The Federal Inland Revenue Service (FIRS) has announced that items such as food, education, transport, and agriculture are now exempt from Value-Added Tax (VAT) under the new tax reform laws signed by President Bola Ahmed Tinubu.
Zacch Adedeji, the Executive Chairman of the FIRS, announced the changes during an interview marking his two years in office, stating the move fulfills Tinubu’s promise to simplify tax compliance.
Adedeji declared: “With these new laws, food, education, transport, and agriculture will be VAT-free.”
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He added that this is “the best thing that has happened to Nigeria’s fiscal ecosystem since 1960” and that the President “has fulfilled his promise to make businesses flourish by removing all burdens and hurdles.”
The new tax code, which is scheduled to take effect in January, merges several tax laws into one and reduces the number of tax types to single digits.
It also raises thresholds to protect low-income earners and exempts businesses with an annual turnover below N50m from tax.
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Tinubu signed four bills into law on June 26, 2025: the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act.
This quartet of laws aims to broaden the tax base and improve compliance across federal, state, and local governments.
FIRS will also be renamed the Nigeria Revenue Service to better reflect its role as a central tax authority for all tiers of government.
Adedeji explained: “The word ‘federal’ gave the wrong impression that we only collect for the federal government. In reality, we collect VAT, of which 90 per cent belongs to the states.”
Adedeji noted that the reforms are already delivering results, with Nigeria’s tax-to-GDP ratio rising from 10 per cent to 13.5 per cent in two years, and a target of 18 per cent set for 2027.
He added that 30 states have used improved revenue to repay N1.85tn in debts, while debt servicing costs have dropped from 90 per cent to about 50 per cent of revenue.
He credited Tinubu’s other economic decisions, like subsidy removal and exchange rate unification, for strengthening the federation account, stating: “The health of the federation account has blossomed greatly, as there are no bogus subsidy claims to deplete the pool.”
While admitting that the reforms have created short-term hardship, he pointed to government measures, such as compressed natural gas buses and crude-for-naira support for local refiners, as efforts to ease the impact.
He concluded that the consolidated tax law strengthens compliance by grouping taxpayers into small, medium, and large categories, with one-stop shops for filing and payments, emphasizing: “We are service providers to taxpayers rather than just an enforcement agency.”
Regarding a petrol surcharge, Adedeji explained that it would not apply automatically, noting, “It will only take effect if activated by a ministerial order and published in the official gazette.”
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