By Beatrice Gondyi
The Federal Government has initiated the next phase of Nigeria’s landmark tax overhaul, with the Minister of Finance inaugurating an inter-ministerial committee to draft a new VAT Modification Order, and giving the team just six weeks to deliver.
At a ceremony held Thursday at the Ministry’s headquarters in Abuja, Mr. Taiwo Oyedele charged the 10-member committee with producing a modern VAT framework that aligns with the Tax Reform Acts, which took effect on 1 January 2026.
“The Tax Reform Acts represent the most comprehensive reform of Nigeria’s tax system in decades,” Oyedele told stakeholders gathered at the event. “They simplify our tax laws, improve certainty, enhance competitiveness, protect vulnerable Nigerians, and position our economy for sustainable growth.”
But the Minister was careful to distinguish the committee’s task from the previous regime. The old VAT Modification Order, he noted, has been superseded by the new legislation. The committee is not to replicate it, but to craft what he described as a “modern, coherent, and forward-looking” order that complements the new law.
The assignment, however, is not without its challenges. The committee must balance competing interests—revenue generation against the need to stimulate industrialisation, investment, and exports. It must also navigate international obligations while protecting food security and supporting the energy transition.
To guide the process, Oyedele outlined five principles: fidelity to the law, growth-oriented design, clarity and certainty, broad stakeholder engagement, and international benchmarking.
“This Order should promote industrialisation, investment, exports, innovation, food security, and energy transition, without undermining the integrity of the VAT system,” he stated.
The committee brings together representatives from the Federal Ministry of Finance, Nigeria Revenue Service, Nigeria Customs Service, Federal Ministry of Industry, Trade and Investment, Joint Revenue Board, Manufacturers Association of Nigeria, Tax Advisory Committee, and Tax Justice and Governance Platform.
“The membership of this Committee brings together deep knowledge, expertise, and experience from across government and the private sector,” Oyedele noted, underscoring the administration’s push for inclusive policy formulation.
By the end of its six-week mandate, the committee is expected to submit a draft VAT Modification Order 2026, detailed schedules of exempt and zero-rated supplies with corresponding HS Codes, implementation notes, and a stakeholder consultation report.
The Tax Reform Acts, which came into force on 1 January 2026, repealed several existing tax laws and consolidated them into a unified framework. While the VAT rate remains at 7.5%, businesses can now recover input VAT on all purchases, including goods, services, and capital assets, provided these inputs are used to produce taxable goods or services.
The reforms also expand the scope of zero-rated items to include basic food items, pharmaceutical products, educational materials, fertilisers, and non-oil exports.
In a significant shift, the Federal Government’s share of VAT revenue has been reduced from 15% to 10%, while allocations to states and local governments have increased to 55% and 35%, respectively, a move aimed at a fairer, performance-based distribution.
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