The five percent charge on fossil fuel products in the new tax reform Act will impoverish more Nigerians and push more into abject poverty.
Despite the government excluding cooking gas {LPG},kerosene,clean or renewable energy products and compressed natural gas{CNG},more Nigerians will suffer with effective implementation of this policy.
The Country Director of ActionAid Nigeria, Dr Andrew Mamedu who disclosed this in an exclusive interview with VDCInsights said governemnt needs to take a second look at the law for the benefit of Nigerians.
Mamedu argued that for such a policy to start running in a year preceding a general election would be too rough for the ruling party, and could undermine its popularity,if it was in other civilised climes.
He stated ‘In summary, by my own take on the whole discussion is that the Tax Reform Act that will kick start effective 1st January, 2026, is not ripe for the present state of Nigerian Economy, given the current hardship in the land’
‘ I want the government to have a second thought on it. Who are the beneficiaries? How can it move the economic state of Nigerian forward?’
The ActionAid Nigeria Country Director asked ‘ Are these reforms timely and suitable for Nigeria’s economy? Affirmatively, there’s cautious optimism – but also valid concerns’.
He noted ‘The six months transition period is strategically timed to begin with the fiscal year, allowing stakeholders to adapt smoothly,pointing out ‘Analysts say the reforms – centered on fairness, consolidation, and transparency – could transform the Nigerian Economy, if executed effectively’
‘However, critics warn that raising VAT significantly (up to 12.5%) may stoke inflation and dampen consumer demand amid already fragile economic conditions.’
Mamedu argued that moreover, systemic challenges like insecurity, weak infrastructure, and governance inefficiencies could blunt the reforms’ positive impact.
He regrettablt stated that there are no signs so far that governemnt could reconsider this policy as there are ‘No signals suggesting a major rollback so far.’
The anti-poverty agency boss said ’The six-month lead-up aligns with global best practices and ensures smoother implementation. Modifications to certain provisions-such as VAT distribution-have already occurred during legislative review to address regional equity concerns. However, the reforms remain largely intact and likely to be implemented as planned.’
He pointed out that ‘states generating higher VAT revenues have been motivated by the new reforms as ‘The new VAT-sharing formula gives 30% of VAT collected to the generating states, compared to the previous flat or impression-based approach-rewarding states with strong economy activity.’
Mamedu however lauded some provisions of the tax Reform Act concerning general public and investors, saying there is now ‘Simplification (merging multiple tax laws), Unified Authority (Nigeria Revenue Service), digital tools, transparency reforms tax, Tax Ombudsman, and single TIN systems will reduce inefficiencies and boost investor confidence.’
On how can it move the economy state of Nigerian forward, he highlighted potential positives such as: ‘Increased disposable incomes for wage earners and vulnerable households;’growth of MSMEs, spurring job creation and formalization; greater tax fairness and improved revenue collection-helping to reduce over-reliance on oil and borrowing, and stronger investor sentiment from streamlined and transparent systems.
He noted that the reforms are not without possible risks like : ‘Inflationary Pressure: VAT hikes could stifle consumption and worsen living costs; lead to regional Inequality; distribution changes might disadvantage poorer, populous states in the north-unless mitigated.
Mamedu also highlighted execution challenges to include: ‘A cash-based, informal economy limits tracking; weak infrastructure and institutions could undermine reform effectiveness’
He stressed ‘Nigeria’s 2025 Tax Reform, starting January 2026, if implemented well, it could enhance revenue stability, reduce poverty, encourage entrepreneurship, and restore public trust. But mis-steps-especially amid economic fragility, could undercut these benefits or cause unrest.
On the way forward in case of execution challenges, he said : ‘If the tax reform do not favour the citizenry, policy-level actions could be employed; we could demand review and amendments, use democratic channels: petitions, town Halls, professional associations, and the National Assembly.
The Country Director called for targeted relief e.g. temporary VAT suspensions on certain goods, reduced levies for struggling sectors, push for phased implementation, pointing out that ‘If hardship spikes, we should urge government to roll out high-impact (like MSME tax relief) while delaying others(like VAT hikes) until inflation cools.’
He enjoined the government to ‘Leverage on fiscal federalism,pointing out that ‘State governments can create their own relief packages or subsides (for transport, electricity, farming) to cushion citizens’.
Mamedu also called for Citizen and Community Actions,organised through Civil Society groups like labour unions, business associations, and NGOs that will amplify voices and negotiate with government.
He equally called for participating in budget tracking, follow how tax revenues are allocated, expose waste or mismanagement, and use Media and Public for enlightenment.
Mamedu concluded by saying that the reforms can raise the living standards of Nigerians , but noted that if they worsen hardship, the immediate remedy is Citizen-led advocacy with Government flexibility, stressing that the key in the whole reforms is engagement before unrest-citizens must speak up early, present evidence, and demand adjustments rather than simply absorbing economic plan.
