The passage of Nigeria's Tax Reform and Revenue Mobilisation Act is genuinely historic. For years, economists, development agencies and domestic revenue experts have argued that Nigeria's tax-to-GDP ratio of 10.6% — among the lowest in the world — is the single largest constraint on the government's ability to build infrastructure, deliver public services and reduce dependence on oil.

The new legislation addresses this structural problem head-on. The VAT increase to 10% is overdue — Ghana, Côte d'Ivoire and Kenya all collect VAT at 12-15%. The digital services levy is inspired by measures already adopted in France, Italy, India and Kenya. The corporate tax restructuring creates a more progressive system that protects small businesses while ensuring large multinationals pay their fair share.

But legislation is the easy part

Nigeria has a long history of excellent legislation that has delivered disappointing results because of weak implementation capacity. The Tax Administration Act of 2011 was supposed to transform the Federal Inland Revenue Service. In practice, it changed very little because the FIRS lacked the data infrastructure, the skilled manpower, and the political independence to enforce it effectively.

The same risk exists today. The FIRS currently identifies only 40 million taxpayers out of a population of over 220 million. It processes fewer than 2 million corporate tax returns annually in an economy with over 40 million registered businesses. Its digital systems cannot currently handle real-time data exchange with banks, telecoms companies and the CBN — the exchange that would be needed to enforce the new digital services levy effectively.

Good tax law without capable tax administration is like a map without roads. You can see where you want to go; you just cannot get there.

What needs to happen now

The government must immediately fund a FIRS transformation programme. This means: investing in data infrastructure that allows automatic identification and registration of taxpayers; hiring and training 15,000 additional FIRS staff over three years; passing operational independence for the FIRS so that political connections cannot override lawful assessments; and establishing a dedicated tax court system to resolve disputes quickly.

None of this is glamorous. None of it will get headlines the way the Senate vote did. But without it, this landmark legislation will join a long list of Nigerian laws that were celebrated at passage and forgotten at implementation.