FG Set to Forfeit N1.4 Trillion in 2026 Through 5% Corporate Tax Cut to Boost Economy

The Federal Government of Nigeria is set to give up approximately N1.4 trillion in revenue in 2026 by reducing the corporate income tax (CIT) rate from 30% to 25%, according to Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee. The reduction is part of the government’s new consolidated tax reform framework, designed to encourage business growth rather than raise additional taxes.

Speaking at a media workshop on the new tax laws, Oyedele highlighted that this deliberate move aims to stimulate economic activity. “If you do the maths, taking away 5% out of 30% translates to around N1.4 trillion. So this is government giving N1.4 trillion to businesses next year,” he explained, citing Federal Inland Revenue Service (FIRS) data showing that corporate tax collections reached about N8.6 trillion in 2024.

The reforms focus on economic growth over higher taxation, Oyedele said, emphasizing that sustainable government revenue comes from expanding the economy rather than burdening taxpayers. “The fastest and most sustainable way to generate revenue is to allow the economy to grow. If I’m unemployed, you can have the best personal income tax law in the world, but you can’t collect tax from me,” he added. The new tax laws intentionally avoid introducing new levies, instead aiming to remove bottlenecks and reduce the cost of doing business in Nigeria.

In addition to the CIT reduction, businesses will benefit from changes to the Value Added Tax (VAT) system starting January 2026. Companies will now be able to claim input VAT credits on assets, overheads, and services—categories previously excluded. Oyedele illustrated the impact using bread production: under the new law, bread becomes VAT zero-rated rather than exempt, lowering production costs and potentially reducing consumer prices. This zero-rating principle also applies to essential sectors like food, education, and healthcare.

The tax overhaul comes into effect on January 1, 2026, with four new tax reform acts simplifying Nigeria’s tax system and broadening the tax base for businesses and individuals. To oversee the implementation, President Bola Tinubu has established the National Tax Policy Implementation Committee (NTPIC), chaired by tax expert Joseph Tegbe. While the reforms will reduce government revenue in the short term, Oyedele emphasized that the trade-off is a strategic investment in long-term economic growth.

source: nairametrics