Nigeria’s Tax Reform Faces a State-Level Test as Levies Remain Fragmented

Nigeria’s Tax Reform Faces a State-Level Test . Nigeria’s sweeping tax reforms may have changed the rules at the federal level, but one question is increasingly moving to the centre of the debate: will businesses experience the same tax system across the country?

The Chartered Institute of Taxation of Nigeria (CITN) has warned that the answer may still be no, as some states are yet to fully align their tax and levy systems with the new harmonised framework.

The concern comes at a critical point for Nigeria’s tax reform programme. The new tax laws, which took effect from January 2026, are intended to simplify administration, improve compliance and create greater consistency across the country’s revenue system. The Federal Government’s transition guidelines also emphasise clarity, fairness and administrative certainty in implementing the new framework.

But while the federal framework is being rolled out, implementation at state and local government levels could determine whether businesses actually feel the promised reduction in compliance burdens.

The reform is not just about collecting more tax

Speaking at the investiture of the 20th Chairman of the CITN Lagos and District Society, CITN President Innocent Ohagwa said concerns surrounding the wider tax reforms had eased considerably.

According to him, the new framework provides relief for lower-income earners and exemptions for small and micro businesses, while also creating opportunities to bring more participants in the informal economy into the tax system.

The bigger challenge, however, is coordination.

Ohagwa noted that the process of harmonising taxes across states and local governments had begun, but some states were yet to regularise their position under the new framework.

That could prove significant because a tax reform designed to simplify the system can only achieve that objective if the rules taxpayers encounter on the ground are also aligned.

For a business operating across several states, differences in levies, collection procedures and administrative requirements can quickly turn a supposedly simplified tax system into a complicated compliance exercise.

How much progress has been made?

There has already been measurable movement towards harmonisation.

The Joint Revenue Board (JRB) said in May that the Harmonised Taxes and Levies Law had been domesticated by 15 states at the time. The model framework seeks to improve revenue administration at both state and local government levels and prohibits practices such as cash collection and the use of roadblocks to collect taxes and levies.

By July, reports indicated that the number had risen to 16 states, showing that adoption is progressing, although a substantial number of states still have work to do.

The JRB’s mandate under the new reform architecture is particularly important here. The Board was created partly to promote harmonisation of taxes, levies, rates and charges and to encourage more uniform revenue administration across Nigeria’s three tiers of government.

The direction is therefore clear. The issue is increasingly becoming one of implementation speed and consistency.

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Why businesses are watching closely

For businesses, tax harmonisation is not simply a government policy issue. It can directly affect the cost and predictability of doing business.

A company operating in multiple locations may have to deal with different revenue authorities, payment processes, assessments and local charges. Even where individual levies are legally valid, fragmented administration can create additional costs through compliance, documentation and personnel requirements.

This is why the push for harmonisation has become closely connected with Nigeria’s long-running ease-of-doing-business conversation.

Lagos State Internal Revenue Service Chairman Ayodele Subair also linked harmonisation with efforts to address complaints surrounding multiple taxation. He pointed to the state’s digital tax platform as an example of how technology could reduce human interaction and make revenue collection more efficient.

The Federal Government has similarly positioned digitalisation and coordination as central components of the wider tax reform agenda.

The reform is also changing who carries the tax burden

Another important feature emerging from the reforms is a deliberate attempt to change the distribution of the tax burden.

Subair said the new system is designed to provide greater relief at the lower end of the income scale while placing more responsibility on taxpayers with greater capacity to pay.

This means the success of the reform will not necessarily be measured only by how much revenue government collects.

It will also depend on whether government can expand the tax base without continually increasing pressure on taxpayers who are already compliant.

That issue was highlighted by Nigerian Bar Association President Oyinkansola Badejo-Okusanya, who called for professional bodies to play a greater role in bringing unbanked and undertaxed Nigerians into the formal tax system.

Her argument points to one of the central challenges facing Nigeria: the country does not necessarily need to rely exclusively on higher tax rates to increase revenue. It can also generate more revenue by improving compliance, reducing leakages and bringing more economic activity into the formal tax net.

A reform that will need regular updates

CITN Deputy Vice President Dr Titilayo Fowokan also cautioned against viewing the new tax laws as a finished product.

She said taxation is dynamic and would require periodic review as new economic activities and administrative challenges emerge.

Plans are already being discussed for a first Finance Act in 2027, with some existing provisions and modification orders expected to require review following the introduction of the new tax framework.

This is significant because tax reform is rarely a one-time exercise. As businesses change, technology develops and new forms of economic activity emerge, tax rules must also evolve.

The bigger question: can Nigeria create one predictable tax environment?

Nigeria’s new tax architecture is clearly moving towards greater coordination.

The replacement of the former Joint Tax Board structure with the Joint Revenue Board has expanded the institutional focus towards harmonising revenue administration across federal, state and local governments. At its April 2026 meeting, the JRB described the reform as a structural shift intended to harmonise revenue administration, improve inter-governmental coordination and strengthen taxpayer protection.

The JRB has also been active in developing national guidance under the new framework, including the 2026 Personal Income Tax Guidelines and other measures aimed at creating greater consistency in tax administration.

But legislation and guidelines can only go so far.

The real test will be what a trader in Kano, a manufacturer in Ogun, a technology company in Lagos or a distributor operating across several states actually encounters when dealing with revenue authorities.

If businesses continue to face substantially different levies and collection practices from one jurisdiction to another, the promise of a simpler tax system could remain incomplete.

The African Tax Review view

Nigeria’s tax reform is therefore entering a less obvious but equally important phase: implementation at the sub-national level.

The federal government can introduce a modern tax framework, but businesses will judge the reform by how consistently it is applied.

For taxpayers, harmonisation should mean more than reducing the number of taxes on paper. It should translate into fewer overlapping demands, clearer obligations, digital payment channels, predictable enforcement and less administrative friction.

For government, the opportunity is equally important. A more coordinated system could improve compliance and revenue collection without necessarily increasing the burden on businesses that are already within the tax net.

The challenge now is ensuring that every state moves in the same direction.

Because if Nigeria wants a tax system that is easier to understand, easier to comply with and easier to administer, tax reform cannot stop at Abuja.