FG introduces 1% tax on informal businesses, outlaws cash collection

THE federal government has officially prohibited the collection of taxes in cash and the use of roadblocks to enforce tax payments in Nigeria’s informal sector.

The move was formalised in the newly issued presumptive tax regulations and implementation guidelines, unveiled on Tuesday in Abuja.

Executive Secretary of the Joint Revenue Board (JRB), Mr Olusegun Adesokan, explained that the framework is intended to curb coercive, fragmented, and non-transparent tax practices, particularly at state and local levels.

“It completely bans cash-based tax collection and prohibits roadblocks set up for the purpose of collecting taxes,” Mr Adesokan said during the signing ceremony.

He emphasised that the regulations aim to promote fairness and transparency in taxation, with a particular focus on traders, artisans, and other informal sector participants.

Under the new guidelines, nano and small enterprises with annual revenues of N12 million or less are exempt from the presumptive tax.

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For all other informal businesses, the regulations set a tax rate of 1 percent of turnover. The framework also encourages operators to adopt digital payment platforms for tax remittance, reducing reliance on cash transactions.

The guidelines provide a standardised structure for subnational governments to levy taxes on informal commerce while integrating operators into the formal economy via a tax identification system.

Transition from policy to implementation

Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, described the signing as the next step in moving the 2025–2026 tax reforms from legislation to operational practice.

“With this framework, we are shifting from policy approval to structured implementation, ensuring reforms are applied fairly and transparently,” he said.

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Edun stressed that the objective is not to increase tax rates but to broaden the tax base so that contributions are equitable across the economy. He noted that the reforms were designed in collaboration with the JRB to ensure consistency between federal, state, and local governments. An ombudsman mechanism will oversee implementation to safeguard fairness.

Chairman of the National Tax Policy Implementation Committee, Mr Joseph Tegbe, called the regulations a move from theoretical policy toward practical execution.

He highlighted that while over 80 percent of Nigeria’s workforce operates in the informal sector, its contribution to structured public revenue has historically been limited due to systemic inefficiencies. The new framework, he said, seeks to replace arbitrary practices with a transparent and disciplined approach.

Tegbe concluded that the committee would actively coordinate with tax authorities to ensure smooth rollout and compliance with the new rules.