Informal Economy, Reform Fatigue Threaten Nigeria’s New Tax Regime, Warns Experts
Economic analysts and tax professionals on Saturday raised concerns that Nigeria’s newly implemented tax reforms could face serious hurdles due to the country’s largely informal business structure and growing public exhaustion from multiple reforms, during a panel discussion held in Lagos.
The concerns were expressed at the 2026 Economic Summit organised by the Empowerment Team of Lagos Province 35 of the Redeemed Christian Church of God, where participants examined the impact of the tax reforms that took effect in January 2026 and their implications for businesses and households.
Speakers at the summit noted that while the reforms are designed to broaden the tax base and strengthen government revenue, Nigeria’s economic realities, particularly the dominance of informal businesses, may undermine effective implementation.
Data from the Moniepoint Informal Economy Report 2025 was referenced to underscore the scale of the challenge. The report estimates that Nigeria has over 39 million Micro, Small and Medium Enterprises, representing about 96 per cent of all businesses, contributing roughly half of the country’s Gross Domestic Product and employing more than 84 per cent of the workforce. Despite this contribution, most of these enterprises operate outside formal regulatory and tax frameworks.
One panelist warned that the design and communication of the reforms could alienate informal operators, saying, “One of the things I worry about is that it (tax reforms) looks a bit elitist, and it also does not appear to take into account the huge informal economy that we have and the level of literacy that we have, and that is why there is so much anxiety, despite all the efforts to assure people that it is for their good.”
The speaker added that the technical nature of the reforms could impose additional costs on small business owners who may now need professional help to comply, noting that many traders already meet the turnover thresholds that bring them into the corporate tax net.
According to the panelist, “This is not something that is part of our culture of doing business. So, it’s a major cultural transition. It may be necessary, but whether this is the time to go through it is a different matter.”
Echoing concerns about the pace of policy changes, economist and Chief Executive Officer of Financial Derivatives, Bismarck Rewane, cautioned against implementing multiple reforms simultaneously. He likened the situation to physical strain, saying, “If you eat too many things at the same time, you end up constipated. Reform fatigue is the same thing as having images.”
Rewane argued that reforms must be properly sequenced and prioritised to avoid negative economic outcomes, stressing that government must ensure tax revenues are recycled back into the economy. He warned that funds trapped within government systems could stifle growth, recalling past reform efforts where revenues failed to stimulate economic activity.
Providing a counterbalance, Tax Partner at KPMG, Elizabeth Olaghere, said the tax reforms had anticipated the informality challenge. She explained that a presumptive tax regime has been introduced to simplify compliance for informal sector operators.
She said, “The reforms recognise this and create a special tax framework for companies operating in the informal sector, which is called the presumptive tax regime.”
According to her, the framework will rely on simplified tax returns rather than full audited accounts, with additional safeguards such as a tax ombudsman and the domestication of the reforms by state governments to reduce multiple taxation.
However, economist Yusuf warned that the new framework could still affect consumers, as businesses may pass the cost of additional taxes to final customers.
In his closing remarks, the pastor in charge of the province and former Director-General of the Budget Office, Ben Akabueze, urged policymakers to carefully balance intention with impact.
He cautioned that without clear benefits, informal businesses may resist formalisation, adding that authorities must be careful not to undermine gains in financial inclusion through aggressive enforcement tools.
Akabueze noted that while the reforms are already in motion, citizens must engage more actively in monitoring how tax revenues are used.
He said Nigerians must embrace compliance while also demanding accountability, stressing that public trust will be critical to the long-term success of the tax reforms.
