June Policy Trend Trail

INTRODUCTION

In June, Nigeria witnessed the roll out of several policies and legislative developments across governance, taxation, financial regulation, digital identity, public health and institutional reform, reflecting the Government’s concerted effort to leverage law and policy as instruments for addressing emerging challenges, strengthening public institutions and advancing national development objectives.

In this edition of the Policy Trend Trails, we examine some of the month’s most notable policy developments, highlighting what they entail, the issues they seek to address, their practical implications for individuals and businesses, and the legal and regulatory obligations they introduce.

POLICIES

THE TRANSITION POLICY FOR THE NEW TAX ACTS

January 2026 saw the official commencement of the implementation of the Tax Acts enacted in 2025. This roll out led to several questions regarding the transition to the application of these Acts, what to expect and how to be positioned for the obligations that each Act requires. In response to these concerns and to facilitate the easy implementation of the new Tax Acts, the Federal Ministry of Finance issued the Transition Guidelines, 2025, (the “Guidelines”) pursuant to Section 144 of the Nigerian Tax Administration Act, 2025 and Section 200 of the Nigerian Tax Act, 2025.

These Guidelines are expected to manage the gap between the old laws and the new Tax Acts. Like every other transitional law, the Guidelines provide the effective date when the new Tax Acts becomes legally effective and how existing rights, processes and obligations are enforced, and it also answers the questions on what has changed and what remains the same. It provides clarity on compliance and filing obligations during the transition period. It provides that all existing tax forms, procedures and processes will continue to apply until new forms and procedures are formally introduced by the relevant authorities.

The Guidelines provide that income earned from goods or services before 1^st January, 2026 will generally remain subject to the repealed tax laws, irrespective of when payment is received. However, for taxes determined by a taxpayer’s financial year, the applicable law depends on the relevant year-end. Financial years ending before 1^st January, 2026 will be governed by the repealed tax laws, while those ending on or after that date will be subject to the Tax Acts, 2025.

For transaction-based taxes, the applicable law is determined by the date of the relevant transaction. Accordingly, where a transaction commenced before 1st January, 2026 but continues after that date, any payments made on or after 1st January, 2026 in respect of that transaction will be assessed and administered under the Tax Acts, 2025, while payments made before that date will remain subject to the repealed tax law.

With respect to tax disputes and appeals, the Guidelines provide that where a taxpayer files an objection after the commencement of the new Tax Acts, the dispute resolution procedures under the new regime will apply, even if the dispute relates to an assessment issued under the repealed tax laws for prior years of assessment. Furthermore, on resolution of disputes, where there is an inconsistency in the new tax framework, it should be resolved in favour of the taxpayer. However, where the Guidelines fail to address a specific issue, the matter should be referred to the relevant tax authority.

The swift introduction of the Guidelines demonstrates the Government’s commitment to ensuring that Nigerians have a smooth transition into the new tax dispensation and its associated obligations.

THE NATIONAL IDENTITY MANAGEMENT COMMISSION ACT, 2026

In June 2026, the president signed the National Identity Management Commission (NIMC) Act 2026 (the “Act”) into law, repealing and re-enacting the National Identity Management Commission (NIMC) Act, 2007. The new Act modernises Nigeria’s identity management framework by aligning it with recent developments in digital governance, cybersecurity and data protection, particularly the Nigeria Data Protection Act, 2023 and the Cybercrimes (Prohibition, Prevention, etc.) Act.

By this Act, the National Identity Number (NIN) is now reinforced as the primary and unique identifier for identity verification across public and private sector services, including banking, taxation, telecommunications, passport administration, pensions, land administration and access to government services. This places an obligation on all entities to link Nigerians’ identities to the NIN.

Furthermore, the Act designates NIMC as Nigeria’s Root Certification Authority (RCA), placing it at the centre of the country’s public key infrastructure for digital identity authentication, electronic signatures and secure digital transactions. This strengthens NIMC’s role in supporting trusted digital services across both the public and private sectors. The Act expands NIMC’s statutory functions to include maintaining and protecting the national identity database, harmonising identity records across Ministries, Departments and Agencies (MDAs), issuing the General Multi-Purpose Card (GMPC), and providing authentication and identity verification services. The Act is intended to improve interoperability across government databases and establish a more integrated national identity ecosystem.

There is also an obligation on organisations that collect, process or rely on the NIN of individuals to remain compliant with applicable data protection obligations under the Nigeria Data Protection Act, 2023, the failure of which attracts strict penalties. This reinforces privacy-by-design principles and increases accountability for the lawful collection, processing, storage and disclosure of personal data, reflecting the government’s committed effort to safeguarding personal data and ensuring accountable and ethical data usage.

The Act also strengthens NIMC’s governance framework by clarifying the composition of the Commission’s Board, the roles and responsibilities of its leadership, and the statutory framework governing appointments. It further provides greater legal certainty by addressing potential conflicts with other legislation and aligning its governance provisions with the Constitution.

In addition, strict penalties have been attributed to unauthorised access to identity records and identity fraud or multiple registrations which attracts a minimum of 5 (five) years imprisonment while corporate bodies that mishandle data or unlawfully process same are liable to pay a fine of N20 million (Twenty Million Naira only).

Overall, the NIMC Act strengthens Nigeria’s digital identity ecosystem by creating a clearer legal framework for identity verification, database interoperability and secure digital authentication. It is expected to improve access to government services, strengthen Know-Your-Customer (KYC) compliance across regulated sectors, reduce identity fraud, enhance cybersecurity and increase public confidence in digital transactions. Financial institutions, telecommunications operators, government agencies and other organisations that rely on identity verification will need to review their compliance frameworks to ensure alignment with the new statutory requirements.

MANDATORY LOCAL HOSTING REQUIREMENTS FOR BANKS AND FINANCIAL INSTITUTIONS

The Central Bank of Nigeria (the “CBN”) issued a directive that required banks, fintech companies, payment service providers and other participants in the payments ecosystem to host and store all payment transaction data generated within Nigeria on a local infrastructure. The directive is one of the CBN’s strategy to improve regulatory oversight, cybersecurity, operational resilience and promote data sovereignty within Nigeria’s financial sector.

The policy seeks to ensure that financial transaction data remains within Nigeria’s jurisdiction and is readily accessible to regulators and law enforcement agencies when necessary, i.e. in the event of investigation. As digital payments continue to grow, CBN aims to reduce the risks associated with storing sensitive financial data on offshore servers and foreign cloud infrastructure.

The directive also aligns with the universal shift towards data sovereignty and the recognition of financial transaction data as a strategic national asset because of the insights it provides on economic activities, consumer behaviour, business operations and financial flows within the economy. By mandating local hosting, the CBN seeks to improve regulatory supervision, facilitate anti-money laundering investigations, strengthen fraud detection and enable faster responses to cybersecurity incidents and other operational disruptions.

In addition, the policy is expected to encourage investment in Nigeria’s data centres and cloud infrastructure which reduces reliance on foreign digital service providers and supports the growth of the local technology ecosystem. Over time, this may contribute to increased domestic investment, job creation and reduced foreign exchange outflows associated with offshore data hosting services.

Despite these potential benefits, the directive presents significant compliance challenges. Financial institutions may be required to migrate existing systems, review outsourcing arrangements, upgrade cybersecurity measures and invest in local hosting infrastructure, all of which may result in increased operational costs, particularly for fintech companies and emerging technology firms.

The directive also imposes new legal and regulatory obligations on banks, fintechs, payment service providers and technology vendors. Organisations are required to strengthen their data governance, cloud management, cybersecurity and regulatory compliance frameworks to ensure alignment with the CBN’s requirements.

The directive may also have implications for Nigeria’s foreign exchange position. Many banks and fintech companies currently make recurring payments in foreign currency to international hosting and cloud service providers. As more institutions migrate to locally hosted infrastructure, there may be a reduction in foreign exchange demand associated with these services. While the impact on overall foreign exchange demand may not be significant, it aligns with broader government efforts to reduce dollar outflows and strengthen domestic economic activity.

A key benefit of the directive is that it strengthens Nigeria’s financial infrastructure through enhanced data security, improved regulatory oversight, greater operational resilience and increased protection of critical payment information. Most importantly, the policy is expected to reinforce confidence in Nigeria’s digital financial ecosystem.

PROPOSED CONSTITUTIONAL REFORM ON THE TERM OF EXECUTIVE TENURE

The Senate proposed a constitutional amendment to replace Nigeria’s two-term governance structure for the President and State Governors with a single, non-renewable six-year tenure. The proposal aims to allow elected executives to focus on governance by eliminating the distractions associated with re-election campaigns. Because executive tenures are constitutionally prescribed, the proposal requires approval by the National Assembly and ratification by at least two-thirds of the State Houses of Assembly before it can take effect, as prescribed by Sections 9, 137 and 180 of the 1999 Constitution (as amended).

The proposal is also driven by the view that Nigeria’s political system encourages continuous campaigning, which has often shifted attention away from governance midway through a first term. A single tenure is therefore expected to promote policy continuity, reduce the influence of incumbency, lower the cost of elections and allow governments to pursue long-term reforms without immediate electoral pressures. However, the proposal also raises the concern on democratic accountability. Under the current system, voters can either reward effective leadership with a second term or remove underperforming administrations after four years. A single six-year tenure removes this electoral check and may reduce incentives for responsiveness to public opinion.

A key implication of the proposal is its attempt to shift Nigeria’s governance model from election-driven politics to performance-focused leadership. Although this may enhance policy focus and continuity, its success will ultimately depend on the strength of democratic institutions and accountability mechanisms that ensure elected officials remain responsive throughout their tenure.

THE TAX REFORM ON SUGAR- SWEETENED BEVERAGE

By virtue of the Customs, Excise Tariff, etc. (Amendment) Bill, the Senate approved the proposed amendment to the excise duty chargeable on sugar-sweetened beverages to a value-based levy now calculated at a percentage of the product’s retail price. The proposed bill sought to replace the previous excise duty introduced under Section X of the Finance Act, 2021 which was chargeable at N10.00 (Ten Naira only) per liter of the sugar-sweetened beverage.

The proposed reform is intended to strengthen the effectiveness of Nigeria’s sugar tax by ensuring that higher-priced beverages attract higher excise duties. This revision also replaces the previous duty, whose value had been significantly eroded by inflation, with a modern, sustainable duty structure that reflects current economic realities.

It is also a reflection of the government’s effort to address the growing incidence and concern of diet-related diseases, including diabetes, cardiovascular ailments, obesity and hypertension, while generating additional revenue for public health interventions.

The reform aligns with the global adoption of health taxes, which uses fiscal measures to discourage unhealthy consumption and improve healthcare funding as a portion of the revenue generated is expected to support the health sector in Nigeria. Although the proposal has not yet become law, it is a pointer towards the use of taxation as a public health and behavioural policy tool.

NATIONAL YOUTH SERVICE CORPS SCHEME REFORM

In response to clamour for the reform of the National Youth Service Corps (“NYSC”) to reflect contemporary economic and digital realities in Nigeria, the NYSC has introduced a new model featuring 11 (eleven) specialised career streams that will deploy corps members based on their academic background, skills and career aspirations, whilst preserving the promotion of national unity as a core objective.

As part of the reform, the NYSC orientation program has also been upgraded to place greater emphasis on digital skills, entrepreneurship, vocational training, civic leadership and industry-relevant competencies. To effectively accommodate this expanded curriculum, the reform proposes the expansion of the duration of the orientation from three to six weeks.

In addition, it introduced changes to the NYSC identity and operational framework, including the adoption of Adire as part of the official uniform, an effort to promote Nigeria’s cultural heritage while modernising the Scheme. The reform also proposed a shift from the military administration of the NYSC scheme to the supervision by a civilian director-general.

Another key objective of the reform is to reposition the NYSC as a platform for human capital development, innovation and youth employment as against the previous model which focused on national integration. As such, by strengthening skills acquisition and improving alignment between graduates and the national sectoral needs, the Government seeks to enhance the employability and productivity of Nigerian graduates.

Although this reform is a shift towards leveraging the NYSC as a viable instrument for national development rather than solely a post-graduation service programme, there has been some push back on some of the reforms such as the extended camp time, the poor infrastructure of NYSC, the change from military administration to civilian governance as well as raised questions on national unity and national defence which were thematic considerations for the NYSC scheme earlier introduced. In the meantime, the reform stands whilst we await the Government’s response to the issues raised.

STATE POLICE REFORM

In June 2026, the House of Representatives and the Senate passed the Constitution of the Federal Republic of Nigeria (Alteration) (State Police) Bill, 2026, marking a major step toward the decentralisation of Nigeria’s policing system. The Bill seeks to alter Sections 214, 215 and 216 of the 1999 Constitution (as amended) to replace the existing single national police structure with a dual policing framework comprising a Federal Police Service and State Police Services.

Under the proposed framework, each State Police Service will be headed by a Commissioner of Police appointed by the Governor and confirmed by the State House of Assembly. The Bill also introduces institutional safeguards intended to prevent the political abuse of state police, including an express prohibition on Governors and other political actors directing the police to target political opponents, ethnic groups or associations, as well as independent State Police Service Commissions to oversee recruitment, promotion and discipline.

In addition, the Bill vests in the State Commissioner of Police the authority to formally challenge any directive issued by a State Governor where such directive is considered unlawful or inconsistent with established police standards. Where such a conflict arises between the Commissioner of Police and the State Governor, the Nigeria Police Council (NPC) is empowered to serve as the final deciding authority on the matter, with its determination binding on both parties.

The Bill delineates the responsibilities of both tiers of policing to minimise jurisdictional conflict. The Federal Police Service retains responsibility for the protection of federal institutions and the Federal Capital Territory, counterterrorism, organised crime, cybercrime, border security, arms trafficking and other matters of national security, while State Police Services are responsible for enforcing state laws, maintaining public order, preventing crime and protecting lives and property within their respective states.

Notwithstanding these safeguards, there are significant policy and implementation questions that need to be considered. These include how operational responsibilities will be shared between federal and state police services, the funding capacity of individual states, the establishment of uniform recruitment and training standards, mechanisms for intelligence sharing, accountability and discipline and constitutional safeguards against political abuse. Addressing these issues will determine whether state policing enhances Nigeria’s security architecture or creates additional governance and coordination challenges.

Having scaled through both chambers of the National Assembly, the constitutional amendment now requires ratification by at least two-thirds of the 36 State Houses of Assembly before it can take effect, in line with the procedure prescribed under Section 9 of the 1999 Constitution (as amended).

CONCLUSION

Taken together, the policy and legislative developments of June 2026 reflect a period of active reform across Nigeria’s fiscal, digital, financial, constitutional and institutional landscape. From the transition guidelines easing implementation of the new tax regime, to the consolidation of identity infrastructure under the NIMC Act, the localisation of financial data, and the advancement of long-standing proposals on executive tenure and state policing, the month’s developments point to a government actively using law and policy to respond to governance, security and economic challenges.

For individuals and businesses alike, these reforms carry practical and compliance implications that will likely continue to unfold in the months ahead. We will continue to monitor these developments and their implementation and provide updates as they progress.

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