Nigeria’s efforts to simplify its tax system face an implementation challenge as 67.2 percent of households encounter informal levies, raising concerns that overlapping charges could undermine the relief promised by the country’s new tax laws.
The finding, contained in the Nigeria Economic Summit Group’s (NESG) Tax Perception Survey 2026, highlights the persistence of informal collections even as the government seeks to harmonise taxation, reduce multiple levies, and improve compliance under the new tax regime.
For businesses, the burden extends beyond formal tax obligations, with 13.9 percent of surveyed firms reporting exposure to illegal charges. The persistence of these payments could increase operating costs, weaken business margins, and discourage smaller enterprises from entering the formal tax system.
The survey, which covered 18,000 working adults and 9,097 firms across the 36 states and the Federal Capital Territory between July and September 2026, also found that poor public services and high taxes were the most frequently cited reasons for tax avoidance among households that had encountered informal levies.
About 35 percent identified poor public services, while 18.6 percent cited high taxes, suggesting that taxpayer resistance is linked not only to the amount demanded but also to the perceived value of public services received.
Oluwadamilare Oladele, managing director of a Lagos-based fintech company, said many small businesses viewed formal taxes as an additional burden layered on top of existing informal payments.
“If citizens are encouraged to enter the formal tax net, the government must also ensure they are not simultaneously subjected to informal levies that often cost more than formal taxes,” Oladele said. “For many small businesses, the problem is not taxation itself, but double extraction.”
His concerns reflect the experiences of small business operators in Lagos, where payments to state revenue authorities, local governments, and other collectors can create uncertainty over how much businesses are expected to pay.
Omolara Bamidele, who has operated Tobshe Hair salon in Lagos for more than nine years, said officials assessed her business at N150,000 in November last year under a presumptive tax arrangement. She negotiated the amount down to N80,000 but said she still did not know how the initial assessment was determined.
Presumptive taxation allows authorities to estimate tax liabilities for businesses that do not maintain formal accounting records, rather than relying on declared profits.
For Nneka Eze, who operates a beauty shop in Lagos, payments include N1,500 monthly for waste collection and N10,000 annually for local government permits. She said the amounts demanded for some permits could vary and were sometimes negotiated with collectors.
Tax experts say presumptive taxation does not automatically eliminate other statutory obligations.
Oluwafemi Odusote, a tax expert, said businesses could still be required to pay other applicable charges depending on their activities and the relevant regulatory framework.
“They will pay other rates if it applies to their business sector,” Odusote said. “If I have a bar where I serve beer, I will still pay my personal income tax. And the local government will still come and tell us to pay licence.”
This distinction highlights a challenge for the government’s tax harmonisation drive. While the new framework seeks to simplify taxation and reduce overlapping obligations, state and local governments retain powers to impose authorised charges within their respective areas of responsibility.
The NESG survey also found that 74.4 percent of households recognised government’s right to tax, although average trust in tax authorities stood at 2.01 out of four.
Among firms that had been asked to file returns or provide records in the preceding year, 95.8 percent reported complying. However, businesses that did not comply cited high tax burdens, cash-flow constraints, multiple taxes and levies, and poor public services among their reasons.
The findings suggest that improving compliance will require more than expanding the tax net. Clearer assessment procedures, better coordination among revenue authorities and stronger enforcement against unauthorised collections will be necessary to make the system more predictable for businesses.
As Nigeria seeks to widen its revenue base, the challenge will be ensuring that tax reform translates into fewer overlapping demands and a clearer understanding of what households and businesses are legally required to pay.
Ayomide Odunlami is a Tax Reporter at BusinessDay, covering Nigeria’s tax reforms, compliance trends, and government revenue strategies. She reports on how evolving tax policies affect businesses, investors, and the broader economy, providing clarity on complex regulatory issues through data-driven journalism.
