New tax law critical to spur investment, shield low-income earners — Uwaleke

As Nigeria enters into a new fiscal era with  the Nigeria Tax Act 2025, Uche Uwaleke, professor of Capital Markets and Director, Institute of Capital Market studies, Nasarawa state University, has explained that while the mention of tax reforms often trigger anxiety, the new framework is deliberately structured to be pro-poor, pro-investment, and pro-growth.

Uwaleke stated this at BusinessDay Tax reform conference in Abuja on Thursday.

He explained that at its core, the new tax regime seeks to strike a delicate balance between revenue generation and economic growth stressing that the government needs sustainable revenue to finance development priorities and reduce dependence on borrowing.

On the other hand, Uwaleke said that the tax system must remain competitive, predictable, and supportive of investment and enterprise.

He noted that for many years, Nigeria has operated with a tax-to-GDP ratio significantly below global and African averages. This, he said, has constrained the government’s capacity to fund critical investments in infrastructure, healthcare, education, and social protection.

“At the same time, the existing tax system has often been characterized by
complexity, multiple levies, and outdated laws. The recent reforms are therefore designed to address these structural weaknesses by modernizing tax administration, improving efficiency, broadening the tax base, and strengthening fairness.

“At its core, the new tax regime seeks to strike a delicate balance between revenue
generation and economic growth. On the one hand, the government needs
sustainable revenue to finance development priorities and reduce dependence on
borrowing; on the other hand, the tax system must remain competitive, predictable, and supportive of investment and enterprise.

“The central question before us today is: What does this mean for your wallet? At
first glance, any mention of tax reform can cause anxiety. However, a closer look
reveals a regime that is deliberately structured to be pro-poor, pro-investment, and pro-growth,” said.

Speaking further, Uwaleke emphasised that for the individual citizen and household, the Act brings significant relief as it expands exemptions for low-income earners, provides rent reliefs, and protects
pensions and healthcare contributions from undue tax burdens.

He added that the expanded VAT zero-rating on essential goods and services means that the basic cost of living is shielded. This for him is a conscious effort to build a more equitable social contract. “For your wallet, this translates to more disposable income for savings and investment, and a tax system that recognizes your essential needs. At the same time, by strengthening tax compliance and expanding the base of contributors, the reforms aim to distribute fiscal responsibility more equitably across the economy.

“For entrepreneurs and small business owners- the engine of our economy- the message is one of deliberate empowerment. The expanded definition of small companies, now covering businesses with turnover up to N100 million, brings sweeping exemptions. Many will pay no Companies Income Tax, no Capital Gains Tax, and face no VAT obligations.

“This is a strategic move to nurture MSMEs, encourage formalization, and reduce the compliance burden. It means more capital can be reinvested into your business, creating jobs and driving innovation. Large corporations and multinational enterprises, on the other hand, will face strengthened
compliance expectations, including the introduction of a minimum effective tax rate of 15 percent in line with emerging global tax standards. This ensures that
companies benefiting from Nigeria’s economic environment make a fair
contribution to national development.”

For investors and participants in the capital markets, Uwaleke said that the new tax regime offers enhanced clarity and incentive. He explained that the reformed Capital Gains Tax, while broadening the base, wisely protects the small investor by exempting disposals below defined thresholds.

He noted that the law encourages reinvestment and long-term holding, which are essential for market depth and stability, adding that by aligning the tax treatment of capital transactions with income, the Act plugs avoidance loopholes while ensuring that genuine investors are not penalized.

“This bolsters investor confidence, which is the lifeblood of any thriving economy,” he added.

Uwaleke however emphasised that legislation alone does not guarantee outcomes. He stressed that the success of the new tax regime will depend heavily on implementation which includes strengthening digital tax administration, improving taxpayer education, enhancing audit capacity, and ensuring transparency in the use of public revenues.

“Citizens are more willing to comply with tax obligations when they can clearly see the link between taxes paid and public services delivered. Equally important is the role of institutions in helping individuals and businesses navigate the evolving tax landscape,” Uwaleke said.