Nigeria’s new 25 percent personal income tax rate has sparked debate over whether workers will pay more or less tax under the revised system, following Senator Ireti Kingibe’s claim that drew a rebuttal from the Senate.
The disagreement raises a broader question about how Nigeria’s tax structure compares with those of other African economies and whether headline rates tell the full story of what workers actually pay.
Adekunle Ishola, a human resources manager and payroll expert, said the reduction became visible when employers processed January salaries under the revised tax bands.
‘More than 65 percent of our workforce paid less tax in January compared with December,’ Ishola said.
He said employers initially faced technical challenges adjusting payroll systems to the new structure but resolved them after consulting tax advisers, enabling implementation within the first month.
The experience offers a more immediate way to assess the reforms than comparing tax rates alone. While Nigeria’s top personal income tax rate is 25 percent, below the maximum rates in South Africa, Kenya, and Uganda, what matters to workers is how the rules affect the amount reaching their bank accounts.
Melville Ogbeama, a human resource specialist, said the changes were designed to reduce the tax burden on low- and middle-income earners and increase disposable income. He said the relief could support household consumption as workers deal with elevated living costs.
Under the Nigeria Tax Act 2025, which took effect on January 1, 2026, the first N800,000 of chargeable income is taxed at zero percent. The next N2.2 million attracts 15 percent, followed by rates of 18, 21 and 23 percent. The top rate of 25 percent applies to chargeable income above N50 million.
Ayo Akinduyite, a tax and regulatory thought leader, said the new structure raised the threshold at which the highest rate applies compared with the previous regime.
‘The old 24 percent top rate began biting at just N3.2 million, capturing middle-income professionals. The new 25 percent top rate is genuinely a rate on the wealthy,’ Akinduyite said in a LinkedIn post.
The law also provides rent relief of 20 percent of annual rent paid, capped at N500,000, alongside eligible deductions such as pension contributions and life insurance premiums. Employees earning the national minimum wage are exempt from personal income tax.
These provisions mean that a headline rate does not tell workers how much tax they will pay. The tax bands apply progressively to chargeable income after eligible deductions and reliefs, so the final liability depends on an individual’s circumstances.
Nigeria’s top rate is lower than South Africa’s 45 percent, Kenya’s 35 percent, and Uganda’s 40 percent for resident individuals. However, the comparison does not automatically mean Nigerian workers pay less tax, because each country has different thresholds, income bands, and deductions.
The Presidential Fiscal Policy and Tax Reforms Committee said that about 98 percent of workers in the public and private sectors were expected to pay less or no PAYE or personal income tax under the new laws. The claim was a projection, while Ishola’s account provides an example of the reported experience within one workforce. It does not establish the reforms’ national impact.
The implications extend to state finances. States and the Federal Capital Territory collected N2.64 trillion in Pay-As-You-Earn (PAYE) in 2025, up from N1.88 trillion in 2024, according to figures attributed to the National Bureau of Statistics. PAYE accounted for about 69.5 percent of state tax revenue of N3.79 trillion and roughly 51 percent of total internally generated revenue of N5.15 trillion.
Those figures predate the new tax regime, so they cannot show how the reforms will affect future collections. But they underline the importance of balancing workers’ tax burdens with governments’ need for reliable revenue.
Opeyemi Ajetunmobi, a capital markets strategist, said tax collection should be considered alongside the economy’s capacity to generate productive businesses and well-paid jobs.
‘Higher collections matter, but their long-term value depends partly on what they enable governments and businesses to achieve,’ Ajetunmobi said in an October post.
With PAYE generating N2.64 trillion for states and the FCT in 2025, the reform has implications beyond workers’ monthly salaries. If the new rules reduce tax bills for many earners, the challenge for state governments will be to maintain revenue without placing a heavier burden on those who earn less.