoral; They refuse because they can see who is getting away with not paying.
However, if Nigeria uses this moment to create a tax system that is data-driven, politically insulated and ruthlessly even-handed, the payoff will be huge. Not just in revenue, but also in legitimacy. A state that can tax fairly is a state that can govern.
This is the real test of the reforms of 2026. Not whether the laws are beautiful, but whether the power is ultimately brought to mind.
