Nigeria’s sweeping tax reforms have triggered a major shift in the country’s revenue administration system, with the Nigeria Customs Service (NCS) officially exiting the collection of import Value Added Tax (VAT), paving the way for the Nigeria Revenue Service (NRS) to assume full control.

The transition, which took effect from January 1, 2026, is part of a broader fiscal overhaul aimed at centralising tax collection, improving efficiency, and eliminating duplication among government agencies.

Latest fiscal data underscore the scale of the shift. Customs’ cost of import VAT collection, which stood at ₦3.84 billion in December 2025, fell to zero in January 2026, confirming its complete withdrawal from the process. The development aligns with provisions in the newly implemented tax laws designed to harmonise Nigeria’s fragmented revenue framework.

Under the new regime, the NRS—rebranded from the Federal Inland Revenue Service—has been empowered as the sole authority responsible for assessing, collecting, and accounting for federally accruable taxes, including VAT. The reform reflects the government’s strategic push to modernise tax administration through digital integration and unified oversight.

With the expanded mandate, the NRS has recorded a significant rise in operational activity. Its VAT collection cost, pegged at four percent, rose sharply to ₦43.33 billion in January from ₦32.72 billion in December, reflecting both higher tax receipts and the increased administrative burden associated with centralised collection.

The restructuring coincides with a notable surge in VAT revenue. Data from the Federation Account show that VAT collections climbed to approximately ₦1.08 trillion in January 2026, up from ₦913.96 billion in December—an 18.5 percent month-on-month increase. The strong performance is attributed to improved enforcement, expanded tax net coverage, and policy adjustments embedded in the reform framework.

Despite the structural changes, Nigeria’s VAT rate remains at 7.5 percent. However, the reforms introduce important adjustments to the scope of taxable and zero-rated items, aimed at easing the burden on households and businesses. One key provision allows companies to claim input VAT on a broader range of expenses, including services and capital assets—an initiative expected to enhance liquidity and reduce cascading tax effects across value chains.

In addition, the new VAT regime introduces measures to strengthen compliance and build taxpayer confidence. These include a targeted 30-day timeline for VAT refunds, stricter documentation requirements, and enhanced digital reporting systems designed to improve transparency and reduce leakages.

The centralisation of VAT collection also comes with a revised revenue-sharing formula. States’ share of VAT revenue has increased from 50 percent to 55 percent, while the Federal Government’s share has been reduced to 10 percent. The adjustment is projected to significantly boost subnational revenues, with states expected to receive over ₦5 trillion from VAT in 2026.

Analysts say the removal of the NCS from VAT collection eliminates administrative overlap and aligns Nigeria’s system with global best practices, where a single authority typically manages consumption taxes. The reform is also expected to improve accountability by enabling the creation of a unified data system for VAT transactions nationwide.

Overall, the emergence of the NRS as the sole VAT administrator marks a pivotal moment in Nigeria’s fiscal evolution. By streamlining processes and consolidating authority, the reforms signal a shift toward a more efficient, transparent, and technology-driven tax system capable of supporting long-term revenue growth.

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