Nigeria’s Tax Law Delivers Early Pay Gains for Workers
The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has said that the newly enacted Nigeria Tax Act 2025 is already increasing the disposable income of low- and middle-income earners through major changes to the Pay-As-You-Earn (PAYE) tax system.
Oyedele made this known on Wednesday during a virtual stakeholder engagement organised by the Presidential Fiscal Policy and Tax Reforms Committee in collaboration with the Joint Revenue Board. The session, titled “Tax Reform Implementation Session for HR, Payroll and Finance Executives,” brought together human resource directors, payroll managers, chief financial officers, tax managers and other senior executives involved in employee compensation and payroll compliance.
His remarks come amid reports that some Nigerian workers who received their January salaries have expressed mixed reactions to the reforms, with many describing the increases in take-home pay as marginal and insufficient to offset prevailing economic pressures.
Addressing the concerns, Oyedele said the reforms were intentionally structured to prioritise equity and fairness, shifting the tax burden away from those least able to afford it.
“This new tax law has been designed to deliver exemptions for the lowest income earners, lower taxes for the middle class, and progressively higher taxes for high-income earners,” he said.
According to data from the committee, 98 per cent of workers in both the public and private sectors will either see a reduction in their PAYE obligations or be completely exempt from personal income tax.
Oyedele explained that minimum wage earners will pay no personal income tax, noting that the law explicitly exempts the national minimum wage, currently set at ₦70,000 per month.
“If that amount is increased tomorrow to ₦250,000, that ₦250,000 becomes automatically tax-exempt,” he added.
Oyedele also addressed concerns raised by a recent statement from the Lagos State Internal Revenue Service, which suggested that banks could be directed to recover unpaid taxes directly from taxpayers’ accounts.
He clarified that the provision, known as the Power of Substitution, was not new and had existed under previous tax laws. However, he reassured taxpayers that such actions would not be carried out secretly.
“There’s no way this will be done without your knowledge. It may not require your consent, but it requires your knowledge. You are aware that this is what is going on,” he said.
Beyond personal income tax relief, Oyedele noted that the new law introduces significant incentives for small businesses and the digital economy.
Under the reforms, small businesses with an annual turnover below ₦100 million can now register as companies and pay zero per cent corporate income tax, a move aimed at encouraging formalisation and business growth.
The law also removes tax barriers that previously discouraged foreign companies from hiring Nigerians for remote work, a change expected to expand employment opportunities and boost foreign earnings.
While acknowledging that the immediate impact on workers’ take-home pay may appear modest for some, Oyedele stressed that the broader objective of the reform is to build a fairer, simpler and growth-friendly tax system that supports workers, businesses and long-term economic development.
