The Federal Government of Nigeria has made clarification regarding the new tax regime that commenced on January 1, 2026, emphasizing that the policy exempts the lowest earners from personal income tax (PIT).
Tanimu Yakubu, Director-General of the Budget Office of the Federation, addressed the public on Friday, stating that the criticisms of the policy were based on selective accounting rather than the legal structure of the reform.
The 2026 tax reforms were introduced by the presidency to modernize the system and increase non-oil revenue.
The new framework establishes a ₦800,000 annual tax-free threshold, meaning the first ₦800,000 earned by any individual attracts a 0% tax rate.
Meanwhile, contributions to pensions and health insurance are classified as deductions, not taxes. These contributions reduce a worker’s taxable income, and also push earners of up to ₦900,000 annually into the zero-tax bracket.
The government channels the tax to high-net-worth individuals, the digital economy, and non-compliant formal sector employers rather than taxing low-income earners.
The first N800,000 of annual income is taxed at 0 per cent. That is not a footnote. That is the hinge… The new tax structure explicitly protects low incomes- Tanimu Yakubu, Director-General, Budget Office of the Federation
The Federal Government stressed that the reform is designed to shield the poor and that pension and insurance payments are personal assets, not government levies.
Budget Office is charged to monitor the first quarter of implementation to ensure employers correctly apply the ₦800,000 exemption and do not over-tax low-wage staff.
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