Understanding the Nigeria 2026 Tax reform and what it means to you (I)
The 2026 tax reform is a lot to take in. For many people, it raises questions like: Which of my earnings are taxable? What counts as income? The new tax reform that will take effect from January 1, 2026, seem to touch everything and it’s easy to feel a little lost trying to make sense of it all. Here is what you need to know
All the old tax laws have been combined into one clear law, making it easier to understand what counts as income, what is taxed, and what reliefs are available.
The Tax-Free Threshold is: ₦800,000
If you earn ₦800,000 or less annually, you pay zero personal income tax. This protects low earners while keeping the system fair.
Progressive Tax Rates
The more you earn, the higher the percentage you pay on that extra income. But you only pay higher rates on the part that falls in each bracket:
• ₦0 – ₦800,000: 0%
• ₦800,001 – ₦3,000,000: 15%
• ₦3,000,001 – ₦12,000,000: 18%
• ₦12,000,001 – ₦25,000,000: 21%
• ₦25,000,001 – ₦50,000,000: 23%
• Above ₦50,000,000: 25%
Example: If you earn ₦5 million, you do not pay 18% on everything. You pay 0% on the first ₦800,000, 15% on the next ₦2.2 million, and 18% on the remaining ₦2 million. Total tax: ₦690,000. You keep ₦4.31 million (86% of your income).
Tax Reliefs Available
Rent Relief: The rent relief system has abolished the consolidated relief allowance(CRA). The rent relief deduct ₦500,000 or 20% of your annual rent (whichever is lower) before tax is calculated. This new system means homeowners and those who do not pay rent are not eligible for this specific relief, leaving their primary personal relief as the first NGN800,000 of tax-free annual income.
Other Reliefs: Pension contributions, NHIS, NHF, and life insurance premiums also reduce your taxable income.
What Counts as Income?
Everything you earn is now clearly included:
• Salary and wages
• Side hustles and freelance work
• Online sales and digital businesses
• Cryptocurrency earnings
• Capital gains (money made from selling property, shares, etc.)
• Rental income
• Dividends and interest
Some people might hear all this and say, “So what am I now left with?”And honestly it is understandable. At first, seeing the rates, it’s easy to feel like your whole salary is going to tax. But that’s not the case. When you can see clearly how much comes in and what is taken out, it’s easier to find your own balance. Knowing how much will go into savings, investments and other bills that need to be sorted.
Also, bank transfer narrations have become more important than ever. A transfer without a clear description could be mistaken for business income. For instance, sending money to a friend, repaying a loan, or gifting money without specifying the purpose could be taxed incorrectly.
Additionally, the reform encourages transparency and proper documentation. The tax administration will now be supervised by one central regulatory body, the Nigeria Revenue Service (NRS). This body will be responsible for assessment, collection, enforcement, and keeping your tax records in one place. What this means for you is clarity. You can easily track your tax status, payments, through a portal. This means having a Tax ID is now non-negotiable. Any taxable person who fails to register and obtain a Tax ID will be sanctioned.
Overall, the 2026 reform aims to make taxation simpler, fairer, and more transparent. Low earners are protected, reliefs are clear, and everyone can understand exactly what counts as taxable income.
NOW TO THE NEWS
Naira declines, closes week at N1,454/$1 amid festive-season demand
The naira continued to weaken against the US dollar this week, closing at N1,454/$1 on Friday as festive-season spending drove up demand for foreign exchange. Importers, retailers, and consumers increased dollar purchases ahead of Christmas and New Year, reversing the relative stability the currency had enjoyed in recent weeks.
Official CBN data showed a mixed but generally downward trend. The naira opened at N1,450.01/$1 on Monday, briefly appreciated to N1,447/$1 on Tuesday, and then gradually slipped through the week. By Thursday, it had weakened to N1,449/$1, before ending at N1,454/$1. Parallel-market rates in Abuja ranged between N1,469.5/$1 and N1,472/$1, reflecting even tighter pressure outside the official window.
This depreciation reverses last week’s modest recovery, when the currency had strengthened from N1,452/$1 on Monday to N1,446.9/$1 by Friday. Analysts attribute the current slide to typical Q4 spending patterns, speculative trading, and increased import activity—seasonal factors that often strain the FX market at year-end.
In a positive development, Nigeria’s foreign reserves rose to $45.04 billion, up from $44.9 billion at the start of the week. The increase suggests improved inflows, likely from crude oil sales, external financing, or Eurobond-related transactions, giving the CBN more room to support the naira if necessary.
To reinforce market stability, the CBN is finalising a revised Foreign Exchange Manual, part of broader reforms aimed at enhancing transparency, documentation standards, and oversight in the FX market. The upcoming manual builds on the Nigerian Foreign Exchange Code introduced earlier in the year, as the apex bank works toward a more predictable and credible FX market structure.
Govt reassures Nigerians, investors of fair and transparent tax reforms
The Federal Government has reassured citizens and investors that the implementation of the new tax laws will be conducted fairly, transparently, and responsibly.
Chairman of the National Tax Policy Implementation Committee, Joseph Tegba, stated that fears of intrusion into personal bank accounts are unfounded and emphasized that no investigations will be targeted at ordinary Nigerians.
Tegbe explained that the reforms are intended to support economic stability, improve revenue, and protect vulnerable groups, with the implementation starting on January 1, 2026. He assured that nothing harmful to the economy would be implemented and that the government aims to reduce uncertainty while protecting the most vulnerable. The committee has been set up to ensure broad consultation with businesses, subnational governments, civil society, and professional bodies.
Concerns exist over specific provisions, particularly the capital gains tax, which Tegbe said would be reviewed and refined in consultation with stakeholders. He added that some parts of the law might be revisited before the effective date, while incentives under the Act are designed to encourage both local and foreign investment.
The administration also intends to protect low-income earners, retaining widened tax bands and exemptions to ensure that gains made in improving relief are not reversed. Tegbe emphasized that if the reforms are well executed, they will lead to improved revenue mobilisation, reduced leakages, and a more stable and competitive economic environment. The committee will continue reviewing sensitive areas, including provisions linked to pioneer status, as part of a responsible and responsive implementation process.
CAC warns PoS operators to regularise ahead of 2026
The Corporate Affairs Commission (CAC) has issued a stern warning to Point-of-Sale (PoS) operators across Nigeria, announcing a nationwide enforcement campaign against businesses operating without proper registration.
The commission said it had noticed a significant rise in unregistered PoS operators, a violation of both the Companies and Allied Matters Act 2020 and the Central Bank of Nigeria’s Agent Banking Regulations. It also criticized some fintech companies for onboarding unregistered agents, describing the practice as risky and potentially harmful to Nigeria’s financial system.
Starting 1 January 2026, all PoS operators must complete full CAC registration to continue operations. Security agencies will enforce compliance, with unregistered terminals subject to seizure or shutdown. Fintechs that facilitate illegal operations will be placed on a watchlist and reported to the CBN. The CAC has urged operators to regularise immediately, stressing that compliance is mandatory to protect consumers and maintain a stable financial environment.
The warning comes amid growing concerns over fraud and weak regulatory practices in the PoS sector. Commitees have highlighted issues such as cloned terminals, unprofiled agents, anonymous transactions, and weak Know-Your-Customer (KYC) measures, which Nigerians at risk of financial loss, cybercrime, and security breaches. Authorities say the crackdown aims to secure the sector and safeguard the public.
Nigeria’s external reserves cross $45 Billion, strongest in six years
Nigeria’s external reserves have surpassed $45 billion, reaching $45.04 billion, marking the strongest position in six years and matching the level last seen on July 23, 2019. The reserves rose from $42.03 billion in September 2025, reflecting a significant turnaround amid global FX challenges.
The buildup in reserves reflects a steady and consistent accumulation, rather than a one-off spike. In November, reserves climbed from $43.26 billion to $44.67 billion, before crossing the $45 billion threshold on December 4, highlighting improving foreign exchange conditions.
The increase in reserves is attributed to improved inflows, possibly from crude oil earnings, Eurobond-related transactions, or multilateral financing. Higher reserves provide the CBN with greater capacity to intervene in the foreign exchange market if necessary, helping to stabilize the currency and manage FX pressures.
Crossing $45 billion signals stronger external health, enhances Nigeria’s ability to meet obligations and finance imports, and may boost investor confidence, encouraging capital inflows into fixed-income and equities markets.
