Policy Watch 2026: Key Government Reforms Affecting Business Growth in Nigeria

Let me tell you about a transformation reshaping Nigerian business.

President Bola Ahmed Tinubu’s administration is implementing the most comprehensive economic reforms in decades. From the landmark Tax Reform Acts signed in June 2025 to the Central Bank of Nigeria’s innovative foreign exchange policies, these changes are fundamentally reshaping how businesses operate.

This report examines the key government reforms and their implications for business growth.

If you need professional support navigating these changes, our policy and regulatory compliance advisory for Nigerian businesses can help you stay ahead.

Understanding fiscal policy in Nigeria’s reform context

According to the Library of Congress, fiscal policy is “the means by which the government adjusts its budget balance through spending and revenue changes to influence broader economic conditions.”

In Nigeria’s case, the 2025 reforms represent an expansionary and modernizing approach to fiscal policy, aimed at stimulating business growth while establishing a sustainable revenue framework.

For a broader perspective, check out our strategic policy and regulatory advisory.

The Nigeria Tax Reform Acts 2025: a new fiscal architecture

On June 26, 2025, President Tinubu signed into law a historic package of tax reform legislation. This landmark reform comprises four interconnected laws.

The four pillars of tax reform.

The Nigeria Tax Act replaces multiple outdated tax laws with a unified, modern framework, consolidating provisions from the Companies Income Tax Act, Personal Income Tax Act, Petroleum Profits Tax Act, and Capital Gains Tax Act.

The Nigeria Revenue Service (Establishment) Act replaces the Federal Inland Revenue Service (FIRS) as the central tax authority, operating with enhanced autonomy and digital infrastructure.

The Nigeria Tax Administration Act establishes streamlined procedures for tax compliance, dispute resolution, and taxpayer rights, introducing digital compliance mechanisms including e-invoicing and real-time VAT reporting.

The Joint Revenue Board (Establishment) Act creates a coordinating body bringing together federal, state, and local revenue authorities to combat multiple taxation.

Key business impacts.

For small businesses, companies with annual turnover below NGN 25 million are now exempt from Company Income Tax, VAT, and Tertiary Education Tax. Simplified filing procedures and access to digital platforms reduce compliance costs significantly.

For medium and large enterprises, the introduction of the Development Levy replaces overlapping sectoral levies, reducing compliance complexity. Improved dispute resolution procedures through the new Tax Ombud system provide greater certainty.

For multinational corporations, a minimum effective tax rate of 15 percent applies to multinationals with global revenues exceeding EUR 750 million or Nigerian annual revenue above NGN 50 billion. Controlled Foreign Company provisions align Nigeria with global tax standards.

Personal income tax reforms.

The reformed Personal Income Tax regime now features 0 percent tax rate for individuals earning below NGN 800,000 annually, progressive rates from 0 to 25 percent for higher earners, and a 20 percent rent deduction capped at NGN 500,000 to ease housing costs.

VAT revenue restructuring.

A significant shift in revenue allocation sees the Federal Government’s VAT share reduced from 15 to 10 percent. State governments now receive 55 percent, up from 50 percent. Local governments receive 35 percent. Revenue is distributed based on equality at 50 percent, population at 20 percent, and consumption at 30 percent.

Central Bank of Nigeria reforms: stabilizing the financial ecosystem

Under Governor Olayemi Cardoso, the CBN has implemented aggressive reforms. Nigeria’s gross external reserves rose from $33 bi ll i o nin S e pt e mb er 2023 t oo v er$ 42 billion by late 2025.

Foreign exchange market innovations.

The Electronic Foreign Exchange Matching System (EFEMS), launched on December 2, 2024, promotes real-time pricing and complete transparency, eliminates artificially inflated FX prices, and operates with mandatory trading hours from 9:00 AM to 4:00 PM WAT.

The Nigeria Foreign Exchange Code, approved in January 2025, establishes six guiding principles: ethics, governance, execution, information sharing, risk management, and confirmation and settlement.

Non-Resident Nigerian Accounts, introduced on January 10, 2025, include the Non-Resident Nigerian Ordinary Account for general banking and the Non-Resident Nigerian Investment Account for investment purposes, allowing diaspora Nigerians to remit and manage funds seamlessly with full repatriation rights.

The Non-Resident BVN Platform, launched May 13, 2025, enables Nigerians abroad to obtain Bank Verification Numbers remotely, eliminating the need for physical presence in Nigeria.

Monetary policy stance.

The CBN raised the Monetary Policy Rate by 875 basis points to 27.5 percent in 2024. As of November 2025, inflation has declined to 23.7 percent year-on-year from 31 percent average in 2024.

Banking sector recapitalization.

The CBN has directed banks to prepare for a new round of recapitalization. The banking sector maintains strong fundamentals with an industry capital adequacy ratio of 13.70 percent exceeding the 10 percent benchmark, and non-performing loans at 4.9 percent below the 5 percent threshold.

For Bureau De Change operators, new capital requirements introduced in May 2024 require Tier-1 BDCs to have NGN 2 billion minimum capital and Tier-2 BDCs NGN 500 million minimum capital.

Sectoral reforms and industry-specific impacts

Oil and gas sector transformation.

The Nigeria Tax Act 2025 repeals the Petroleum Profits Tax Act and Deep Offshore Inland Basin Production Sharing Contract Act, harmonizing oil and gas taxation with the broader national system. Nigeria’s crude oil production has risen to 1.54 million barrels per day in 2024, supported by improved security and fiscal reforms. Gas production has grown from 3.9 to 4.6 billion cubic feet per day between 2023 and 2025.

Electricity sector deregulation.

Aligned with the Electricity Act of 2023, reforms focus on encouraging private investment in power generation and distribution, improving efficiency and service delivery, and creating a sustainable framework for sector growth.

Free Trade Zones and export processing.

As of 2025, NEPZA oversees over 400 licensed zones across Nigeria with active operations in more than 50 zones across all six geopolitical zones, hosting over 5,800 enterprises. Companies operating in Free Zones remain exempt on exports but face stricter scrutiny when supplying Nigeria’s customs territory.

For support with sector-specific compliance, our industry regulatory compliance advisory can help.

Economic performance and investment climate

GDP growth and sectoral performance.

Economic growth accelerated to 4.6 percent year-on-year in Q4 2024, pushing full-year 2024 growth to 3.4 percent, the highest since 2014. For 2025, GDP growth is projected at 3.4 percent, stabilizing around 3.5 percent over the medium term.

Leading sectors include finance and insurance as the strongest performer, ICT with robust growth, construction and real estate with significant expansion, and services with vibrant performance across various sub-sectors.

Foreign exchange stability.

The naira has stabilized around NGN 1,559 per USD as of December 2024, supported by CBN’s liquidity support measures, reduced demand for USD due to domestic refining capacity, increased portfolio inflows, and clearing of over $7 billion FX backlog.

Capital inflows surge.

Capital importation into Nigeria reached $5.64 bi ll i o nin Q 12025, re p rese n t in g a 67.12 p erce n t in cre a se f ro m$ 3.37 billion in Q1 2024. Portfolio investment accounted for $5.2 bi ll i o n (92.25 p erce n t), o t h er in v es t m e n t$ 311.17 million (5.52 percent), and foreign direct investment $126.29 million (2.24 percent).

The banking sector received $3.1 bi ll i o n (55.44 p erce n t), t h e f inan c in g sec t or$ 2.09 billion (37.18 percent), with production, manufacturing, and other sectors receiving the balance.

Credit rating upgrades.

Nigeria has earned credit rating upgrades from major agencies including Moody’s and Standard & Poor’s, with outlooks revised to positive, reflecting improved investor confidence and successful reform implementation.

Equity market performance.

The Nigerian All Share Index gained nearly 18 percent year-to-date as of mid-2025 despite weak global oil prices, driven by firms regaining pricing power and improving income statements after years of declining earnings.

2026 budget framework: “Budget of Restoration”

Presented in December 2024, the 2025 budget focuses on “Securing Peace, Rebuilding Prosperity.”

Total appropriation is NGN 49.74 trillion, a 42 percent increase from 2024’s amended NGN 35.1 trillion. Expected revenue is NGN 36.35 trillion. Oil revenue accounts for 56.3 percent based on 2.06 million barrels per day at $75 per barrel and NGN 1,500 per dollar. Non-oil revenue accounts for 43.7 percent, largely tax-driven.

The fiscal deficit is NGN 13.39 trillion, to be financed through domestic and international borrowing. Key economic assumptions include GDP growth rate of 3.68 percent, exchange rate of NGN 1,500 per USD, and inflation expected to decline to 21.46 percent annual average in 2025.

Sectoral priorities include infrastructure development, human capital development in education and health, food security, peace and security, and economic renewal initiatives.

Challenges and opportunities for businesses

Key challenges.

Despite declining from 31 percent in 2024 to 23.7 percent in April 2025, inflation remains elevated. Food inflation continues to strain household budgets. Transport costs remain high due to fuel price adjustments. Input costs for businesses remain volatile.

The poverty rate is estimated at 46 percent in 2024, with 31 million Nigerians classified as food insecure. Limited consumer purchasing power constrains demand.

Ongoing security challenges affect agricultural regions, impacting food production and supply chains. Infrastructure gaps persist in electricity supply, transportation networks, and digital infrastructure. Interest rates remain elevated at 27.5 percent, constraining business expansion.

Emerging opportunities.

The tax reforms create significant opportunities for SMEs with zero CIT, VAT, and TET for companies under NGN 25 million turnover. Lower compliance costs encourage formalization. Enhanced cash flow through recoverable input VAT improves liquidity.

The improved business environment features reduced multiple taxation through the Development Levy, streamlined licensing and registration processes, enhanced dispute resolution mechanisms, and greater predictability through advance rulings.

Transparent FX pricing through EFEMS, improved liquidity in the official market, and reduced arbitrage opportunities are stabilizing rates.

Sectoral growth potential exists in manufacturing protected by improved FX access and local refining capacity, technology and fintech with regulatory clarity enabling innovation, real estate and construction driven by infrastructure spending, and financial services with recapitalization unlocking growth potential.

Over 400 licensed export processing zones offer duty-free imports and tax holidays for qualifying activities, with profit repatriation rights preserved and focus on performance-driven incentives.

Strategic recommendations for businesses

Immediate actions (next 6 months).

Conduct a comprehensive tax review. Assess your business structure against new tax provisions. Identify applicable exemptions and new liabilities. Engage qualified tax advisors to optimize position.

Upgrade digital systems. Ensure ERP and accounting systems support e-invoicing. Implement real-time VAT reporting capabilities. Train staff on new digital compliance requirements.

Review banking relationships. Assess FX exposure and hedging strategies. Evaluate credit facilities in light of higher interest rates. Diversify banking relationships for resilience.

Medium-term strategy (6 to 18 months).

Restructure for tax efficiency. Consider optimal entity structures under the new tax regime. Plan capital expenditure to maximize new incentive credits. Document transfer pricing policies.

Build compliance capacity. Establish dedicated tax and regulatory compliance functions. Subscribe to professional updates on evolving regulations. Develop internal audit capabilities.

Strengthen financial management. Improve cash flow forecasting considering new tax timing. Build reserves to manage volatility. Optimize working capital management.

Long-term positioning (18+ months).

Strategic repositioning involves evaluating sector opportunities created by reforms, considering diversification into high-growth areas, and planning for scale-up as conditions stabilize.

Innovation and technology require investing in productivity-enhancing technology, developing digital business models, and leveraging fintech solutions for efficiency.

Sustainability integration means aligning with climate change adaptation priorities, developing ESG frameworks attractive to investors, and investing in renewable energy solutions.

Market expansion involves exploring AfCFTA opportunities, building export capabilities, developing products for the emerging middle class, and creating inclusive business models.

Outlook

GDP growth is projected to stabilize around 3.4 to 3.6 percent annually through 2026, driven by higher crude oil production, continued services sector vitality, infrastructure spending multiplier effects, and improved investor confidence.

Inflation is expected to moderate further to 21 to 22 percent by end of 2025, supported by tight monetary policy stance, FX market stability, improved food production, and base effects from 2024’s high inflation.

The naira is likely to remain relatively stable around NGN 1,500 to 1,600 per USD, barring major shocks, due to the CBN’s reformed FX framework, improved reserves position, reduced import pressures from domestic refining, and portfolio inflow recovery.

The business environment is gradually improving as reforms take root. Tax system predictability is increasing. Compliance costs are declining over time. FX access is more reliable. Infrastructure is slowly improving.

Key policy terms every business leader should know

Fiscal Policy. Government adjustments to spending and tax revenue to influence economic conditions.

Expansionary Fiscal Policy. Increasing spending or decreasing taxes to stimulate economic growth.

Monetary Policy Rate. The interest rate at which the CBN lends to commercial banks, influencing borrowing costs.

Capital Adequacy Ratio. A measure of a bank’s capital relative to its risk-weighted assets.

Non-Performing Loans. Loans where the borrower has failed to make scheduled payments.

Portfolio Investment. Investment in financial assets rather than physical assets or business operations.

Foreign Direct Investment. Investment in physical assets or business operations in another country.

E-Invoicing. Electronic invoicing system for real-time VAT reporting and compliance.

Development Levy. A consolidated levy replacing overlapping sectoral levies to reduce compliance complexity.

Advance Ruling. A binding decision from tax authorities on how tax law applies to a specific transaction.

Recommended services from Business Cardinal

Ready to navigate Nigeria’s evolving policy landscape? These services are designed to help businesses stay compliant and competitive.

Policy and Regulatory Compliance Advisory for Nigerian Businesses – Comprehensive policy monitoring and compliance support.

Strategic Policy and Regulatory Advisory – Strategic guidance for navigating regulatory changes.

Industry Regulatory Compliance Advisory – Sector-specific compliance support.

Business Strategy and Policy Advisory for Nigerian Enterprises – Strategic planning for policy-driven market changes.

Where to go from here

Nigeria’s 2025 reform agenda represents the most comprehensive attempt to modernize the country’s economic framework in decades. The Tax Reform Acts, CBN’s financial sector innovations, and sectoral reforms create a foundation for sustainable growth.

For businesses, this is a period of both challenge and opportunity. Those who successfully navigate the transition, invest in compliance capabilities, and position themselves for the emerging economic structure will be well-placed to benefit from Nigeria’s vast potential.

Start by conducting a tax review. Then upgrade your digital systems. Then assess your banking relationships. Then build compliance capacity. Then reposition strategically.

The policy watch for 2026 needs to be continuous, as both opportunities and challenges evolve rapidly.

Let’s work together

Is your business prepared to navigate Nigeria’s evolving policy landscape?

At Business Cardinal, we help Nigerian businesses understand and adapt to regulatory changes. We monitor policy developments. We assess compliance requirements. And we have practical experience helping organisations navigate transitions.

Not theory. Not generic advice. Practical, actionable support tailored to your specific business.

Contact us today:

📧 Email: hello@businesscardinal.com
📞 Phone: +234 802 320 0801
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Contact Business Cardinal to discuss your policy advisory needs.

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References

Library of Congress – Fiscal Policy Definition
Central Bank of Nigeria – Monetary Policy Reports
Federal Inland Revenue Service – Tax Reform Acts