There is something interesting happening in Nigerian business WhatsApp groups right now.
Someone drops a post about the 2025 Tax Act. Immediately, 40 replies. Confusion. Worry. A few angry voice notes. Someone says their accountant told them one thing. Someone else says their accountant said the opposite. Then the conversation moves on and everyone goes back to business as usual — because what else do you do when you don't know what you're supposed to do?
Lots of fear. Very little clarity. And in that gap, most business owners are just doing nothing — and hoping it doesn't apply to them.
That is the honest reality of where most Nigerian small business owners are right now with the new tax law. Not in denial exactly. Not informed either. Just… waiting. Hoping it doesn't apply to them. Or quietly moving their business income into a personal account and telling themselves that should sort it.
It won't. But we'll get to that.
First — What's Actually Happening
The Finance Act 2025 (what most people are calling the 2025 Tax Act) is real, it is coming, and the awareness campaign around it has been loud. The government has made sure you've heard about it.
What they haven't done as well is explain it in a language that means anything to the woman selling fabrics in Balogun, the man running a noodles spot in Surulere, or the tailor in Yaba with 12 active orders and 4 clients who still owe her balance.
So here is what we know, in plain terms:
The government is tightening how tax — particularly VAT and income tax — is collected from businesses. The threshold for who needs to be paying attention has come down. And the expectation is that more businesses, including smaller ones, will be registered, compliant, and remitting.
That's the short version.
Who Should Actually Be Worried
Not every business owner needs to lose sleep equally over this. But two types of businesses are in the most exposed position right now:
Traders and retailers with high cash turnover. If your shop moves a lot of stock — even if your personal profit at the end of the month feels small — the volume of transactions is what matters. A market trader who moves ₦2 million worth of goods a month but earns ₦150,000 in margin is still processing ₦2 million. That gap between what flows through your business and what you actually keep is something you need to be able to explain clearly if asked.
Manufacturers and producers. If you're making something — food, clothing, furniture, cosmetics, anything — you're at a point in the supply chain where tax obligations become more complex. Raw materials, value added during production, final selling price — each of those stages has implications.
There's also a specific situation worth flagging: businesses that have high cash inflow but only earn commission. Think of an agent or wholesale distributor who receives large payments on behalf of someone else and passes most of it on. Your actual income is the commission. But if your account is showing multi-million naira inflows regularly and you can't demonstrate that clearly, it looks very different on paper to how it feels in your pocket.
The Personal Account Move Is Not a Strategy
Let's address this directly because it's happening more than people admit.
Some business owners, when they heard about the new tax requirements, quietly started routing business income through personal accounts. The thinking is: if it doesn't look like a business, maybe it won't be treated like one.
This approach has two problems.
The first is practical. The CBN and FIRS have been sharing data for longer than most people realise. Large, regular inflows into a personal account — especially if they're coming from multiple business names or commercial transactions — do get flagged. The account name being personal doesn't make the transaction pattern personal.
The second is strategic. Businesses that can't demonstrate clean financial records when it matters — when they want a loan, when they want to partner with a bigger company, when they want to apply for a contract — pay a price for that invisibility. Hiding from tax is also hiding from opportunity.
What Is Actually VAT-Exempt? (More Than You Think)
Part of the reason so much fear exists around VAT is that most business owners assume it applies to everything they sell. It doesn't.
Under the Nigerian VAT Act, the following are exempt from VAT entirely:
- Basic food items — unprocessed agricultural produce, grains, tubers, fruits, vegetables, nuts, livestock, and poultry
- Medical and pharmaceutical products — drugs, medical equipment, and healthcare services
- Educational materials — books, newspapers, magazines, and educational services
- Baby products — food, medication, and products specifically for infants
- Agricultural equipment and inputs — fertilisers, veterinary medicine, farming machinery
- Exported goods and services — if you're selling outside Nigeria, VAT generally does not apply
- Commercial vehicles and public transport
So if you're selling raw foodstuff at a market — you're likely exempt. If you're a pharmacist or a school supplies retailer — largely exempt. If you're a manufacturer exporting finished goods — exempt on those exports.
Where VAT does apply is on processed goods, most retail products, professional services, and anything that isn't specifically listed as exempt.
The practical question to ask yourself:
Is what I sell on the exemption list? If yes, you don't need to charge your customers VAT. If no, you should be collecting it and remitting it — not absorbing it from your own margin.
When in doubt, a registered tax consultant can give you a clear answer for your specific business in about 30 minutes. It is worth that conversation.
Company Income Tax — Here's the Part Most People Don't Know
All the noise around the 2025 Tax Act has many small business owners convinced that government wants a cut of whatever they're making. For most of them, that fear is not accurate — at least not when it comes to Company Income Tax.
Here is the actual structure:
| Annual Turnover | Company Income Tax Rate |
|---|---|
| Below ₦25 million / year | 0% — Fully Exempt |
| ₦25 million – ₦100 million | 20% |
| Above ₦100 million | 30% |
If your business turns over less than ₦25 million a year — roughly ₦2 million a month — you pay zero Company Income Tax. Nothing. That covers the vast majority of micro and small businesses in Nigeria.
This is not a loophole. It is the law, specifically designed to protect small businesses from the tax burden that larger companies carry.
The trader selling in Balogun market, the tailor with a small studio, the food vendor with a loyal customer base — most of these businesses are legally exempt from CIT and will remain so unless they grow past that threshold.
The fear that every naira of your profit is at risk is not the reality. But the fear that none of this applies to you and you can ignore it entirely — that's also not the reality.
What this means practically: the government's concern at the small business level is less about income tax and more about VAT registration and remittance for businesses that are above the VAT threshold — and ensuring that businesses growing into the medium tier are filing appropriately.
The One Thing You Should Actually Do Right Now
If you've been waiting for someone to tell you one concrete thing to do, here it is:
Find out if VAT applies to your products or services.
Not everything is subject to VAT. If you're selling something that attracts VAT and you haven't been collecting it from customers, you have two choices: absorb it yourself (which cuts your margin) or start adding it to your prices going forward. Neither option is painless. But the earlier you know which situation you're in, the earlier you can make a plan.
If you're VAT-registered or above the threshold that requires you to be, you should also know that VAT isn't money you keep — you're collecting it on behalf of the government and remitting it. The sooner your records reflect that clearly, the better.
This is not a call to panic. It is a call to know your own position.
On Enforcement — Let's Be Honest
Will FIRS show up at every small business in Nigeria next year? No. Realistically, enforcement is going to start broad and land hardest on medium-sized businesses first — the ones big enough to have a paper trail but not big enough to have lawyers and accountants who make compliance investigations complicated.
Very small businesses will likely exist in a grey zone for longer. But "longer" is not the same as "forever," and the businesses that get ahead of this — even partially, even just by keeping cleaner records — will be in a much better position when the net widens. Because it will widen.
The government is not running an awareness campaign this loud because they plan to do nothing. They're casting wide. And they're waiting to see who bites.
The Honest Takeaway
You don't need to become a tax expert. You don't need to be perfect. But you do need to be able to answer three questions:
- What is my business actually earning — not revenue, actual profit?
- What flows through my accounts and can I explain it clearly?
- Does VAT apply to what I sell, and am I handling it correctly?
If you can answer those three questions clearly, you are already ahead of most Nigerian business owners right now.
The fear is understandable. The confusion is real. But staying in the dark costs more in the long run than doing the work to understand your position.
Start there.
This post is written for informational purposes and reflects general observations, not professional tax advice. Tax laws are subject to change and the thresholds and exemptions described here are based on the Finance Acts as understood at the time of writing. For guidance specific to your business situation, speak with a registered tax consultant or accountant.