Weak state level implementation capacity overshadows early wins in tax reform

Nigeria’s 2025 tax reform programme is beginning to record notable early gains in investor confidence, improved revenue outlook, and relief for low- and middle-income earners, according to analysts.

However, these achievements are increasingly being tempered by concerns over weak implementation capacity across sub-national governments.

Policy experts and fiscal authorities describe the reforms as one of the most ambitious fiscal transformation efforts in Nigeria’s modern history, but warn that their long-term success will depend largely on how effectively states and local governments translate the new framework into operational reality.

They were speaking at the ongoing Annual Tax Conference organised by Chamber Institute of Taxation of Nigeria (CITN), themed Tax Reforms and Global Relevance: Positioning Nigeria’s Tax System for Sustainable Future on Tuesday in Abuja,

Joseph Tegbe, Chairman of the National Tax Policy Implementation Committee, in his paper presentation titled, “From Blue Print to Reality: Evaluating the Early Outcomes of Nigeria’s 2025 Tax Reforms”, said taxation remains one of the most critical instruments for national development and economic stability.

According to him, a functional tax system is essential for financing infrastructure, healthcare, education and social welfare, but stressed that the country can only achieve those objectives through a tax framework that is fair, transparent, technology-driven and business-friendly.

He noted that the future of Nigeria’s tax administration would depend on the country’s commitment to adopting global standards while adapting reforms to local realities.

Tegbe explained that the National Tax Policy Implementation Committee was inaugurated in the last quarter of 2025 following the enactment of key tax reform laws, including the Nigerian Tax Act, the Nigerian Tax Administration Act, the Nigerian Revenue Service Act and the Joint Revenue Board Act.

He said the committee was created to coordinate implementation, facilitate automation and ensure collaboration among federal and sub-national revenue authorities, fiscal policy institutions, private sector operators and technical experts.

According to him, the committee’s responsibilities include overseeing implementation of the tax reform laws, coordinating inter-governmental collaboration, facilitating taxpayer education and public sensitisation, identifying operational challenges and monitoring compliance with reform objectives and timelines.

He said the establishment of the committee demonstrated strategic foresight by the Federal Government, noting that unlike previous reforms that focused mainly on legislation, the current initiative includes a dedicated institutional framework for implementation management and policy continuity.

“A major focus of the committee is bridging the gap between policy intent and execution by promoting clarity, managing expectations and ensuring that implementation reflects the realities of businesses, citizens and all tiers of government,” he said.

Tegbe added that although the reforms remain at an early stage, there were already measurable developments, especially following the recent filing season for personal income tax returns.

Read also: Tax reforms key to Nigeria’s economic survival, growth

He said several subsidiary regulations, implementation guidelines, administrative directives and operational frameworks had already been developed since the announcement of the new tax laws.

Also speaking, Zaid Abubakar, Executive Chairman of the Kano State Internal Revenue Service, described the conference as timely, given Nigeria’s ongoing fiscal reforms and increasing global economic pressures.

He said governments around the world were facing rising demands for transparency, accountability and inclusive growth, making tax reform central to sustainable public finance.

According to him, President Bola Tinubu’s administration has placed strong emphasis on revenue mobilisation, fiscal discipline, economic diversification and institutional reforms, adding that achieving those objectives would require a modern and efficient tax administration system.

Abubakar stressed that sustainable tax systems must be built on fairness, efficiency, simplicity, predictability, transparency and public trust.

He noted that citizens were more likely to comply voluntarily with tax obligations when they could see accountability in the management of public resources and improvements in governance outcomes.

He further highlighted the close relationship between tax administration and public financial management, stating that efficient revenue mobilisation must be complemented by prudent expenditure management and effective service delivery.

“As tax practitioners and administrators, we have a responsibility to strengthen voluntary compliance, support domestic revenue generation and build public trust in the management of government resources,” he said.

The Kano IRS boss urged participants at the conference to use the platform to exchange innovative ideas, strengthen collaboration and develop practical solutions capable of advancing Nigeria’s tax administration system.

Abubakar also noted that the reforms had exposed weaknesses in taxpayer registration systems and digital infrastructure across many states.

According to him, expanding taxpayer registration remains central to the success of the reforms because revenue authorities cannot collect taxes effectively without proper identification and enumeration of taxpayers.

He explained that the introduction of National Identification Number-based tax identification for individuals and Corporate Affairs Commission registration for companies had improved the registration process, but challenges still existed for government agencies, non-governmental organisations and incorporated trustees.

“What happens for MDAs and NGOs that do not have clearly defined tax identification structures? Those are practical challenges we are still grappling with,” he said.

Abubakar described the early outcomes of the reforms as “mixed realities,” noting that while tax burdens on individuals had reduced, some states had surprisingly recorded increases in revenue collection.

He disclosed that several states, including Kano and Lagos, had reported stronger-than-expected revenue inflows during the first quarter of 2026 despite earlier fears that collections would decline sharply.

“Some states have actually seen improvements in collections. In Lagos, for example, revenue performance recently reached one of the highest levels in the agency’s history,” he said.

However, he admitted that other states had recorded declines in revenue, largely due to differences in administrative readiness and digital capacity.

Abubakar warned that the reforms were imposing significant technological demands on states, many of which were still struggling with basic electronic tax administration systems.

“The new reforms are already moving toward AI-integrated tax administration platforms while some states are still grappling with basic digital infrastructure,” he said.

He also revealed that state revenue agencies were now facing increasing pressure to improve stakeholder engagement, forcing some agencies to establish 24-hour call centres to respond to taxpayers’ concerns and enquiries.

Similarly, Oladapo Abdul-Rahman, Commissioner for Finance and Chief Economic Adviser to the Ogun State Governor, said taxation remained fundamental to building a civilised and economically stable society.

He described the conference theme as reflective of a collective commitment to building a modern and transparent tax system that supports economic growth, encourages voluntary compliance and ensures fairness.

Abdul-Rahman emphasised the need for collaboration among lawmakers, tax administrators, policymakers and legislative institutions to achieve sustainable reforms in Nigeria’s tax administration framework.

He commended the Chartered Institute of Taxation of Nigeria for sustaining dialogue around fiscal reforms and tax policy development.

A representative from Ogun State also said the reforms were still at an early stage and that it would take more time before their full impact became visible.

He noted that many states initially expected a sharp decline in revenue because large numbers of low-income earners had effectively been removed from the tax bracket.

According to him, states were now shifting attention toward improving compliance among high-net-worth individuals while ensuring that low-income earners retained more disposable income.

“What we are preaching is simple: those earning more should pay more, while those earning little should pay little or nothing,” he said.

The Ogun official added that political will remained one of the biggest challenges confronting tax authorities, especially when dealing with influential high-net-worth individuals.

On her part, Rakiya Ahmad, Executive Chairman of the Zamfara State Internal Revenue Service, said Nigeria’s reform experience continued to evolve amid broader fiscal mobilisation efforts across Africa.

She said discussions at the conference were expected to deepen understanding of the reforms and strengthen institutional responses to implementation challenges.

Ahmad also mentioned that institutional capacity and digitisation remained major concerns for many states implementing the reforms.

She disclosed that Zamfara had already implemented a central billing system but later discovered that it lacked an adequate taxpayer assessment model, forcing authorities to redesign parts of the system.

Ahmad also highlighted challenges in harmonising tax administration between state and local governments, particularly because many local governments still lacked digital infrastructure.

“We are still grappling with issues of capacity because these are things that will develop over time,” she said.

According to her, the state had sought technical support from federal revenue authorities to strengthen capacity building and improve implementation processes.

Participants at the session agreed that although the reforms were beginning to produce positive signals, sustained political commitment, institutional coordination, taxpayer education and investment in digital infrastructure would determine their long-term success.

Participants also raised concerns over institutional readiness, taxpayer adaptation and the availability of infrastructure required to translate legislative intentions into measurable economic outcomes.