Market Context and Overview
After two decades of piecemeal fixes, Nigeria’s tax architecture is undergoing a structural redesign in 2025. Within a single week in June, seven separate developments surfaced—from corporate tax-rate cuts advocated by the Presidential Tax Reform Committee to National Assembly bills that expand the tax net for foreign carriers. Simultaneously, a new National Tax Transition Steering Committee (NTTSC) was inaugurated to align fiscal policy with ECOWAS directives, while governors, NEITI, and FAAC figures exposed the pressure points of Nigeria’s revenue system. Taken together, these moves sketch the contours of a crucial mid-year inflection point for policy makers, businesses, and investors.
Nigeria’s revenue-to-GDP ratio, at barely 8.5 %, remains among the world’s lowest. Oil receipts are volatile, VAT buoyancy is offset by compliance gaps, and illicit financial flows drain an estimated US$18 billion annually. Against this backdrop, the push for a streamlined, investment-friendly, and data-driven tax regime is not just desirable—it is existential.
Major Developments Analysis
1. Oyedele’s Blueprint for Lower Corporate Tax and Inclusive Relief
Chairman of the Presidential Tax Reform Committee, Taiwo Oyedele, used a public lecture to call for a lower headline corporate income tax rate, higher exemption thresholds for MSMEs, and zero-rating of essential goods. His remarks emphasize the committee’s philosophy: fewer, broader-based taxes anchored on credible data. Voice of Nigeria reports that over one-third of Nigeria’s workers could become fully exempt from income tax under the proposed framework, while tariff reductions on raw materials aim to compress manufacturers’ input costs.
Policy trend: Nigeria is converging toward the continental average corporate tax rate of 27 %. The move echoes Kenya’s 2023 cut from 30 % to 25 % and South Africa’s phased reduction to 27 %—a competitive response to foreign-direct-investment (FDI) attrition.
Practical implications:
• Large corporates secure lower statutory burdens but lose access to a patchwork of discretionary waivers.
• MSMEs gain simplified filing and higher exemption thresholds, encouraging migration from the informal sector.
2. NEITI’s Call for a Fair Global Tax Regime
At the National Dialogue on Financing for Development, NEITI’s Executive Secretary, Dr. Orji Ogbonnaya Orji, demanded an equitable global tax order to curb illicit flows from resource-rich nations. According to Punch Newspapers, Orji urged African negotiators to present a unified front at the forthcoming UN Financing for Development summit in Spain.
Policy trend: The OECD’s Pillar 2 global minimum tax and UN resolutions on tax cooperation have rekindled debates on source-based taxation for commodities. Nigeria’s stake lies in clawing back royalties and profit-shifting leakages, conservatively valued at ₦7 trillion annually.
Practical implications:
• Multinationals face heightened due-diligence demands and country-by-country filing.
• The FIRS may leverage multilateral exchange-of-information (EOI) channels to issue retroactive assessments.
3. National Assembly Tightens the Net on Foreign Shipping & Aviation Firms
Both chambers passed harmonised amendments to Section 14 of the Companies Income Tax Act (CITA). The bills, now on the President’s desk, deem profits from any carriage service that originates in Nigeria as Nigerian-source income—regardless of a carrier’s domicile, reports BusinessDay. A parallel story captured by Goldmyne TV underscores bipartisan support.
Policy trend: Source-based rules mirror India’s "significant economic presence" tests and Ghana’s 2023 freight-income tax. Nigeria is closing long-exploited gaps where foreign carriers escape tax by ticketing through overseas hubs.
Practical implications:
• Airlines and shipping lines must register for Tax Identification Numbers (TINs) and may face 2 years’ retroactive assessments once the bill is signed.
• Logistics costs could initially rise 2-3 %, but local carriers may gain a level playing field.
• The FIRS must craft apportionment formulas where global route profitability is opaque.
4. Inauguration of the National Tax Transition Steering Committee (NTTSC)
On 5 June, the Finance Ministry launched the NTTSC to steer Nigeria’s shift from border tariffs toward domestic taxation in compliance with ECOWAS Directive C/DIR.5/07/23, according to Realnews Magazine. The committee serves as Nigeria’s single window for regional fiscal integration and will coordinate with the ECOWAS Fiscal Transition Programme.
Policy trend: As the African Continental Free Trade Area (AfCFTA) slashes tariffs, ECOWAS members must replenish revenue via VAT and direct taxes. The NTTSC is Nigeria’s institutional answer.
Practical implications:
• Accelerated e-VAT rollout on digital supplies to capture cross-border consumption.
• A possible uniform ECOWAS customs code by 2027, affecting supply-chain classifications.
5. Governors Flag Illegal Taxes and Checkpoints in Food Supply Chains
Rising food inflation—35.7 % year-on-year in May—prompted the Nigeria Governors Forum (NGF) to decry informal levies and checkpoints that bloat farm-gate prices. Daily Post quotes Lagos Governor Babajide Sanwo-Olu: “Proliferation of checkpoints and illegal taxation are key contributors to price inflation.”
Policy trend: Sub-national fiscal desperation has spawned up to 500 different levies across 36 states. The new push for harmonised levies echoes the Joint Tax Board’s 2024 guidelines on presumptive taxes.
Practical implications:
• Agribusiness margins remain under threat until road-tax consolidation takes hold.
• States may sign MOUs with the federal government to digitise haulage permits by Q4 2025.
6. FAAC May 2025 Allocation Shows Revenue Volatility
The Federation Account Allocation Committee shared ₦1.65 trillion in May—₦30 billion lower than April—driven by weaker oil receipts even as VAT surged to ₦742.8 billion. Nigerian Bulletin also highlighted ₦731 billion in unpaid oil royalties.
Policy trend: Dependence on statutory oil revenue remains Nigeria’s fiscal Achilles heel. The uptick in VAT underscores the tax’s resilience but exposes compliance disparities—formal-sector contributors shoulder the bulk, while the informal economy remains largely untaxed.
Practical implications:
• States reliant on 13 % derivation face cash-flow stress as oil output stagnates.
• Expect more aggressive VAT audits targeting telecommunications and e-commerce.
Market Analysis and Sector Impact
- Manufacturing: Tariff cuts on raw materials, if adopted, lower cost-of-sales and improve EBITDA margins by an estimated 150 bps. Yet, VAT on inputs will still accumulate unless prompt refunds materialise. Export-oriented manufacturers may become net VAT refund claimants.
- Transport & Logistics: Foreign carrier taxation could raise ticket prices 2–5 % in the short run. Local airlines such as Air Peace may exploit cost parity to win market share. Shipping lines may renegotiate Nigerian leg surcharges.
- Digital & Remote Work Platforms: Oyedele’s pledge for income-class reforms to attract remote work can make Nigeria a hub for global freelancing, contingent on double-taxation treaty adjustments.
- Agribusiness & FMCG: Harmonised levies could shave 3 % off farm-to-market logistics costs, partially easing food inflation. FMCGs will welcome lower checkpoint payments but may still grapple with exchange-rate volatility.
- Oil & Gas: Exposure to NEITI-driven transparency means IOC cash-call recoveries and royalty settlements will tighten. Operators should prepare for joint audits under the Petroleum Industry Act’s fiscal provisions.
- State Governments & Sub-nationals: FAAC volatility pressures states into domestic borrowing, but prospective VAT pool growth offers relief—conditional on enhanced compliance enforcement.
Looking Ahead: Future Implications
- Corporate Tax Rate Trajectory: Should the Presidency embrace Oyedele’s proposal, headline CIT could fall from 30 % to 25 % by the 2026 assessment year. The move will spur M&A interest but must be paired with base-broadening anti-avoidance rules.
- Enactment of CITA Amendments: Presidential assent is expected before the legislative recess in July 2025. The FIRS will likely issue a public notice within 30 days, detailing registration, filing cycles, and safe-harbour rules for foreign carriers.
- ECOWAS VAT Harmonisation: By 2027, Nigeria may need to adjust its VAT Act to align with a regional standard rate (15 % floated in ECOWAS papers) and adopt destination-based principles for e-commerce.
- Global Tax Negotiations: If the UN adopts a framework convention on tax cooperation in 2026, Nigeria may gain legal grounds for unilateral withholding taxes on digital multinationals—a revenue upside of ₦400 billion annually.
- Digitisation & Data Analytics: The FIRS is piloting blockchain-enabled e-invoicing for exports. Expect mandatory e-invoice generation for all business-to-business (B2B) transactions above ₦5 million by 2028.
Key Takeaways for Stakeholders
• Businesses: Model effective tax rates under a 25 % CIT scenario but budget for broader audit coverage. Foreign carriers should initiate readiness assessments for Nigerian booking data segregation.
• Tax Advisors: Prioritise transfer-pricing diagnostics for extractive and digital clients; advise MSME clients on navigating new exemption thresholds and presumptive-tax regimes.
• State Governments: Digitise levy collection to merge informal road taxes into transparent, single-window payments; leverage VAT buoyancy while boosting compliance.
• Policy Makers: Ensure tariff cuts coincide with customs automation to prevent fraud; fast-track VAT refund processing to sustain manufacturer liquidity.
• Investors: Monitor timelines for CITA amendment assent and corporate rate changes; valuation models should incorporate lower tax drag but higher compliance costs.
• Compliance Deadlines:
– 30 days post-assent: FIRS guidelines on foreign carriers.
– 31 Dec 2025: NTTSC to publish ECOWAS Fiscal Transition implementation roadmap.
– Q1 2026: Anticipated MSME simplified filing portal.
Prepared by MyTax - mytax.com.ng