The Federal Government has approved a new simple tax for people in the informal sector – from market traders to mechanics and tailors – set at 1 per cent of their yearly sales (turnover). The move is part of ongoing tax reforms meant to widen the tax net from 2025/2026 without raising the main tax rates already paid by big companies and formal workers.[3][4][10][1]
Under the new rules, very small “nano” and small businesses that make N12 million or less in a year will not pay this presumptive tax at all. Once a business earns above that threshold, it will simply pay 1 per cent of its total yearly sales as tax, instead of dealing with complicated tax forms or visits from multiple tax agents. For example, a trader whose annual sales come to N20 million will pay N200,000 as tax for the year under this system.[6][10][1][3]
Government officials say the new approach is designed to stop harassment and “nuisance taxes” by different agents, especially at roadblocks and markets. Cash collection of tax and the use of roadblocks for revenue drives have been banned, with authorities insisting that payments should now go through technology-based platforms linked to tax identification numbers. The idea is to create a uniform, transparent method for federal, state and local governments to deal with informal businesses, rather than the current patchwork of levies.[5][8][10][1][3][6]
For many informal workers, “1 per cent of turnover” simply means 1 per cent of everything they sell in a year, not their profit. This is important because a trader can have high sales but very low profit if costs such as rent, transport and stock are also high. In such cases, even a small tax on turnover can feel heavy, especially in a period of rising prices and weak consumer spending.[2][3]
The government argues that, over time, joining this system could benefit informal businesses by giving them official records and making it easier to access loans, insurance and government support schemes. Once a business is registered and paying a predictable tax, banks and other institutions may be more willing to extend credit or offer formal services, which can help them grow. Officials also say the aim is to spread the tax burden more fairly, so that more people contribute small amounts instead of overtaxing a few.[4][3][6]
However, in the short term, the impact on earnings and livelihoods will likely be mixed. For those still below the N12 million mark, the exemption offers relief and may even reduce harassment if the ban on cash collections and roadblocks is enforced. For those above the threshold, the 1 per cent charge will cut into already tight margins, but it may replace multiple unofficial levies, which could leave some operators paying roughly the same or even less overall if the rules work as intended. The real test will be implementation: if authorities strictly stop illegal collections and keep the process simple and predictable, informal sector players may adjust; if not, the new tax could be seen as just one more burden on already strained livelihoods.[8][10][1][3][6]
Sources
[1] FG rolls out 1% presumptive tax on informal businesses, bans cash … https://www.nigerianeye.com/2026/03/fg-rolls-out-1-presumptive-tax-on.html [2] Taxing Fairly: What informal workers need from the new scheme https://thebftonline.com/2025/07/21/taxing-fairly-what-informal-workers-need-from-the-new-sche me/
- Nigeria Rolls Out 1% Tax on Informal Businesses Under New Fiscal … https://www.ecofinagency.com/news-finances/0703-53553-nigeria-rolls-out-1-tax-on-informal-bu sinesses-under-new-fiscal-framework
- Finance Minister Unveils Presumptive Tax Rules for MSMEs https://thejournalnigeria.com/finance-minister-unveils-presumptive-tax-rules-for-msmes/
- FG rolls out 1% presumptive tax on informal sector, bans roadblocks https://guardian.ng/news/fg-rolls-out-1-presumptive-tax-on-informal-sector-bans-roadblocks/
- FG Introduces Simplified Presumptive Tax Rules for MSMEs https://www.nigerianeye.com/2026/03/fg-introduces-simplified-presumptive.html [7] FG rolls out 1% presumptive tax on informal businesses, bans cash …
[8] FG Bans Cash Tax Collections & Revenue Roadblocks in Nigeria https://punchng.com/fg-bans-cash-tax-collections-revenue-roadblocks/ [9] Federal Government introduces 1% presumptive tax for … – Facebook https://www.facebook.com/AriseTVNews/posts/federal-government-introduces-1-presumptive-ta x-for-informal-businesses-bans-cas/1489795516485649/
[10] FG bans cash tax collection, roadblocks under new regulations https://punchng.com/fg-bans-cash-tax-collection-roadblocks-under-new-regulations/?amp