By the start of 2026, the Nigerian economy had crossed a critical psychological threshold. For millions of households, survival, not prosperity, had become the central economic concern. Food prices climbed relentlessly, transportation costs ballooned, electricity tariffs rose, and the naira’s weakness continued to hollow out purchasing power. Wages, meanwhile, remained stubbornly stagnant. In one word: Nigeria’s cost-of-living crisis swirl.
This is the economic terrain into which President Bola Tinubu’s administration has launched Nigeria’s most aggressive fiscal overhaul in decades. Framed as reform, sold as necessity, and defended as inevitability, the new tax regime arrives not as a technocratic adjustment but as an additional burden on a population already stretched to its limits.
The question confronting Nigerians in 2026 is no longer whether reform is needed, but who bears the cost, and who decides how much pain is acceptable.
Reform in the Middle of Hardship
The removal of fuel subsidies unleashed a cascade of price increases that reverberated through every sector of the economy. Transport fares surged, food inflation accelerated, and informal businesses, already operating on thin margins, struggled to survive. Electricity tariff hikes followed, further eroding household incomes and raising production costs. Currency policy adjustments compounded the crisis, making imports more expensive and local substitutes scarcer.
Rather than pause to stabilize living conditions, the government pressed ahead with sweeping tax reforms. For many Nigerians, the timing alone felt punitive: a state demanding more at the precise moment its citizens had less to give.
A New Tax Regime, Old Trust Deficit
The overhaul rests on four major laws that replace Nigeria’s chaotic tax framework with a centralized, digitally monitored system. On paper, the logic is compelling: fewer taxes, better enforcement, broader compliance. In reality, centralization without trust risks becoming coercion by another name.
Progressive tax bands and exemptions for low-income earners are cited as evidence of fairness. Yet the lived experience tells a different story. Middle-income Nigerians comprising, civil servants, professionals, and small traders, are watching their take-home pay shrink as inflation bites and long-standing reliefs disappear. What remains is a widening gap between what the state demands and what it delivers.
“Widening the Net” or Tightening the Noose?
Officials insist the reforms are about widening the tax net rather than increasing the burden. But a net cast over a struggling economy does not magically become lighter because it is broader. When energy costs soar, food prices spike, and wages lag inflation, taxation, no matter how elegantly designed, feels punitive.
The promise that higher revenue will eventually translate into better schools, hospitals, and infrastructure rings hollow in a country where decades of oil wealth failed to produce durable public value. Nigerians have heard this argument before. Each time, they were asked to be patient. Each time, patience yielded diminishing returns.
VAT and Regional Fault Lines: Old Battles, New Weapons
No element of Tinubu’s tax reset better exposes Nigeria’s unresolved national question than the proposed restructuring of the Value Added Tax (VAT) sharing formula. Presented by the government as a neutral, efficiency-driven move toward derivation, the reform has instead resurrected the ghosts of Nigeria’s most bitter fiscal conflicts, conflicts never resolved, only postponed. By tilting VAT allocation more decisively toward where consumption and economic activity are recorded, the reform overwhelmingly favours Lagos and a handful of commercially dominant states in the South-West. Lagos’s outsized contribution to VAT revenue is frequently cited to justify this shift. The logic is straightforward: where revenue is generated, revenue should remain.
But Nigeria’s history warns that straightforward logic often produces dangerous outcomes. In the First Republic, a strong derivation principle allowed regions to retain up to 50 percent of revenues from cocoa, groundnuts, and palm produce. That system collapsed not because derivation was inefficient, but because widening regional disparities turned it into a political weapon. The fiscal tensions it generated contributed to the instability that ended civilian rule.
After the civil war, military governments centralized revenue sharing not out of ideological preference, but because national survival required redistribution. Oil revenues were pooled to hold a fractured country together, not to reward efficiency. The VAT debate now retraces that path, without the trauma that once forced compromise.
Many Northern states, heavily dependent on VAT allocations to fund basic services, see the reform not as fiscal federalism but as fiscal punishment. Their argument is blunt: productivity cannot be rewarded fairly in a country where productivity itself has been shaped by decades of uneven federal investment, insecurity, and policy bias. When ports, rail lines, industrial clusters, and financial infrastructure are concentrated in one region, derivation ceases to be neutral, it becomes structural exclusion.
The echoes of the Niger Delta struggle are unmistakable. For decades, oil-producing communities watched wealth flow to Abuja while bearing the environmental and social costs of extraction. Today, roles appear reversed: commercially dominant states demand to keep what they generate, while poorer regions warn that redistribution, the glue of the federation, is being quietly dismantled.
The federal government’s response, that states should simply “grow their economies,” rings hollow in regions battling insurgency, banditry, collapsing education systems, and mass poverty. Growth is not summoned by rhetoric; it is enabled by security, infrastructure, and human capital, public goods that require funding in the first place. History is unambiguous: Nigeria’s most destabilizing crises often begin as revenue disputes disguised as technical reforms. When groups feel fiscally cornered, resistance follows, political, legal, and sometimes worse. Wether anyone agrees or not, a VAT regime that sharpens inequality without robust equalization mechanisms is not reform, it is deferred instability. The question therefore becomes, wether Nigeria is prepared for another combustive civil disorder?
The Lagos Model Goes National
The reforms unmistakably bear the imprint of the Lagos model that is notorious for its centralized authority, digital surveillance, and uncompromising enforcement. In Lagos, this model thrived on a dense commercial base and a large formal sector. Nationally, it risks flattening Nigeria’s economic diversity into a one-size-fits-all template.
Equally corrosive is the perception, fair or not, that fiscal power is increasingly concentrated within a narrow regional and ideological circle. In a federation where legitimacy depends on balance as much as performance, perception alone can be politically fatal.
A Dangerous Gamble
The tax reforms underpin President Tinubu’s ₦58 trillion 2026 Budget of Consolidation, a document that demands sacrifice now in exchange for promises later. But for Nigerians already suffocating under inflation, those promises feel remote and uncertain. This is the administration’s gamble: that Nigerians will endure sustained hardship on faith. Yet faith is precisely what the Nigerian state has depleted over decades of broken promises, opaque governance, and squandered revenues. Moreover, who shall have faith in your promises when it amounts to telling an economically distressed populace to fast while you, your family members and a few rogue elite feast?
Tax reform without visible accountability is extraction.
Ultimately, the success of Tinubu’s tax reset will not be decided in policy papers or revenue charts. It will be decided in markets, transport hubs, and households where people calculate daily whether survival is still possible.
Without transparency, fairness, and immediate, visible improvements in public services, this reform risks doing more than failing. It risks hardening public cynicism, weakening compliance, and pushing an already fragile social contract toward a breaking point. As it is often asserted, Nigeria does not lack reform ideas. What it lacks is a state that convinces its citizens that reform is being done with them, not to them.
