The Federal Inland Revenue Service (FIRS) has moved to quell growing anxieties over Nigeria’s upcoming tax overhaul, assuring businesses and investors that the controversial 4 percent Development Levy on imported goods is not an additional tax burden but a consolidation of existing charges designed to cut red tape, improve predictability, and boost the country’s investment appeal.
In a detailed statement released Wednesday, the FIRS addressed concerns surrounding the newly enacted Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA), which take effect in January 2026. According to the agency, the reforms are aimed at creating “a more competitive, transparent, and investor-friendly Nigeria,” noting that much of the public criticism stems from “misinterpretations” of the changes.
Central to the debate is the 4 percent Development Levy, which replaces several separate charges previously paid by importers, including the Tertiary Education Tax, NITDA Levy, NASENI Levy, and Police Trust Fund Levy. The FIRS reiterated that the levy is not a new tax but a streamlined approach that reduces compliance costs and eliminates unpredictable, agency-by-agency collections.
The levy also includes safeguards: small businesses and non-resident companies are fully exempt, protecting vulnerable sectors of the economy. Analysts say the move signals Nigeria’s shift toward a unified, more business-friendly fiscal framework capable of attracting increased foreign direct investment by eliminating the long-criticized “multiple tax trap.”
Concerns had also been raised about the future of Nigeria’s Free Trade Zones (FTZs), which have long attracted export-focused industries. Early leaks suggested that incentives might be weakened, but the FIRS clarified that FTZ privileges remain intact.
Under the revised structure, FTZ companies may now sell up to 25 percent of their production in the domestic market without losing their tax exemptions, a measure intended to prevent past abuses where FTZs were allegedly used to avoid taxes while competing directly with local producers. A three-year transition window will ease implementation, aligning Nigeria with global practices in countries such as the UAE and Malaysia, where FTZs operate primarily as export-driven hubs for manufacturing, logistics, and technology.
The reforms also introduce a 15 percent minimum Effective Tax Rate (ETR) for large multinationals and domestic corporations, consistent with the OECD/G20 global minimum tax framework endorsed by over 140 countries. Without adopting the standard, Nigeria risked losing revenue through “Top-Up Tax” mechanisms that allow a multinational’s home country to recover tax shortfalls if the host country’s rate falls below 15 percent.
By implementing the policy locally, the FIRS said Nigeria retains revenue generated within its borders. The ETR will also apply to large domestic firms to discourage profit shifting and promote fairness. According to analysts, the measure protects Nigeria’s tax base without discouraging legitimate investment.
On the investment front, the NTA now classifies capital gains as “chargeable gains” and introduces several pro-growth incentives. Among them is a reinvestment relief: investors who sell shares and reinvest the proceeds in another Nigerian company within the same year will not pay gains tax. Analysts say the reform could unlock new funding opportunities for startups, venture capital, and private equity.
Other features include updated loss carryforward rules, exemptions for low-value transactions to protect small investors, and measures to prevent business income from being disguised as capital gains. Consistent with assurances given in November by Presidential Fiscal Policy and Tax Reforms Committee Chairman Taiwo Oyedele, the reforms are not retroactive. Investments made before 2026 will have their cost base reset to the higher of the original purchase price or the market value as of December 31, 2025, preventing the kind of panic-driven sell-offs that unsettled the markets last month.