One of the world’s leading credit rating agencies, Fitch Ratings, has said that factors such as, “weak governance, a large informal sector, capacity gaps and enforcement challenges,” may negatively affect the Federal Government’s ability to implement new tax laws which came into effect on January 1, 2026.

C o m m e n t i n g on Nigeria’s 2026 Appropriation Bill, the agency, in its latest article on the country, predicted that “near-term execution risks” could prevent the government from achieving its objective of using the new tax laws to increase revenue to 14.6 percent of Gross Domestic Product (GDP) in the first year of the laws’ implementation.

Also, Fitch stated that Nigeria’s 2026 budget broadly aligns with its fiscal deficit forecast partly because it expects that revenue and expenditure are likely to miss targets, adding that: “This reflects long-term challenges to raising both oil and non-oil revenues, and persistent under execution of budgeted capital spending.”

Specifically, the credit rating agency said: “We expect revenue to undershoot despite new tax reform laws effective from January 1, 2026, as these face near-term execution risks. Expenditure will also fall short, despite election-related spending pressures.

The government has allocated about 40 per cent of expenditure to capex, but the execution rate for capital projects is usually low in Nigeria. “Budget documents published on January 8 envisage a deficit of N25.3 trillion (about $17.8 billion), which we estimate at 4.5 per cent of GDP in 2026 (up from 2.9 per cent in 2025).

This is broadly in line with our forecast of 4.6 per ceny, which would lift public debt to about 39 per cent of GDP (below the ‘B’ median of 55%). “ T h e bu d g e t assumptions are generally more optimistic than Fitch’s forecasts.

The budget is based on oil at $64.85 a barrel, production of 1.84 million barrels a day and real GDP growth of 4.7 per cent, compared to Fitch’s assumption of $63/ bbl, 1.74 million barrels a day and 4.2 per cent.

The budget’s exchange rate projection is USD/ N1,400, compared to our N1,474 forecast, which combined with higher oil price and production assumptions, means the implied revenue appears ambitious.

“The budget contains new tax laws that aim to lift revenue to 14.6 per cent of GDP in the first year of implementation, against our forecast of 10.9 per cent, up only 1.2pp from our 2025 estimate. Measures include a more progressive personal income tax for high‑income earners, a four per cent development levy on the assessable profits of larger companies, and tighter compliance enforcement for companies and individuals.”

However, Fitch said that while it believes that “raising fiscal revenue is central to the government’s reform agenda and an important consideration for Nigeria’s sovereign credit profile,” it was skeptical about the new tax laws yielding the desired result.