From available sources:
Under Nigeria’s Tax Reform Act effective 1 January 2026, Nigerian residents will be taxed on worldwide income while non-residents are taxed only on income sourced within Nigeria.
The law clarifies what constitutes “residency” (presence, domicile, economic & family ties, or habitual abode) via criteria such as being in Nigeria for at least 183 days.
Additionally, there’s an amended Personal Income Tax Act (PITA 2011) that will begin taxing certain foreign or expatriate earnings under certain thresholds.
So the bottom line: Nigeria is moving more toward a residence-based taxation model (taxing residents on their global income), whereas non-residents or citizens abroad who are clearly non-resident may still be taxed only on Nigeria-sourced income. The crucial distinction is “resident” vs “non-resident”.
Is This “Citizens Abroad Should Pay Taxes” Exactly What It Means?
Not precisely. There’s a difference between:
Taxation by citizenship (i.e. anyone who holds citizenship must pay tax irrespective of where they live), and
Taxation by residency (if you are a resident of the country, you pay on your global income; if not, just on local or source-based income).
Most countries (and the international norm) use the residency approach. Only a few use citizenship‐based taxation.
Nigeria’s law seems to adopt the residency model, not pure citizenship‐based taxation. So Nigerians abroad could be taxed, but typically only if they meet residency or other criteria that tie them sufficiently to Nigeria (e.g. 183 days etc.), or if they have income sourced in Nigeria.
Global Best Practice — What Do Others Do?
To assess whether Nigeria’s approach aligns with “best practices,” let’s see what others do and what norms tend to be.
Approach
Examples Pros & Cons
Citizenship-based taxation (everyone pays wherever they live) The US is the most prominent example. Also Eritrea has a diaspora tax (though controversial). Ensures all citizens contribute; may capture high net worth individuals abroad; prevents loopholes if people shift income abroad. Very hard to enforce; perceived unfair if a person lives permanently elsewhere, pays taxes in host country, uses no services in home country; can disincentivize emigration or even citizenship retention.
Residency-based taxation (residents taxed globally; non-residents taxed only on source income) Many countries: e.g. China, UK (subject to domicile/residency), etc. Fairer in many respects; matches service provision; simpler in many situations; more accepted globally. Defining “residency” can be complicated; possible avoidance via establishing non-residency; tax treaties and double taxation issues.
Territorial systems (only the income earned inside country is taxed) Some countries especially ones trying to attract foreign investment or diaspora. More attractive for diaspora / foreigners; encourages foreign income / investment inflows; simpler to administer for non-residents. May lead to erosion of tax base if many citizens live abroad; less revenue; complicated if citizens maintain strong ties.
Is Nigeria’s Law “Global Best Practice”?
Yes and no — there are arguments both ways.
Arguments in Favor
Consistency with many tax systems: Most countries use residency as a criterion for taxing global income; Nigeria’s move is in line with that. It avoids some of the extreme pitfalls of citizenship-based taxation.
Revenue generation: Nigeria has large external obligations plus needs for public investment; broadening the base (by taxing foreign income of residents) can increase revenues.
Fairness between people: Residents who live partly abroad but benefit from Nigerian infrastructure/ties could be expected to contribute; treating non-residents differently is common.
Arguments Against / Challenges
Ambiguity over who counts as “resident”:
The criteria (e.g. 183 days, domicile etc.) can be manipulated, or lead to disputes. Diasporans might object if they feel tied to Nigeria culturally but not meeting strict legal “residency.”
Double taxation issues: Many Nigerians abroad already pay taxes in their country of residence. Unless there are solid tax treaties or foreign tax credit systems, residents could be taxed twice.
Diaspora relations effects: If the diaspora sees this as unfair, it can reduce investments, remittances, or engagement. The diaspora often contributes a lot (financially, socially, through skills) beyond direct tax cooperation.
Enforcement challenges: Collecting tax on incomes earned outside Nigeria is hard (tracking, verifying, international cooperation), especially if the person uses foreign bank accounts or hosts in countries with strict privacy.
How “Best Practice” Might Be Defined Here
What “best practice” looks like depends on what priority a country sets:
If the priority is maximizing revenue and closing loopholes, then a well-defined residence-based global income tax makes sense.
If priority is diaspora engagement, encouraging remittances, foreign investment, then having too heavy a tax burden on citizens abroad might backfire.
If the goal is fairness (i.e. everyone who uses/benefits from services contributes in proportion), then resident-based global taxation (with good treaties/credits) is more defensible.
Conclusion
Nigeria’s law is not unique; many countries tax residents on worldwide income. It is aligned with global norms in many respects.
It is not the same as pure citizenship-based taxation (which is rare globally). So stating “Nigerians abroad must pay taxes” may be a simplification; many might remain exempt if they don’t meet residency requirements or have Nigeria-sourced income.
Whether it is “best practice” depends on how well the law is crafted: definitions, treaty protections, credit for foreign taxes, avoiding double taxation, and balanced with diaspora goodwill.
by Dr. Dishack Izuchukwu
@IzuchukwuCenter
