Adeola Olatunji

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As of January 1, 2026, the new tax reform laws will take effect, and Nigerians may experience some financial relief. Although the tax reform has generated both positive and negative opinions online, the Value Added Tax (VAT) provisions promise some changes that will bring about a positive shift in the financial situation of the average Nigerian.

Many Nigerians may not be very aware of what VAT really means. They only see VAT deductions on receipts after purchase. But when it comes to everyday life in Nigeria, one of the most important topics for consumers should be how VAT is handled. This includes understanding how it is applied, which goods and services will now be exempt or zero-rated, what this really means for the average person, and how it affects their daily routines.&nbsp;

It is crucial to have an understanding of these details as they can significantly impact our daily expenses and purchasing decisions. In this article, we break down the reliefs and exemptions, item by item, with relatable examples.

<h2>What Is VAT and What Is Changing?</h2>

VAT is a consumption tax placed on goods and services at every stage of production and distribution, from raw materials to the final sale. The final consumer ultimately bears the tax, but it is remitted to the government by businesses on their behalf. In Nigeria, the standard VAT rate remains 7.5% under the current reforms.

However, there is a change in which goods and services this applies to, and which goods or services become exempt from VAT with no charge or zero-rated, VAT charged at 0%. In this case, you pay no VAT, but the supplier can claim input VAT as a deduction.<a target="_blank" class="editor-link" href="https://www.mondaq.com/nigeria/sales-taxes-vat-gst/1657998/tax-reform-in-nigeria-key-changes-under-new-tax-acts?utm_source=chatgpt.com">&nbsp;</a>

For you and me as consumers, this means when we buy certain items or use certain services, we either will not pay VAT at all or will pay 0% VAT. That can reduce the final price we pay, or at least avoid an extra tax burden.

This Is What VAT in Nigeria’s Tax Reform Means for Average Nigerians and Small Businesses

<h2>What is Zero-rated VAT?</h2>

Zero-rated VAT refers to a Value Added Tax rate of 0% applied to specific goods and services. This means that if you sell goods that are zero-rated for VAT, you are not permitted to charge VAT on those sales.&nbsp;

However, you can still recover the VAT you paid on the items you bought to produce the goods. This not only benefits the consumer but also allows producers to seek tax relief from the authorities, which can be ploughed back into their business.

For the average Nigerian, zero-rated VAT means that certain essential goods and services are sold without the added cost of VAT. This will help lower the final price that consumers pay for these items, making them more affordable.

<h3>What is Tax-Exempt VAT?</h3>

Tax-exempt means that certain incomes, individuals, businesses, or goods and services do not have to pay taxes by law. They are exempted. This is designed to help low-income earners, support small businesses, and make essential goods easily accessible and affordable. For the average Nigerian, this means that some incomes and essential goods will be exempt from taxation, which can help reduce the overall cost of living.

<h2>What This List Means</h2>

This is a list of the major relief items and their implications for everyday Nigerians.&nbsp;

<h3>1. Basic food items – 0% VAT</h3>

If you purchase staple foods like rice, beans, bread, and others, they become zero-rated for VAT. This means instead of paying the regular VAT component, which at 7.5% would add a few extra naira to the actual price, you pay none.For example, if you buy a food item for ₦1,075 that previously included 7.5% VAT, which is approximately ₦75, going forward, you would pay ₦1,000 with no VAT applied. This is very impactful because food accounts for a large share of household spending, so the tax relief reduces the cost of purchasing it.

<h3>2. Rent – Exempt</h3>

Rent also becomes exempt from VAT under the new reform.. Therefore, if you pay rent, you will no longer be required to pay VAT, and you will also not see a VAT line on your rental invoice. For example, if your monthly rent is ₦100,000 and is typically charged VAT of 7.5%, it amounts to ₦ 107,500. This will end by the start of 2026, as you will then pay ₦100,000 with no VAT component. That means you get to keep ₦7,500. This is great relief for tenants in the country.

<h3>3. Education services and materials – 0% VAT</h3>

This covers tuition, educational materials (such as books and stationery), and other educational services. These will be zero-rated. So when you pay school fees or buy textbooks, you won’t incur VAT.For instance, if your school fees were ₦200,000 and a VAT of 7.5% previously included at ₦ 215,000, you would now pay just ₦200,000 from January 2026. Parents and students will benefit to some extent.

<h3>4. Health and medical services</h3>

Medical services become exempt or zero-rated, depending on the nature, under this law. That means doctors’ consultations and hospital treatment may not be subject to VAT.

This is very important in Nigeria, where healthcare costs are often high and removing VAT makes care marginally more affordable. Imagine going to the hospital for a ₦50,000 treatment and not paying VAT on top of that.

<h3>5. Pharmaceutical products – 0% VAT</h3>

Some medicines and pharmaceutical supplies will be zero-rated. So, if you buy a medication like Paracetamol for ₦200 under the previous VAT regime, a 7.5% tax of ₦15 would have been added, making the total ₦215. However, under the new law, you pay just ₦200 with no VAT.&nbsp;

<h3>6. Small companies (≤ ₦100m turnover) are exempt from charging VAT</h3>

If you run a small business and your turnover is below what the reform defines as the small company threshold, you may be exempt from paying VAT. This reduces the compliance burden and can result in lower prices for their customers.&nbsp;For many everyday Nigerians, the real advantage lies in smaller businesses being able to reduce costs and potentially face fewer hidden tax charges. This can make a big difference in how these businesses operate and thrive in the community.

<h3>7. Diesel, petrol, and solar power equipment – VAT suspended or exempt</h3>

Certain energy-related items, such as solar power equipment and fuel, will be subject to VAT suspension or exemption. This will help households reduce energy cost burdens.

<h3>8. Agricultural inputs – fertilisers, seeds, seedlings, feeds, and live animals</h3>

These items will be zero-rated or exempt from tax. This relief has two key effects. It will reduce the cost of farming, benefiting farmers and indirectly lowering food costs for consumers as farm input costs decrease.

<h3>9. Purchase, lease or hire of equipment for agricultural purposes</h3>

When equipment like tractors or harvesters is purchased or leased for agricultural use, VAT relief is applicable. This helps mechanisation and productivity in farming, which again benefits the food chain and consumers indirectly.

<h3>10. Disability aids – hearing aids, wheelchairs, braille materials</h3>

These essential items for persons with disability are exempt or zero-rated. This means that a wheelchair priced at, let’s say, ₦150,000, will have no VAT. This is a direct cost-saving for persons with disabilities and helps with inclusion.

<h3>11. Transport – shared passenger road transport (non-charter)</h3>

VAT will not be applied to shared public passenger road transport services. When you commute, part of your fare is no longer subject to VAT, and over time, this reduces your commuting costs.

<h3>12. Electric vehicles and parts – exempt</h3>

This is a future-forward relief. Electric vehicles and their components are VAT-exempt. For Nigerians planning to purchase electric vehicles, this is good news. If an EV is priced at ₦10 million and previously VAT was applied, the VAT-exempt status removes the burden of having to pay extra VAT.

<h3>13. Humanitarian supplies – exempt</h3>

Donor-funded or humanitarian goods are exempt. This ensures NGOs and aid agencies can buy supplies without VAT, reducing the cost of humanitarian programmes and ultimately benefiting more communities.

<h3>14. Baby products</h3>

Certain items like baby formula, diapers, and baby clothing may be zero-rated. For example, if diapers cost ₦10,750 with previous VAT included, you now pay ₦10,000 only. It may look small, but it is a helpful relief for many families.

<h3>15. Sanitary towels, pads or tampons</h3>

Menstrual hygiene products also become exempt or zero-rated. If you buy a pack for ₦2,150, the VAT of ₦150 will no longer be applied, and the price becomes ₦ 2,000.&nbsp;

<h3>16. Land and building</h3>

Sales or leases of land and residential buildings are exempt from VAT. If you buy a plot for ₦10 million and previously VAT was applied, you get to save the VAT component. This makes homes and property acquisition a bit affordable.

<h2>Why These Changes Matter to You</h2>

For many Nigerians, these VAT reforms automatically translate to affordable daily costs. With essential goods such as food, medicine, rent, education, and public transport now exempt or zero-rated, many households will experience some financial relief. While the price difference in these items might seem small, the savings add up across a month or even a year.VAT reliefs are also designed to empower small businesses. Exempting small companies with a turnover below ₦100 million from VAT obligation allows them to focus on growth. Farmers and agribusiness owners also benefit from tax-free access to fertilisers, seedlings, feeds, and agricultural equipment. These changes aim to promote productivity and sustainability, particularly in the food and energy sectors, where many Nigerians continue to struggle with rising costs.Overall, the reform may not solve all economic challenges, but it reduces the everyday burdens of Nigerians and shows that the government is trying to put citizens first in the ongoing tax conversation.

<h2>Important Things to Note</h2>

<ul><li>Even though a lot of things are exempt or zero-rated, not everything is. Some goods and services will still be subject to VAT at a rate of 7.5%.</li><li>Suppliers and retailers may not immediately pass on this. In some cases, prices may not drop by the full VAT amount, so it's best to ask or check your receipts.</li><li>For zero-rated goods, businesses must account for VAT when they file their returns. Therefore, the cost they will incur depends partly on their efficiency.</li><li>For property and land, specific conditions, lease duration, value, and other factors may have particular rules. </li><li>The law takes effect on 1 January 2026, so until then, the old rules still apply.</li></ul>

As Nigeria’s new tax reform reshapes VAT policies, here’s what it really means for everyday citizens, entrepreneurs, and the cost of doing business.

Using ChatGPT or thinking about upgrading? Then you should know that things are changing. If you are on the paid version of ChatGPT here in Nigeria, you will soon be paying a little more. Do not panic, but do pull up your billing settings.&nbsp;

OpenAI, the company behind the world’s most popular AI chatbot, has just announced that Nigerian users of its paid version, ChatGPT Plus, will soon start paying more. The reason? A new 7.5% Value Added Tax (VAT) will now be applied to all paid OpenAI services in the country. Somehow, VAT has found its way to artificial intelligence.

Starting 1 November 2025, OpenAI will begin collecting VAT on all its billable products for users based in Nigeria. That means anyone subscribed to ChatGPT Plus (the premium plan that costs around ₦31,500 or $20 a month) will soon pay a bit extra, which amounts to roughly ₦33,862.50 after tax.

The company announced this in emails sent to users earlier in October, informing them of the new billing adjustment and requesting that they update their payment details to include their Tax Identification Number (TIN).&nbsp;

This step aligns with Nigeria’s existing VAT regulations for digital services, a rule that has slowly become the norm for international tech companies operating in the country.

For context, OpenAI is not the first to make this move. Netflix, Google, Apple, Amazon, and Meta, owners of Facebook, WhatsApp, and Instagram, have all started collecting VAT from Nigerian users over the past few years. OpenAI is just the newest member to join the group.

This might sound strange and have you thinking: why would a government tax a chatbot? But in reality, this is part of a global trend. Many countries are tightening tax laws around digital products and services, especially those offered by foreign companies.

Under Nigeria’s Value Added Tax Act (amended), foreign service providers who sell to Nigerian users are required to collect VAT on behalf of the Federal Inland Revenue Service (FIRS). Section 10 of that Act explicitly mentions “electronic, digital, and remote services.”

So if a product is being used in Nigeria, it is therefore taxable, whether it is Netflix, Apple Music, or ChatGPT. The current VAT rate in Nigeria is 7.5%, and that is the extra charge that will now appear on every paid OpenAI subscription.

According to tax experts, this move is not just about making users pay more. Instead, it is about ensuring a level playing field between local and foreign companies. Nigerian businesses have long been required to remit VAT on sales within the country, and the government is simply extending that same rule to international players who profit from Nigerian users.

The good news is that free ChatGPT users won’t feel a thing. You can continue using the free version without any changes. But if you are on ChatGPT Plus or plan to upgrade for faster speed, access to GPT-4, and priority usage, you will start seeing a slightly higher monthly bill.

For creators, freelancers, and students who rely on ChatGPT for writing, brainstorming, or even coding, this may feel like yet another item on Nigeria’s long list of “new things to budget for.” It might not seem like much, but with the naira’s instability and the rising cost of living, every extra kobo counts for many Nigerians.

But by charging VAT, OpenAI becomes officially compliant with Nigerian tax laws, which means cleaner invoices, proper receipts, and better transparency for users who might need documentation for business expenses. For registered business owners or freelancers with a TIN, this could even simplify bookkeeping.

The VAT on ChatGPT is not just a financial adjustment; it is a sign of where the digital world is heading. Governments across Africa and beyond are beginning to treat digital services the same way they treat physical goods.

For years, foreign tech companies have made millions, and even billions, in local markets without paying direct taxes. As digital tools become central to everyday life—from content creation to remote work—countries like Nigeria are saying, “It’s time to contribute.”

If you are subscribed to ChatGPT Plus, here’s what you should know:

<ul><li>You do not need to resubscribe; the VAT will be automatically added to your next payment. </li><li>Check your billing email or payment settings for a breakdown of your updated cost. </li><li>If you are registered as a business or freelancer, include your Tax Identification Number (TIN) in your OpenAI billing information to keep your records accurate. </li><li>VAT is not retroactive, so it only applies from the date the change takes effect.</li></ul>

For casual users, it is important to consider whether the paid version is worth the investment. The Plus plan provides smoother access and enhanced performance during peak hours, which can be beneficial. However, if you only use ChatGPT occasionally for quick prompts or casual conversations, the free version may still meet your needs perfectly.

And if you are one of those who swear by AI for work, creativity, or research, you might want to consider updating your billing information to maintain access to this tool that has become our digital best friend.

OpenAI’s AI tool, ChatGPT, is getting pricier for Nigerian users and it’s not just inflation. Here’s what’s behind the sudden hike in cost.

ChatGPT Will Now Cost More for Nigerians — Here’s Why

Segun Adeyemi

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President Bola Tinubu has called on the media to support his administration’s proposed tax reforms, describing them as a pivotal measure for building enduring national prosperity.

Speaking through the Minister of Information and National Orientation, Mohammed Idris, at the 2024 Nigerian Media Merit Awards (NNMA) in Lagos, Tinubu emphasised the critical role of accurate reporting in fostering public understanding of the reforms.

“Our policies are deliberate and well-thought-out. Among our landmark reforms is tax restructuring—a profound step toward setting Nigeria on the path of enduring wealth and inclusive growth,” Tinubu stated.

Acknowledging differences in opinion on the reforms’ specifics, he highlighted a national consensus on the need for a comprehensive overhaul of the tax system.

The President explained that the proposed tax bills aim to reduce the number of taxes, alleviate burdens on vulnerable Nigerians, and boost state revenues while incentivising business growth.

He noted that these measures align with the administration’s Renewed Hope Agenda, which also includes subsidy removal and exchange rate unification.

Tinubu celebrated recent fiscal milestones, citing the Federation Accounts Allocation Committee’s highest-ever revenue distribution.

“These freed resources are financing critical initiatives, including the consumer credit scheme, student loan fund, MSME clinics, and massive road infrastructure projects,” he said.

Beyond tax reforms, Tinubu reaffirmed his commitment to press freedom, urging journalists to responsibly counter misinformation in the digital age.

“Media freedom must be exercised responsibly, especially in an era where falsehoods often go viral,” he remarked.

To combat misinformation, the President announced the establishment of the UNESCO Media and Information Literacy Institute at the National Open University of Nigeria, aimed at equipping Nigerians with skills to identify credible information.

Tinubu commended Nigerian journalists for their contributions to democracy, congratulating the NNMA winners and pledging continued support for press rights.

“A protected media and civic space are vital to our democracy,” he concluded.

President Bola Ahmed Tinubu. [Getty Images]

Tinubu commended Nigerian journalists for their contributions to democracy, congratulating the NNMA winners and pledging continued support for press rights.

Why media should back tax reforms - President Tinubu

<h2>Shehu Sani, a former senator representing Kaduna Central, has clarified that President Bola Tinubu's Tax Reform Bill, recently presented to the National Assembly, does not discriminate against the North.</h2>

Addressing concerns over the bill's potential impact, Sani urged both Northern leaders and citizens to “move beyond sentiments and look at the benefits” of the proposed legislation.

In a statement, Sani expressed his belief that Tinubu’s bill is “economically beneficial and fair to all parts” of Nigeria.

He described it as a comprehensive effort to “harmonise and simplify tax administration,” while <a data-link-role-code="open_new_tab" href="https://www.pulse.ng/news/local/how-tinubus-tax-reform-bill-set-to-boost-economic-growth/mltz7q1">streamlining enforcement to enhance revenue generation.</a>

READ ALSO: <a href="https://www.pulse.ng/news/local/senator-ndume-faces-backlash-for-challenging-tinubus-tax-reform-bill/xcxsm7e">Senator Ndume suffers backlash for opposing Tinubu's 'Tax Reform Bill'</a>

“The Tax Reform Bill is not inimical to the North or any part of this country. People should keep aside sentiments and read the Bill carefully. It’s a comprehensive and bold move to harmonise and simplify tax administration… combat corruption in the so-called tax waivers granted to business cabals,” he stated.

Sani addressed <a data-link-role-code="open_new_tab" href="https://www.pulse.ng/news/northern-govs-rebel-against-tinubu-reject-tax-reform-bill/7xjxz1f">Northern governors </a>directly, urging them to “rescind their decision to reject the Bill and take time to read it.”

He emphasised that no region will be shortchanged, nor will there be job losses or increased taxes. Instead, Sani assured that the reforms would safeguard national and state revenues.

He concluded by calling on the National Assembly to treat the bill with urgency, underscoring its importance to Nigeria’s economic future.

<h3>Arewa group rallies support for Tinubu's tax reforms</h3>

Meanwhile, the Coalition of Arewa Groups, comprising 300 organisations from 19 northern states, has declared its support for President Bola Tinubu's tax reform bill, urging the National Assembly to expedite its passage.

The Coalition praised President Tinubu's vision, emphasising the bill's potential to restructure Nigeria's tax framework and drive sustainable economic growth.

“Our endorsement is premised on the understanding that the tax bills are designed to consolidate taxation frameworks, promote economic growth, and ensure sustainability,” said Alhaji Usman Abubakar and Obadiah Amos, co-signatories of the group's statement.

The group also commended Federal Inland Revenue Service (FIRS) Chairman Zacch Adedeji for enhancing public understanding of the bill through media engagements, stating, “We pass a vote of confidence in the FIRS Chairman and express our full support for President Tinubu’s tax bills.”

Reaffirming its stance, the Coalition called on lawmakers to ensure the bill’s timely implementation, noting that transparency in pricing and publishing costs could further strengthen Nigeria's tax system.

Shehu Sani, a former senator representing Kaduna Central, has clarified that President Bola Tinubu's Tax Reform Bill, recently presented to the National Assembly, does not discriminate against the North.

Is Tinubu's 'Tax Reform Bill' anti-North? Shehu Sani clarifies

<h2>Senator Ali Ndume, representing Borno South in the National Assembly, faces harsh criticism from the Northern Redemption Coalition (NRC) over his opposition to President Bola Tinubu's proposed tax reform bills. </h2>

Ndume, who labelled the bills “dead on arrival” during an appearance on Channels Television’s Politics Today, <a data-link-role-code="open_new_tab" href="https://www.pulse.ng/news/local/senator-ndume-vows-to-campaign-against-tinubus-proposed-tax-bill/pevdjv1">called for their rejection by the National Assembly,</a> sparking strong backlash from northern stakeholders.

The tax reform package, sent to the National Assembly by President Tinubu, includes four bills: the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. This legislative package is designed to replace the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service (NRS) and aims to streamline tax collection nationwide.

The Northern Governors Forum (NGF) had already<a data-link-role-code="open_new_tab" href="https://www.pulse.ng/news/northern-govs-rebel-against-tinubu-reject-tax-reform-bill/7xjxz1f"> voiced opposition to the VAT-related changes,</a> fearing economic strain on northern states, a position some groups have also condemned.

READ ALSO: <a href="https://www.pulse.ng/news/local/19-northern-govs-told-to-embrace-tinubus-tax-reform-bill/sw2456q">Northern govs told to embrace Tinubu's 'Tax Reform Bill'</a>

The NRC, however, was quick to distance itself from Ndume's comments. NRC President Comrade Adamu Bashir accused Ndume of self-serving populism that does not represent the interests of northern constituents.

“It is the failure of leaders like Ndume to develop the North that has left them with the phobia for tax bills, which President Tinubu has demonstrated, can turn the economy around,” Bashir stated.

READ ALSO: <a href="https://www.pulse.ng/news/gov-sule-reacts-to-north-rejecting-tinubus-tax-reform-bill/ly3h05e">'We made him president' - Gov Sule reacts to North rejecting Tinubu's 'Tax Bill'</a>

Bashir argued that Ndume’s long tenure in the Senate has yielded little progress for his constituents, suggesting he was disconnected from the reality faced by ordinary northern citizens.

“While he claimed to be speaking for the poor in the country, it turned out he cannot even speak for the North, and certainly, he appears disconnected from his constituency,” Bashir remarked, adding that Ndume’s stance reinforces “the wrong notion of a lazy and entitled North.”

The NRC president further cautioned that northern Nigerians do not fear new tax reforms but rather fear ineffective leadership.

“The North fears leaders like Ndume and our governors, who have refused to distribute wealth evenly,” he said.

Senator Ali Ndume, representing Borno South in the National Assembly, faces harsh criticism from the Northern Redemption Coalition (NRC) over his opposition to President Bola Tinubu's proposed tax reform bills

Senator Ndume suffers backlash for opposing Tinubu's 'Tax Reform Bill'

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