Nigeria’s small and medium-sized enterprises (SMEs) are slowing spending, delaying expansion, and holding back investment as the country edges toward the January 1, 2026 rollout of a sweeping tax reform. Although the federal government insists the changes will simplify the system and reduce burdens on low-income earners, businesses say lingering uncertainty has forced them into a cautious pause during what is usually a peak festive sales period.
The Nigeria Tax Act 2025, the most ambitious overhaul of the tax ecosystem in more than three decades, promises to consolidate multiple tax laws, raise reporting thresholds, and exempt many micro-businesses and low-income earners from paying tax. But while government officials describe the framework as “pro-poor” and “pro-investment,” many entrepreneurs say the lack of official guidelines, sector-specific notes, and clarity on implementation has left them unable to make critical decisions. For businesses already battling inflation, high borrowing costs, and unstable consumer demand, the unknowns feel too risky.
Across major cities like Lagos, Kano, Port Harcourt, and Abuja, traders and service providers are cutting costs, reducing inventory, postponing equipment purchases, and freezing recruitment. Retailers who normally stock heavily in December are keeping inventory “leaner than usual,” while tech firms and manufacturers are delaying launches and contracts until they better understand how the new rules will affect margins, supplier pricing, and compliance requirements. Some SMEs also lack the technical capacity, updated accounting systems, or Tax Identification Numbers needed to navigate the changes ahead.
Experts remain sharply divided on the long-term impact. Supporters, including members of the Chartered Institute of Taxation of Nigeria (CITN), say the reforms will ease the burden on low-income earners, encourage accountability, and expand the tax net by linking reliefs to verifiable documentation like rent receipts. But critics warn that provisions such as the increase in Capital Gains Tax from 10% to 30% and the new 4% development levy could discourage investment, reduce profitability, and push capital toward more business-friendly economies in the region.
With less than a month before implementation, analysts say the government must urgently provide clear guidelines, simplify SME documentation requirements, and roll out nationwide sensitisation programmes to restore confidence. Without immediate intervention, the current spending freeze may extend into early 2026, stifling economic activity at a time when Nigeria relies heavily on SMEs for growth and employment. For now, millions of small business owners remain in a wait-and-see mode—hoping clarity arrives before the new tax era begins.
source: The sun