FG to forgo N1.4 trillion in revenue with CIT reduction

From Adanna Nnamani, Abuja

The Federal Government will forgo an estimated N1.4 trillion in revenue in 2026 as it lowers the Corporate Income Tax (CIT) rate from 30 per cent to 25 per cent, as part of the newly consolidated tax reform framework.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, revealed this during a media workshop on the new tax laws on Friday, noting that the reduction is aimed at stimulating economic growth rather than introducing new taxes.

Oyedele explained that the decision was made to encourage a more business-friendly environment, with the belief that sustainable government revenue can only come from a growing economy. Data from the Federal Inland Revenue Service (FIRS) shows that CIT collections reached approximately N8.6 trillion in 2024. With the reduction, the government will lose about N1.4 trillion annually in tax receipts. “By removing 5% from 30%, you are essentially giving N1.4 trillion to businesses,” he said.

He stressed that the tax reforms focus on reducing the cost of doing business in Nigeria and creating jobs, rather than increasing tax rates. “The fastest way to generate revenue is to let the economy grow. If I’m unemployed, you can have the best personal income tax law in the world, but you can’t collect tax from me,” he added.

In addition to the CIT reduction, Oyedele highlighted changes to the Value Added Tax (VAT) system, which will take effect from January 2026. Under the new framework, businesses across various sectors will be able to claim VAT input credits on expenses that were previously excluded, such as assets, overheads, and services. This change will significantly reduce the hidden VAT costs that businesses typically pass on to consumers.

For instance, Oyedele used the example of bread. Currently, bread is VAT-exempt, meaning bakers cannot recover VAT paid on inputs like sugar, butter, or equipment, making the product more expensive for consumers. Under the new VAT framework, bread will be zero-rated, allowing bakers to charge VAT at 0% while receiving full refunds on VAT paid for production inputs. “What that means is the cost of producing bread will come down,” Oyedele said.

While the reforms will lead to short-term revenue loss for the government, Oyedele insisted that the trade-off is necessary for long-term economic growth.