The Presidential Committee on fiscal policy and Tax Reforms, led by Taiwo Oyedele, has announced that Nigerians earning less than ₦250,000 per month will be exempted from paying personal income tax.

The move, which is part of the government’s broader economic reform plan, aims to ease financial pressure on low-income earners while simplifying Nigeria’s notoriously complex tax system. If implemented effectively, it could provide tangible relief to a struggling population while also aligning with global best practices in progressive taxation.

A break for the bottom 90 per cent

Data from the Nation Bureau OF Statistics (NBS) shows that over 90 per cent of workers in Nigeria earn below ₦250,000 monthly. Meaning that this is not just a small tweak but a game-changing shift that affects a majority of the country’s workforce.

Income tax before now was typically deducted from all formal workers, regardless of how little they earned. In a country where minimum wage stands at ₦70,000, this blanket taxation system disproportionately burdened the poor.

Under the new framework, we can see now that income earners who fall beneath the ₦250,000 monthly threshold will be completely exempted from Pay-As-You-Earn (PAYE) deductions. This includes entry-level civil servants, junior staff in private firms, and the large informal sector slowly entering the tax net.

Also Read: How can the Nigeria Tax Bill 2024 scale through a divided parliament and ponderous governors worried about their money?

Boosting take-home pay. But, where is the catch?

The immediate benefit is straightforward for Nigerians – more money in their pockets at the end of each month. A worker earning ₦200,000 monthly may now retain an extra ₦5,000–₦10,000 that would have otherwise gone to the taxman. This would make a significant difference in households already stretched thin by the economy.

However, this leaves room for questions by economist wondering how the government plans to balance this fiscal generosity. If a large per cent of formal workers are exempt from tax, what happens to the already fragile internal revenue system? Nigeria’s tax-to-GDP ratio is already one of the lowest in the world.

Taiwo Oyedele, on Thursday, described the newly signed tax laws as “pro-poor,” saying they will ease the burden on low-income earners, small business owners, and everyday Nigerians.

Workers who have watched their payslips shrink every month under the weight of deductions and particularly hyperinflation wrought by the policies of the current government, this policy will be seen as a small but significant shift.

What happens next?

Implementation would require collaboration between the Federal Inland Revenue Service (FIRS), state revenue boards, and employers. There is also the challenge of enforcing it in the large and loosely regulated informal economy.

But if passed and enforced, it could be one of the most fiscal changes in decades, especially for a nation with one of the world’s youngest and lowest earning populations.

As always, the devil will be in the details but for now, the directive is clear: Low-income earners should keep their money. And with that, Nigerians on the lower rungs of the income ladder may finally be able sigh in relief, now that it appears the poor can finally breathe.

Anita Chinedu