How Nigeria’s New Tax Regime Can Save Small Businesses from Themselves
BY TIJJANI AHMAD Phd.
In my years of working with small and growing businesses, one uncomfortable truth keeps showing up: many businesses do not fail because they lack customers or good products. They fail quietly, slowly, and predictably because of poor financial management.
This is why the new tax regime deserves to be seen beyond the usual complaints of “more taxes” or “government pressure.” Properly understood, it has the potential to fix one of the deepest structural weaknesses of Nigeria’s small business ecosystem.
At the heart of the problem is informality. Many small businesses operate without structure. There is no clear separation between personal and business money. Records are kept in the owner’s head, on loose sheets of paper, or not at all. Decisions are made based on cash in hand rather than actual profitability. When shocks come—rising costs, exchange rate pressure, rent increases—the business collapses because the owner never truly knew its financial position.
The new tax regime pushes businesses, sometimes uncomfortably, toward compliance. But compliance is not just about paying tax; it is about building order. To comply, a business must register properly, open a dedicated bank account, keep basic records, and understand its income and expenses. These steps may feel like a burden at first, but they are the same foundations of good financial management.
Record-keeping, which many small businesses avoid, becomes unavoidable under the new system. Yet this is where sustainability begins. Once transactions are documented, patterns emerge. Business owners can see which products are profitable, which costs are eating into margins, and whether growth is real or just higher cash flow masking inefficiency. Taxes, in this sense, force clarity.
The regime also encourages structure. A structured business is easier to manage, easier to plan, and easier to access financing. Banks, investors, and even large corporate customers prefer businesses that can show records, compliance history, and tax filings. What begins as a tax obligation often becomes a gateway to growth opportunities that informal businesses are permanently locked out of.
Another overlooked benefit is the strategic use of incentives. The new tax framework is not only about collection; it also provides reliefs, exemptions, and incentives targeted at small businesses and priority sectors. However, incentives can only be accessed by businesses that are visible to the system. Informality disqualifies many businesses before they even apply. Compliance, therefore, is not a cost alone; it is also an entry ticket.
As businesses become more financially disciplined, they are better positioned to adopt cost-minimisation and profit-maximisation strategies. With proper records, owners can renegotiate supplier contracts, manage inventory more efficiently, plan tax payments instead of reacting to them, and make informed pricing decisions.
These are not advanced corporate techniques; they are basic management practices that compliance helps to enforce.
Ultimately, business sustainability is about survival today and stability tomorrow. A tax system that nudges businesses toward discipline, structure, and informed decision-making is not an enemy of small enterprises. It is, in many ways, an uncomfortable ally.
The new tax regime will not magically fix all the challenges facing small businesses. But if embraced correctly, it can help business owners move from guesswork to governance, from hustle to strategy, and from short-term survival to long-term sustainability. That shift, more than any tax rate, may be the difference between businesses that fail quietly and those that endure.