(Ecofin Agency) - Nigeria is set to overhaul its tax system by reducing corporate taxes and removing value-added tax (VAT) on essential goods such as food and education. This move aims to support households, attract investors, and control inflation, though it remains to be seen if these changes will ease the strain on the struggling private sector.

Taiwo Oyedele (pictured x), head of the Presidential Committee on Fiscal Policy, announced that the government intends to lower corporate tax rates within the next one to two years. Speaking at the 2024 Corporate Forum in Lagos, organized by Access Holdings, Oyedele explained that the goal is to relieve pressure on businesses while improving tax collection efficiency.

Currently, large companies in Nigeria, earning over 100 million naira, pay a 30% corporate tax. Medium-sized businesses, with revenues between 25 million and 100 million, pay 20%, while small businesses are exempt. However, amid economic challenges, the government hopes that lowering these rates will attract foreign investment and boost local activity.

The government also plans to eliminate VAT on essential items such as food, education, and transportation. This reform is expected to benefit Nigerian households struggling with high inflation. Oyedele noted that removing VAT on these goods should encourage production and help lower prices. Another key reform is allowing companies to reclaim VAT credits on investments, further reducing their costs.

These tax reforms come at a time of increased corporate tax revenue in Nigeria. According to the National Bureau of Statistics (NBS), corporate tax receipts surged by 150% in the second quarter of 2024, reaching 2.47 trillion naira ($1.5 billion). This spike is largely due to an 87% increase in contributions from foreign companies, which benefited from the naira's devaluation following the unification of exchange rates.

Meanwhile, VAT revenue also soared by 99.82% year-on-year, hitting 1.56 trillion naira ($950 million) in the second quarter of 2024. Despite these gains, many local businesses are still struggling to cope with the country's economic shocks.