BY DR. TOPE FASUA—In recent weeks, a wave of commentary has suggested that Nigeria’s new tax regime may scare away investors, trigger capital flight, or damage business competitiveness. These concerns, although understandable in an environment where fiscal reforms attract intense public scrutiny, are largely misplaced.
The 2025 tax reforms, anchored by the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA), represent one of Nigeria’s most pro-investment, pro-market, and modernising tax policy updates in decades. Far from undermining growth and competitiveness, the reforms simplify the tax landscape, align Nigeria with global best practices, reduce compliance burdens, and protect both businesses and individuals from outdated rules. More importantly, the reforms are fundamentally progressive, in line with Mr President’s promise to improve the standard of living of all Nigerians.
A careful review of the reforms shows that they make Nigeria more competitive, not less. They achieve this through significant improvements, including: consolidating multiple earmarked taxes into a streamlined Development Levy; maintaining strong incentives for Free Trade Zones; implementing the globally agreed 15% minimum tax on multinational enterprises; and modernising capital gains taxation to reflect today’s economic realities. Let us examine each in turn.
One of the most misunderstood elements of the reform is the 4% Development Levy. Some have incorrectly described it as “a new tax.” It is not. It replaces a chaotic regime of fragmented earmarked taxes, including the Tertiary Education Tax (3%), NITDA Levy (1% of PBT), NASENI Levy (0.25%), and the Police Trust Fund Levy. When aggregated, these distinct levies imposed an effective tax burden that could exceed 4% particularly for companies in the technology, telecommunications and financial sectors. Furthermore, small businesses with a turnover of 100 million and below and non-resident companies are now exempt from the Development Levy.
The consolidation of the plethora of levies into one offers investors predictability, a reduction in the cost of compliance, and a reduction in the cost of doing business. In the previous regime, the proliferation of agency-specific levies created uncertainty; investors feared that new, distinct taxes would inevitably fund new agencies. The Development Levy establishes a unified framework for funding education, defence, security, technology, and cybersecurity from a single pool, signalling to investors that the era of ad hoc earmark taxes is finally over. Investors value certainty and simplicity, and the Development Levy delivers both.
Another area that has generated anxiety is the treatment of Free Trade Zones. Critics suggest that the government watered down their incentives. Again, this is incorrect. A careful reading of Section 60 and the Second Schedule of the NTA reveals a policy designed to curb tax base erosion while sustaining incentives for genuine exporters. The NTA maintains the core tax-exempt status of Free Trade Zone entities but imposes critical conditions to ensure these zones serve their primary economic purpose: generating foreign-exchange earnings through exports.
What changed? The Nigeria Tax Act now sets a 25% threshold for domestic sales by FTZ companies. If an FTZ enterprise sells up to 25% of its output into the Nigerian market, it continues to enjoy exemptions for a three-year transition period (2026 to 2028).
Why is this necessary? FTZs are meant to attract exporters, manufacturers producing for global markets, logistics hubs, and high-value assembly plants. They are not meant to attract companies enjoying tax-free status while competing unfairly with Nigerian firms inside the domestic economy.
After 2028, the law provides that FTZ companies will be taxed on any domestic sales. Countries like the UAE, Malaysia, and Mauritius have similar structures. Nigeria is not doing anything unusual. The underlying message is clear: Nigeria’s FTZs remain competitive for exporters, manufacturing hubs, and global supply chain investors.
Another misconception in public commentary is around the new 15% minimum tax for large multinationals and large Nigerian businesses. The 15% minimum tax is the product of a landmark OECD/G20 agreement endorsed by over 140 countries, including the UK, France, Germany, the UAE, Canada, Japan, South Korea, South Africa, and Nigeria. It applies only to the world’s largest multinational groups, that is, those with a global turnover of €750 million or more.
Section 57 of the NTA, which domesticates the OECD/G20 agreement, is a defensive measure to protect Nigeria’s sovereign tax base, not an attack on capital. If Nigeria continues to offer effective tax rates below 15% to multinationals, their home countries (e.g., the UK, France, Germany, or South Africa) will collect the difference as a Top-Up Tax. By collecting this tax domestically, Nigeria retains revenue that would otherwise be ceded to foreign treasuries without increasing the global tax burden on the investor.
By extending the 15% Effective Tax Rate to large domestic companies (with a turnover of N50 billion or more), the NTA ensures horizontal equity. It prevents a scenario in which foreign multinationals are taxed at 15% (under global rules) while large domestic competitors utilise aggressive tax planning to pay significantly less. This creates a floor for tax competition, stabilising government revenue, which is essential for the infrastructure development that investors require.
