Nigerians are debating President Bola Ahmed Tinubu's proposed tax reform proposals in great detail. Many people are still ignorant of the benefits that these reforms can offer to the vast majority of Nigerians, despite the conflicts between supporters and opponents. Here is all you need to know, broken down into simple terms, from lowering taxes for small businesses to relieving the financial strain on low-income individuals. What's the commotion about? Four tax-related measures were forwarded to the National Assembly by President Tinubu. They are:

Nigeria Tax Administration Bill Nigeria Tax Bill Establishment Bill for the Nigeria Revenue Service and Joint Revenue Board. These proposals aim to update Nigeria's antiquated tax rules, but they have also sparked debate among governors and regional leaders over fairness and revenue distribution. The good news is that the Tinubu Tax Reforms are intended to help ordinary Nigerians, tiny enterprises, and the impoverished.

These benefits include low-income earners' income tax relief. You would save N84,000 a year if your annual income is N800,000 or less because you won't have to pay income tax.

2. A higher threshold for the highest possible tax rates Unlike the present threshold of N3.2 million, only individuals earning over N50 million will be subject to a 25 percent income tax rate.

3. Tax Exemptions for Small Businesses Income tax would no longer be paid by companies with turnovers under N50 million, up from the previous level of N25 million.

4. Lower Corporate Income Tax Rates  By 2026, corporation taxes for medium-sized and big businesses will be reduced from 30% to 25%.

5. Removing the "Minimum Tax" The statutory 1% gross earnings tax will no longer apply to businesses that do not report profits.

6. Less Work for Large Companies  The existing 3.75% in additional taxes is replaced with a new 2% development charge, which would directly support student loans starting in 2030.

7. VAT modifications While the federal government's portion of VAT revenue decreases from 15% to 10%, the sharing formula states will now receive 55% of the money, up from 50%

8. Progressive VAT Increase VAT rates will rise gradually from 7.5% today to 15% by 2030—but basic necessities like food and medicine remain exempt.

9. Affordable Food and Essentials No VAT will be charged on food items, electricity, school fees, or medical services, ensuring prices stay low for the poor.

10. Incentives for Gas Investment  Both related and unrelated gas projects are encouraged to increase the energy supply by tax advantages. Revolutionizing Tax Administration. The Nigeria Tax Administration Bill offers fresh approaches to guarantee justice and compliance.

11. Apprehending Tax Avoiders Bank records are used to identify high spenders for tax audits (individuals spend N25 million per month, organizations spend N100 million).

12. Flexibility in Payment It is now possible to pay taxes assessed in foreign currencies in Naira using the official exchange rates.

13. Simplified Groupings To free up regulatory authorities to concentrate on monitoring, the Nigeria Revenue        Service (NRS) would assume tax-collecting responsibilities from organizations like Customs.

14.    Guarantees of Tax Refunds  To guarantee on-time payments, cash for confirmed tax refunds will be subtracted from collections. Simplifying taxes and empowering local governments.  Equally revolutionary is the Joint Revenue Board Establishment Bill:

15. Local Revenue Committees To increase efficiency, LGAs will oversee taxes, penalties, and rates within their domains.

16. Harmonized Penalties and Offenses To increase compliance across the country, tax rules will now have consistent penalties.

17. Settlement of Conflicts Disputes, including those involving residency for tax reasons, will be resolved by a Tax Appeal Tribunal.

18. Advocacy for Taxpayers If tax officials treat residents unfairly, a Tax Ombudsman Office will assist them in seeking justice. The Significance of This Tinubu's reforms' proponents contend that they are pro-efficiency, pro-growth, and pro-poor.

These proposals seek to lessen Nigeria's reliance on oil revenue while promoting a more equitable and inclusive tax system by providing exemptions for small enterprises and low-income individuals as well as incentives for local economic activity. What comes next? The proposals are now awaiting public hearings after passing the Senate's Second Reading. Despite the ongoing discussion, experts concur that these reforms have the potential to improve the lives of millions of Nigerians and change the country's tax structure if properly executed.

According to Standard Bank, the second half of the year is expected to see $5.05 billion in financing inflows into the economy. It projected that the federal government of Nigeria may issue local bonds worth between $3 billion and $5 billion in dollars, based on estimates from previous Eurobond issuances.

This was concurrent with the estimation in a different analysis by Renaissance Capital Africa (RenCap) that banks would need to receive an extra N4.1 trillion in capital to comply with the banking recapitalization. The Standard Bank report also stated that Afreximbank had confirmed the availability of crude oil in connection with the facility, and it based its assumptions on the $1.05 billion the nation was anticipated to receive as balance from the Nigerian National Petroleum Company (NNPC) crude pre-payment facility ($3.30 billion) in May.

The Naira rose for most of April almost as swiftly as it depreciated earlier in the year, according to the research, which emphasized the volatility of the present exchange rate. It clarified that the increase in geopolitical tensions in mid-April following Iran's drone attacks against Israel, which probably drove foreign investors to sell Naira assets in a flight to safety, may have contributed to the recent FX volatility. It said that the recent World Bank/IMF meetings in Washington, D.C., when the governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, signaled that the central bank was not interfering in the foreign exchange market, may have had a detrimental effect on the investment environment.

However, the Standard Bank research noted that "this may have been interpreted negatively  when it is evident that intervention is needed to support the naira and increase investor confidence while also aiding in price discovery."However, because of the liberalization of the CBN FX market and the FMDQ modification to the FX computing process, which guarantees that the official exchange rate accurately reflects market realities, the exchange rate premium between the official and parallel market rates has returned to pre-COVID levels. 

"FX inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) are on the rise, reaching levels not witnessed since February 20, helping to restore the market to pre-COVID levels."After hitting a 50-month high of $3.75 billion in March, these inflows ended two months of consecutive increases, falling 48.1% month/month to $1.95 billion in April. "This decline reflects the loss of momentum in foreign inflows (-68.9% m/m, to $478.10 million) and inflows from local sources (-33.6 percent month/month, to USD1.47 billion)."

The research did, however, project increasing inflationary pressures and a closing price for the Naira of N1,219.32/$ on December 24. It also cautioned that heightened geopolitical uncertainty may cause a reduction in the foreign exchange reserves (FIP) inflows that have been supporting the Naira in recent weeks. Importantly, we also take into account our predictions for inflation and interest rates through December, it continued. Furthermore, we assume that commercial banks and Bureau De Change (BDC) operators continue to receive sporadic foreign exchange supplies from the CBN.

"FX demand pressures will likely resurface intermittently, especially in the summer, making currency movements likely to be volatile."We modify our currency projection to take into account both this new situation and the likelihood that the naira would depreciate much further this year. Since the first MPC meeting in February, there has been a noticeable improvement in the CBN's transparency and communication. The CBN has been guiding monetary policy and updating stakeholders and investors on its operations.

According to Standard Bank's current forecasts, inflation is projected to climb further in April and peak in May, therefore the committee is expected to raise the MPR by 100 basis points when it meets on May 20. The statement read, "The World Bank Board of Directors is expected to convene on June 13 to deliberate on approving Nigeria's request for a $2.25 billion financing package, of which $1.50 billion is for final approval."$750 million in Program-for-Results finance and $750 million in financing for development policies, divided equally into two equal tranches.

As per the Development Policy Financing, the government asks for a drawdown and the World Bank board approves it before the first tranche is released. The World Bank believes that the macroeconomic policy framework is sufficient for budget support, but the second tranche's distribution will depend on how the changes are implemented. According to the report, total foreign exchange reserves have decreased by $2.3 billion since their year-to-date peak of $34.45 billion on March 18 to $32.15 billion as of April 26.

"We view the recent decline in FX reserves as partly due to the CBN resuming FX sales to support the naira and the repayment of existing debt obligations," the statement read. The main threats to our currency prediction are as follows: (1) fiscal authorities using the CBN's overdraft facilities again amid an expansionary budget; (2) a plausible U-turn in the CBN's tightening stance, which would widen the real interest rate gap; (3) a significant decline in crude oil production, which would lower USD earnings and possibly force the CBN to cut back on FX sales to BDCs and NAFEM; and (5) inflation significantly exceeding our forecast. 

Meanwhile, the RenCap analysis calculated that banks could need to receive an extra N4.1 trillion in capital to meet regulatory requirements. This sum made up 6.8% of the Nigerian Exchange Group's (NGX) total market capitalization and 61.3% of the market capitalization of banks listed on the NGX.

The research also predicted the rise of additional regional banks as national license-holding banks modify their coverage to correspond with their capital sufficiency. As per the revised rules released by the Central Bank of Nigeria (CBN), all banks needed to increase their equity capital. According to the current review, non-interest national banks would need to meet a new minimum threshold of N10 billion, while commercial banks with international banking licenses would have to raise their minimum capital to N500 billion, national banks to N200 billion, regional and merchant banks to N50 billion, and non-interest national banks to N20 billion. 

The anticipated capital required was broken down as follows: N1.5 trillion for commercial banks, N2.3 trillion for international commercial banks, and N310 billion for regional and merchant banks. "We expect a majority of the funding to come from a combination of equity funding options such as rights/issues and/or private placement and public offerings, from both local and international investors," the RenCap study said when discussing the strategies to achieve the additional capital infusion.

Additionally, as banks with national licenses reduce their coverage to fit their capital position, we expect the creation of additional regional banks. According to the study, Zenith Bank is now standing at N270.7 billion, with a N229.3 billion deficit vis-à-vis foreign commercial banks. First Bank has N230.6 billion with a shortfall of N269.4 billion, while Access Bank comes in second with N251.8 billion and a need for an extra N248.2 billion. It further said that Fidelity Bank is at N129.7 billion and needs an additional N370.3 billion, while Guaranty Trust Bank is at N138.5 billion and needs N361.5 billion. 

Additionally, it said that FCMB has N102.8 billion with a deficit of N397.2 billion and the United Bank for Africa has N115.8 billion with a deficit of N384.2 billion. Ecobank has N193 billion for national commercial banks; the remaining N7 billion is all that is needed. Union Bank needs an additional N51.9 billion but currently has N148.1 billion. The current value of Stanbic IBTC is N62.5 billion, and N137.5 billion is needed. While it needs N142.8 billion, Sterling Bank only has N57.2 billion.