Taiwo Oyedele—the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms—stressed that the new tax proposals would not reintroduce an inheritance tax. Speaking before the House of Representatives Committee on Finance, chaired by Hon. James Faleke Oyedele sought to clarify misunderstandings that have circulated in the media and among stakeholders. His remarks come amid an environment of robust debate over Nigeria’s evolving fiscal policies and the broader drive to streamline taxation, attract investment, and bolster government revenue.

Clarifying Misconceptions: Income Versus Inheritance

At the heart of the controversy lies Section 4, Subsection 3 of the Nigerian tax bill, which some critics interpreted as paving the way for an inheritance tax. Oyedele refuted this interpretation, arguing that the provision in question deals exclusively with family income. “If an individual owns a property and rents it out, they pay tax on the rent. Similarly, if a family owns a house and rents it out, should they not pay tax? If we exempt them, I guarantee you, all houses in Nigeria will suddenly become family houses, and nobody will pay tax,” Oyedele explained.

He emphasized the crucial distinction between income and inheritance. While inheritance pertains to assets, wealth, and cash passed on from one generation to the next, income refers to earnings derived externally, such as rent or business profits. According to Oyedele, the relevant tax provision is not a new imposition but a longstanding element of Nigerian tax law. “This provision exists in the Personal Income Tax Act, Section 2, Subsection 5, and it has been in our tax laws since independence,” he noted.

Oyedele went on to illustrate the practical implications of taxing family income. In cases where income is not attributable to a single family member, the tax is levied on the family as a whole—a practice that even extends to communities. For example, if a community owns a town hall and rents it out, the income generated is subject to taxation. This, he argued, is not an introduction of an inheritance tax but rather a continuation of established tax principles. He also recalled that an inheritance tax, akin to the military’s Capital Transfer Tax introduced in 1979, was repealed in 1996. “Since then, we have not, in any way, directly or indirectly attempted to bring it back. Moreover, this is a state government matter, not a federal government initiative. Why would we want to do that?” Oyedele asserted.

Addressing Investor Concerns and Free Zone Policies

The public hearing also tackled concerns raised by stakeholders in Nigeria’s free zones. Allegations had surfaced that approximately 70% of investors were withdrawing funds due to unfavorable policies. Oyedele dismissed these claims by shedding light on Nigeria’s monetary dynamics. He pointed out that “cash in circulation”—the physical currency held by Nigerians for everyday transactions—amounts to roughly four trillion naira. When placed in the context of Nigeria’s total money supply, which exceeds 100 trillion naira, these withdrawals appear negligible. Furthermore, with digital transactions reaching N1.08 quadrillion last year, Oyedele contended that there is no significant flight of capital from the country.

This debate over free zones touches on a critical issue in Nigeria’s industrial sector. Free zones are areas where investors benefit from a distinct tax regime designed to attract manufacturing and export activities. However, some free zone operators have been accused of manufacturing goods under preferential tax conditions and then selling these products within the customs territory—thereby competing unfairly with businesses that adhere to the standard tax code. Zach Adedeji, the Chairman of the Federal Inland Revenue Service (FIRS), criticized such practices, stating, “No responsible government will allow individuals who have either not read the law or have only read it halfway to initiate litigation or threaten to leave the country.” Adedeji stressed that allowing free zone entities to sell to the customs territory while evading standard tax liabilities would create significant economic distortions.

Adding another perspective, Francis Meshioye, President of the Manufacturers Association of Nigeria (MAN), acknowledged the government’s bold move in introducing the tax reform bills but expressed concerns over the lack of incentives for manufacturers producing for export. Meshioye highlighted that, unlike other countries, Nigeria currently permits unrestricted sales into Export Free Zones—a policy he believes should be capped. “No other country in the world, except Nigeria, permits such a policy,” he said, noting that Ghana, for example, allows only 30% of sales into the local market. The association has proposed that the allowable percentage should be capped at 25% to ensure a level playing field between free zone operators and traditional businesses. Meshioye also praised the government’s plan to reduce the corporate income tax, a move consistent with global trends aimed at boosting production and economic growth.

Historical Context and Global Comparisons

The debate over inheritance tax in Nigeria is not new. Historically, Nigeria did impose a form of inheritance tax through the Capital Transfer Tax, which was introduced in the late 1970s and later repealed in 1996. The repeal was hailed by many as a necessary step to stimulate investment and simplify the tax system. Critics of inheritance tax argue that such taxes discourage wealth accumulation and hinder the intergenerational transfer of assets—a view that has gained traction globally. In several developed economies, inheritance taxes have been either significantly reduced or eliminated altogether in favor of taxing income and capital gains, which are seen as more dynamic measures of economic activity.

Nigeria’s current tax reform initiative aims to modernize the tax system by aligning it with international best practices while addressing the unique challenges of its economy. The government’s stance, as articulated by Oyedele, is to continue taxing income—whether generated by individuals, families, or communities—without venturing into the contentious area of inheritance tax. This approach is intended to promote a stable and predictable tax environment that encourages investment, supports public revenue generation, and fosters economic growth.

Globally, many countries have grappled with the balance between generating tax revenue and maintaining an attractive investment climate. Nations like the United States and the United Kingdom have periodically revised their tax codes to eliminate or reduce inheritance taxes, shifting the focus instead to income and corporate taxes. Nigeria’s decision not to reintroduce inheritance tax can be seen as part of this broader trend, one that prioritizes economic dynamism and investor confidence over more onerous fiscal measures.

The Broader Fiscal Policy Environment in Nigeria

Nigeria’s tax reform bills are part of a comprehensive effort to overhaul the country’s fiscal policy and tax administration. The government has been working to widen the tax base, improve compliance, and leverage technology to enhance revenue collection. Initiatives such as digital tax payment systems, improved tax identification measures, and stricter enforcement of tax laws are central to this reform agenda.

The Federal Inland Revenue Service (FIRS) has been at the forefront of these efforts, seeking to reduce tax evasion and ensure that all segments of the economy contribute their fair share. By modernizing the tax system, Nigeria hopes to address long-standing issues of revenue leakage and create a more transparent fiscal environment. These reforms are seen as critical in a country that, despite being Africa’s largest economy, has struggled with persistent budget deficits and underinvestment in infrastructure.

The ongoing discussions in the National Assembly on these tax reform bills reflect a broader consensus on the need to streamline and rationalize the tax code. Lawmakers and fiscal policy experts argue that a simplified tax system can boost economic activity by reducing the compliance burden on businesses and making it easier for foreign investors to navigate the regulatory landscape. In this context, the assurance that no inheritance tax will be reintroduced is particularly significant. It signals continuity with past policies and reinforces the government’s commitment to creating a predictable and investor-friendly tax regime.

Reactions from Key Stakeholders

Government and Fiscal Authorities

Taiwo Oyedele’s detailed explanations at the public hearing were aimed at allaying fears and dispelling myths about the potential reintroduction of an inheritance tax. His clarifications were welcomed by many within the government and fiscal authorities, who view the tax reforms as a critical step in enhancing Nigeria’s revenue generation capabilities. By emphasizing that the contentious provision relates only to family income, Oyedele helped to underscore the continuity of existing tax practices, thereby reassuring investors and the general public alike.

Zach Adedeji of the FIRS, meanwhile, took a firm stance against practices that could undermine the integrity of the tax system. His criticism of free zone investors who attempt to bypass standard tax obligations highlights the government’s resolve to maintain a level playing field. Adedeji’s remarks reflect broader concerns about economic distortion and the need for stringent enforcement of tax laws, particularly in sectors that are crucial to national development.

Business and Industry Perspectives

The business community has reacted with cautious optimism to the government’s tax reform proposals. Francis Meshioye, representing the Manufacturers Association of Nigeria, recognized the potential benefits of a reduced corporate tax rate—a policy that many global economies have adopted to spur industrial growth. However, Meshioye also expressed reservations about the current policy regarding free zone sales, suggesting that a cap should be introduced to prevent market imbalances. His call for a 25% cap on sales into free zones is aimed at protecting domestic businesses from unfair competition, ensuring that the benefits of the tax reforms are equitably distributed.

Industry experts point out that Nigeria’s manufacturing sector, which has immense potential but faces significant challenges, stands to gain from a more predictable and simplified tax system. By reducing the corporate tax rate and clarifying contentious issues such as the misinterpretation of inheritance tax provisions, the government can create an environment that encourages investment, fosters innovation, and drives economic diversification.

Investor Sentiment and Economic Implications

Investor confidence is a critical component of Nigeria’s economic recovery and long-term growth strategy. The assurances provided by Oyedele and other fiscal authorities are intended to signal stability and predictability in Nigeria’s tax regime—a factor that is crucial for attracting both local and foreign investment. In recent years, concerns about unfavorable tax policies and bureaucratic inefficiencies have sometimes deterred investment. By streamlining the tax system and reinforcing a commitment to fair taxation, the government hopes to reverse this trend.

The broader economic implications of these reforms are significant. A more efficient tax system can lead to increased revenue for the government, which in turn can be invested in essential public services and infrastructure. In a country as populous and dynamic as Nigeria, such investments are vital for sustaining economic growth, improving living standards, and reducing poverty. Furthermore, by aligning its tax policies with international best practices, Nigeria can enhance its reputation as an attractive destination for investment—a critical factor in today’s globalized economy.

Comparison with International Practices

Nigeria’s decision not to reintroduce an inheritance tax aligns with trends observed in many developed and emerging economies. Countries across the globe have increasingly shifted their focus towards taxing income, capital gains, and corporate profits rather than imposing inheritance taxes, which are often seen as discouraging wealth creation and transfer. For instance, in the United Kingdom, recent debates over inheritance tax have centered on issues of fairness and economic efficiency, with many arguing that the tax should be reformed rather than reintroduced in a burdensome manner.

Similarly, in the United States, while some states continue to impose inheritance or estate taxes, there is ongoing debate at both the federal and state levels about the optimal structure of these taxes. The emphasis in many developed countries has been on creating a tax system that incentivizes investment, promotes economic growth, and minimizes administrative complexity. Nigeria’s approach—maintaining a clear distinction between income and inheritance while focusing on broadening the tax base—reflects a similar philosophy.

The Road Ahead: Implementing Reforms and Ensuring Compliance

The successful implementation of Nigeria’s tax reform bills will depend on a number of factors, including legislative support, effective enforcement, and robust public communication. As the National Assembly continues its deliberations, close attention will be paid to how the reforms are structured to ensure that they promote economic growth without imposing undue burdens on taxpayers.

One of the key challenges will be the modernization of tax administration. The Federal Inland Revenue Service is expected to play a central role in this regard by leveraging digital technologies to improve tax collection and compliance. Initiatives such as online tax filing, real-time transaction monitoring, and the integration of advanced data analytics are seen as essential for reducing evasion and increasing revenue. These technological advancements are not only critical for ensuring compliance but also for building public trust in the tax system.

Moreover, the government is likely to embark on a comprehensive public education campaign to clarify the nuances of the new tax bills. By engaging with stakeholders—including business leaders, industry associations, and the general public—the government hopes to foster a better understanding of the reforms and alleviate any concerns that may arise from misinterpretations of the legislation.

Conclusion: A New Chapter in Nigeria’s Fiscal Policy

As Nigeria navigates a complex economic landscape marked by the need for fiscal consolidation and growth stimulation, the latest tax reform bills represent a bold step toward modernizing the nation’s tax system. Taiwo Oyedele’s emphatic clarification that inheritance tax will not be reintroduced is a critical element of this reform, ensuring continuity with long-established tax practices and reinforcing investor confidence.

By maintaining a clear focus on taxing income and preserving the principles that have underpinned Nigeria’s tax system since independence, the government is taking decisive action to create a more predictable, equitable, and growth-oriented fiscal environment. The reforms are not without their challenges—from addressing contentious free zone policies to modernizing tax administration—but they also offer significant opportunities. A streamlined tax system that attracts investment, broadens the revenue base, and funds essential public services is key to Nigeria’s long-term economic prosperity.

In the context of a global trend toward simplifying tax codes and eliminating burdensome taxes, Nigeria’s decision not to reintroduce an inheritance tax is both timely and strategically sound. It sends a clear signal to domestic and international investors that the government is committed to creating a stable and supportive environment for business and economic development. As the legislative process unfolds and the reforms are implemented, the hope is that Nigeria will not only improve its revenue generation but also lay the foundation for a more vibrant and resilient economy.

Ultimately, the success of these reforms will depend on the ability of policymakers to balance the need for revenue with the imperative to foster economic growth. With a careful calibration of tax policies, enhanced enforcement mechanisms, and a commitment to transparency, Nigeria stands poised to embark on a new chapter in its fiscal history—one that promises to fuel development, attract investment, and secure a prosperous future for all Nigerians.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

3rd march, 2025