Proposed Tax Break Gives Lifeline To Nigeria’s SMEs, Says tappi Founder
Industry players are observing with keen interest following the Nigerian government’s recent proposal to exempt 95% of the informal sector from taxes as a significant step towards bolstering the country’s small and medium-sized enterprises (SMEs). Kenfield Griffith, CEO and Co-Founder of tappi, a digital commerce SaaS solution with a presence in Nigeria, expressed optimism about the potential impact of the tax reforms.
“Recent news to reduce the burden of multiple taxation offers critical relief in arguably the most challenging economic period Nigeria’s small business owners have experienced in recent years,” remarked Griffith in a statement shared with WT, highlighting the profound implications of the government’s initiative.
With Nigeria boasting over 40 million MSMEs, constituting over 90% of all businesses, the tax reforms hold immense promise for the country’s economic landscape. Griffith underscored the pivotal role of SMEs in driving economic growth, stating, “SMEs are undoubtedly the backbone of Nigeria’s economy. In order to realize their full potential, we simply cannot undervalue the role of establishing an enabling ecosystem for them to truly thrive.”
The sentiment echoed by Griffith resonates across various sectors, as stakeholders recognise the importance of fostering a conducive environment for SMEs to thrive. Earlier this month, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, shed light on the government’s rationale behind the reforms, emphasising the need to support small businesses. “We think that the informal sector are people who are trying to earn a legitimate living. We should allow them to be and support them to grow to a point where they can then have the ability to pay taxes,” Oyedele stated.
According to him, 95% of businesses earning NGN 25 M or less yearly will be exempt from the various taxes as the Nigerian government intensifies taxation efforts to generate revenue. In 2020, it increased the VAT rate from 5% to 7.5%.
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As Nigeria grapples with economic challenges exacerbated by factors such as inflation and rising production costs, initiatives like these are seen as vital for revitalising the SME sector. The proposed tax relief for the informal sector signals a commitment to creating a more inclusive and supportive ecosystem for businesses of all sizes.
However, amid the optimism, there are concerns about the sustainability of such policies in the long run. Oyedele emphasised the need for legislative measures to ensure the longevity of these reforms, stating, “We don’t want this whole effort to go down the drain, after one or two years.”
Nevertheless, as the government moves forward with implementing these tax reforms, stakeholders remain cautiously optimistic about the potential benefits they could bring to Nigeria’s SME landscape. With the right policies and support mechanisms in place, SMEs could emerge as a driving force for growth and prosperity in the years to come.
