New Laws Exempt State Bonds From Tax, Slashes Borrowing Costs – Oyedele
Nigeria’s incoming Nigeria Revenue Service (NRS) will exempt state government bonds from tax under new laws effective January 1, 2026, slashing borrowing costs and creating vital fiscal space for infrastructure, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, announced in Lagos.
Speaking at a recent briefing, Oyedele highlighted how the reforms transitioning from the Federal Inland Revenue Service (FIRS) also funnel full proceeds from electronic money transfer levies to states alongside a projected N4 trillion Value Added Tax (VAT) windfall.
“This is a unique opportunity for states to build resilience, close existing tax gaps and invest in infrastructure,” he stressed, urging governors to seize the chance for shared prosperity beyond mere survival.
Oyedele said the Nigeria Revenue Service (NRS), which becomes operational on 1st of January, 2026, under the new tax regime, after its transition from Federal Inland Revenue Service (FIRS), will offer more incentives to taxpayers in the new year.
To him, some of the tax reforms had already taken effect with the change of name from FIRS to NRS, although, these reforms fully becomes operational on the first day of next year.
The tax relief embedded in the new law, according to him, will, therefore create more jobs for Nigerians, especially the youths, who hitherto have been unemployed and stranded. Oyedele reaffirmed his belief that Nigerian employees, employers and businesses would benefit more from the new tax law.
The criticisms of the law by a cross section of Nigerians, he said, stemmed from ignorance of what the laws entail and how it will be of benefit to the country and the citizens.
Explaining the toxic nature of the old law, which is paving way for the new laws., he described it as complex and unconducive for growth.
Saying the new law addresses the issues of multiplicity of taxes and prodding taxing agencies in the old laws, Oyedele explained that, Nigeria had one of the highest tax burdens on businesses in the world, coupled with some craziest tax structure and systems.
Multiplicity of taxes has caused disruptions to many Nigerian businesses in the past, he said, adding that, ‘the picture you are looking at is exactly the type of tax system we have in Nigeria.’
“Some of it we inherited from our colonial masters before our independence and now we are passing it, so how is it supposed to work even the British that gave us has forgotten they have those versions of tax laws? And this has now became impediments to our growth and development in Nigeria.
“To start a small business is difficult, Medium size life is hard, Multinational cannot compete. So this is the reason why this new reform policy is formed to review all the obsolete tax laws and enacted new ones because we needed to address the issues of multiplicity of taxes and rampant taxing agencies.
“Not that we have many taxes that we collect but, we also have all manners of those who collect these taxes, including non state actors. We have one of the highest tax burdens on businesses in the world, we ranked amongst the top 10,” he pointed out.
He added that, “you will think, we are America or China but, this is us trying to find all the investments in the world to employ our young people to grace prosperity. It is also us with some craziest tax structure and system in the world. We taxed poverty.
“When TIN was launched in 2017, the Vice President was acting as the Acting President as at that time, and I was involved in the weight design and I was in the State House, And the then V.P read that 96 per cent of the income tax that people pay in Nigeria is collected from the low income earners.
“So you see, how does it make sense or how is it right that you taxed your most vulnerable citizens to finance government in a country where you already have wide income inequality. You have not even consider tax there, wide inequality and you now collect more taxes from the low income earners to further complicate their suffering.”
The new tax law billed for operation January 2026, he said, could also see States raking over as much as N4 trillion from Value Added Tax (VAT).. The new tax laws, which transfer the full proceeds of electronic money transfer levies to states and exempt state government bonds from tax, he said, would help reduce borrowing costs and create fiscal space.
“This is a unique opportunity for States to build resilience, close existing tax gaps and invest in infrastructure,” he stressed. Oyedele urged State governments to seize the opportunity provided by upcoming reforms to move beyond survival and ensure shared prosperity.
He equally clarified that the authority to recover unpaid taxes from bank accounts, commonly referred to as the ‘power of substitution’ is not new and already exists under Nigeria’s current tax laws as that power is in the current law, saying, ‘It has always been there. ‘
He added that, while it is legally possible for tax authorities to recover funds from bank accounts, it can only happen after an elaborate process backed by court decisions, stressing that, such measures are typically reserved for serious cases.
