By DAYO ADESULU
In a landmark move aimed at economic fairness and poverty reduction, the Federal Government of Nigeria has announced that Nigerians earning less than N250,000 monthly will be exempt from income tax starting January 2026. This was disclosed by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, following President Bola Tinubu’s approval of four key tax bills.
Background and Overview of the Tax Reform
The Nigerians earning current tax system has long been criticized for being both inefficient and inequitable. With widespread poverty and high inflation, taxing low-income earners often worsens their financial burden. This reform aims to create a tax system that is fairer, growth-driven, and people-focused.
- NEITI Endorses 2024 Tax Reform Bill, Advocates for Modernized Tax System
- https://www.thecheernews.com/president-tinubu-signs-4-tax-reform-bills-into-law/
The approved tax bills are part of a broader strategy to reform Nigeria’s fiscal architecture, reduce tax evasion, and simplify compliance.
The Role of the Presidential Committee on Fiscal Policy and Tax Reforms
Led by Taiwo Oyedele, the Committee was established in July 2023 with the mandate to restructure the nation’s outdated tax policies. Under Oyedele’s guidance, the committee has pursued a data-driven and inclusive approach, ensuring that reforms reflect the socio-economic realities of Nigerian households.
What the New Nigerians Earning Tax Policy Means for Low-Income Earners
So, what does “Nigerians earning less than N250,000 monthly” really mean?
According to Oyedele, the Nigerians earning figure was carefully chosen after studying household compositions across Nigeria. An average Nigerian family includes five members, with usually two working adults. To meet basic needs like food, transportation, education, and shelter, the household would need a minimum of ₦250,000 per month. Anyone below this income level is now classified as poor and will not be taxed.
This change acknowledges that poverty isn’t just about income—it’s about survival and dignity.
Effective Date and Transition Period
The Nigerians earning law will come into effect in January 2026, giving the government enough time to restructure tax infrastructure, educate citizens, and phase in implementation.
Here’s a timeline:
| Period | Milestone |
|---|---|
| Jul 2023 | Committee formed |
| Jun 2025 | Tax laws signed |
| Jul–Dec 2025 | Infrastructure preparation & education |
| Jan 2026 | Full implementation begins |
High-income earners, including executives and corporate professionals, will see a slight increase in their income tax contributions.
Fiscal Benefits and Goals of the New Policy
The reform isn’t just about compassion—it’s strategic. Nigeria currently collects only 30% of its expected tax revenues. This new law aims to capture more from evaders at the top while relieving the bottom.
Key objectives include:
- Encouraging tax compliance
- Stimulating consumer spending
- Making taxation equitable
Public Reactions and Expert Commentary
Reactions have been largely positive, with many praising the pro-people approach of the committee.
Economists have noted that this reform may help reduce poverty-related crimes, improve household welfare, and boost trust in the system.
Comparisons with Global Practices
Globally, many countries exempt their poorest citizens from income tax. For example:
- USA: Federal tax exemptions based on income brackets and family size
- UK: Personal allowance up to £12,570
- India: Exemption for those earning under ₹300,000
Nigerians earning is now aligning with best practices in progressive taxation.
Economic Implications for Nigeria
While some fear reduced revenue, the real goal is long-term growth and compliance. As more citizens engage with a fairer tax system, Nigerians earning could close its 70% tax collection gap, creating room for:
- Infrastructure spending
- Social services
- Economic diversification
Challenges to Implementation
Success will depend on:
- Digitalizing tax administration
- Coordinating with state governments
- Preventing loopholes
The government must ensure smooth onboarding and public awareness campaigns.
How Businesses Will Be Affected
Companies will need to:
- Update payroll systems
- Adjust employee withholding taxes
- Maintain clearer records for audits
This reform may reduce labour costs for firms with low-income staff.
Social Justice and Equity in Taxation
Ultimately, this reform addresses a deeper issue: fairness.
By not “taxing poverty,” Nigeria acknowledges that true progress comes from lifting people up, not burdening them.
What Comes Next: Future Plans of the Tax Reform Committee
Oyedele has hinted at additional reforms in areas like:
- Property taxes
- Luxury goods
- Digital economy compliance
The committee’s work continues through 2025.
Conclusion: A People-Centered Fiscal Shift
The exemption for Nigerians earning less than N250,000 monthly is a clear sign that Nigeria is rethinking its approach to taxation. By focusing on fairness, growth, and simplicity, this reform could become a model for other emerging economies.
FAQs About the New Tax Exemption
1. When does the tax exemption for low-income earners begin? 👉 January 2026.
2. Who qualifies for this exemption? 👉 Anyone earning ₦250,000 or less per month.
3. Will businesses also benefit? 👉 Indirectly, yes—especially those employing low-income workers.
4. How will the government make up for lost revenue? 👉 By improving compliance and taxing high-income earners more effectively.
5. Is this a temporary policy? 👉 No, it is part of a long-term structural reform.
6. How can I know if I qualify? 👉 Check your gross monthly earnings before deductions. If it’s ₦250,000 or less, you qualify.
