The Centre for the Promotion of Private Enterprise (CPPE) has cautioned that Nigeria’s recently passed tax reforms could inadvertently criminalize as many as 40 million informal micro, small, and nano enterprises (MSMEs) if implemented without careful planning and adequate support.
In a policy brief released by CPPE’s Chief Executive Officer, Dr. Muda Yusuf, the organization highlighted the critical role of the informal sector in Nigeria’s economy, noting that over 80 percent of these businesses operate informally. “With an estimated 40 million informal enterprises and over 90 percent of jobs concentrated in this sector, the informal economy is central to employment, income generation, and economic resilience,” Yusuf said.
The warning comes as the Federal Government proceeds with the implementation of the remaining tax laws signed into law on June 26, 2025, despite controversy surrounding alleged alterations in the gazetted versions of the legislation.
Dr. Yusuf described the reforms as ambitious fiscal restructuring efforts but emphasized that most informal operators are unprepared for the stringent requirements. “Many micro and small businesses lack structured record-keeping systems and have a limited understanding of taxes such as company income tax, VAT, personal income tax, and withholding tax. Most operate on cash-based transactions, thin margins, and minimal digital literacy. The new framework introduces mandatory filing, record-keeping standards, penalties, and presumptive taxation. Without careful sequencing, these measures risk criminalizing informal businesses rather than supporting gradual formalization,” he explained.
The CPPE urged policymakers to design interventions that support informal MSMEs during the transition, such as tax education, digital tools for compliance, and phased implementation. Failure to do so, the organization warns, could significantly affect Nigeria’s job market, economic stability, and small business growth.
“Informal SMEs are the backbone of Nigeria’s economy,” Dr. Yusuf added. “Protecting their interests while modernizing tax administration is critical to sustaining livelihoods, encouraging formalization, and ensuring inclusive economic growth.”
