The Special Adviser to President Bola Ahmed Tinubu on Economic Affairs, Tope Fasua, has provided further insight into Nigeria’s upcoming Tax Administration Act, set to take effect in January 2026. According to Fasua, the reforms embedded in the act are designed to enhance Nigeria’s economic competitiveness and create a more investor-friendly environment.
Recent public discussions have raised concerns that the new tax regime could discourage investors, trigger capital flight, or reduce business competitiveness. While such worries are understandable given the scrutiny fiscal reforms often receive, they are largely misplaced.
The 2025 tax reforms, anchored by the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), mark one of the most comprehensive and pro-investment tax policy updates in decades. Rather than undermining growth, these reforms streamline the tax system, align Nigeria with global standards, reduce compliance burdens, and modernize outdated rules—all while promoting a progressive framework aimed at improving the living standards of Nigerians.
Key Reforms and Their Impact on Investment
A detailed examination reveals that the reforms enhance Nigeria’s economic competitiveness in several ways.
1. Consolidation of Earmarked Taxes into the Development Levy
One of the most misinterpreted changes is the introduction of the 4% Development Levy. Critics have mistakenly labeled it as a new tax, but in reality, it replaces a fragmented system of multiple levies, including the Tertiary Education Tax, NITDA Levy, NASENI Levy, and Police Trust Fund Levy. Previously, these levies could collectively exceed 4%, especially for businesses in sectors like technology, telecommunications, and finance.
Small businesses with turnovers under 100 million naira and non-resident companies are now exempt from the Development Levy. By consolidating multiple levies into a single framework, the reform provides clarity, reduces compliance costs, and eliminates uncertainty for investors. This measure also ensures that funds for education, security, technology, and defense are drawn from a unified pool rather than ad hoc agency-specific taxes.
2. Maintaining Incentives for Free Trade Zones
Some observers have claimed that incentives for Free Trade Zone (FTZ) companies have been weakened. In fact, the reforms preserve the core tax-exempt status of FTZs while introducing conditions to prevent abuse. Companies in FTZs can continue enjoying exemptions if domestic sales do not exceed 25% of their output during the 2026–2028 transition period.
After 2028, FTZ companies will be taxed on domestic sales beyond the threshold, a move consistent with global practices in countries like the UAE, Malaysia, and Mauritius. The reforms ensure that FTZs remain attractive to exporters and manufacturing hubs without creating unfair competition for domestic businesses.
3. Implementation of the 15% Minimum Tax for Large Companies
The reforms also introduce a 15% minimum tax for large multinationals and domestic businesses with a turnover of N50 billion or more. This aligns with the OECD/G20 global minimum tax agreement, which aims to protect sovereign tax bases while ensuring fair competition.
Rather than deterring investment, this provision preserves Nigeria’s fiscal sovereignty by preventing revenue loss to foreign jurisdictions. It also levels the playing field between multinational corporations and large Nigerian companies, ensuring that tax contributions are fair and predictable.
4. Modernizing Capital Gains Taxation
Under the new system, previously outdated capital gains taxation has been replaced with a flexible “chargeable gains” framework. Gains are now integrated into a company’s total profits or individual income and taxed at standard rates, with provisions to encourage reinvestment.
For instance, proceeds from the sale of shares reinvested within the same year in other Nigerian companies are exempt from tax. This encourages capital rotation and fosters growth without punitive taxation. Additionally, losses can offset taxable income, reducing investor risk and supporting innovation-friendly policies, particularly for venture capital and private equity.
Small-scale investors are also protected under new thresholds: gains below N150 million or chargeable gains under N10 million over 12 months are exempt from tax, lowering compliance burdens for startups and retail investors.
Conclusion
Contrary to public misconceptions, Nigeria is not erecting new tax barriers. The 2025 reforms create a modern, competitive, and predictable economic environment. By simplifying taxes, safeguarding key incentives, and aligning with international standards, the government is signaling that Nigeria is open for business while protecting both investors and ordinary citizens. These reforms close loopholes exploited by multinational companies and ensure that domestic businesses compete on an even footing, all while laying the foundation for sustainable economic growth.
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