Nigeria's Tax Reform Aims to Reduce Inflation to 15% by 2024

Nigerian Presidential Adviser Taiwo Oyedele has asserted that the government's proposed tax overhaul will help curb inflation by lowering costs for most households, despite criticism that it may worsen economic hardship. Following the elimination of a petrol subsidy and two currency devaluations, President Bola Tinubu is focusing on tax reform, aiming to reduce inflation from 34.8% to 15% this year. The plan includes increasing the Value-Added Tax (VAT) to 12.5% by 2026, while exempting essential goods—such as food and medicine—which account for 82% of household spending, from VAT. Oyedele claims that most households will see a decrease in prices due to these exemptions, although critics warn that the VAT hike may stifle consumer spending. Nigeria's current tax-to-GDP ratio is around 10.8%, one of the lowest globally, necessitating reliance on borrowing. Despite the anticipated drop in VAT revenue of 30% to 40%, Oyedele maintains that the overall goal is to improve compliance and align with global tax standards.