A new report by the Alliance for Economic Research and Ethics LTD/GTE has said the Nigeria Tax Act, 2025, could, potentially erode business profitability, deter investors and weaken Nigeria’s competitiveness within Africa.
The Act, signed into law in June 2025 will come into effect from January 2026.
According to the report, whereas the government aims to modernise tax administration, block leakages, and boost public revenue amid falling oil income and rising debt obligations, with the stated objective to “streamline administration, curb tax evasion, and ensure all sectors contribute their fair share to national progress,” businesses and investors are increasingly expressing concern over what they describe as steep obligations introduced without adequate transitional measures.
“The severe increase in the Capital Gains Tax, the imposition of a new Development Levy, the uncertainty cast upon the Free Trade Zones, and the unusual domicile of the Single Window Trade Platform threaten to cripple the very investment and business growth that Nigeria desperately needs to secure its long-term economic future,” the report said.
It pointed out that one of the most controversial updates is the increase in Capital Gains Tax (CGT) for companies from 10 per cent to 30 per cent, aligning it with the corporate income tax rate.
The Alliance described the change as “a seismic shock to the investment landscape,” with analysts warning of reduced returns for private equity, venture capital, and foreign investors.
A 4 per cent Development Levy on assessable profits replaces several existing levies. While government officials say the levy will fund national development projects, experts warn it may squeeze margins, particularly for manufacturers, retailers and agribusinesses.
In line with OECD guidelines, Nigeria has adopted a 15 [er cent minimum tax rate for multinationals with turnover above €750 million and domestic firms earning over N50 billion.
The Act abolishes long-standing tax exemptions for Free Trade Zone (FTZ) operators, a move analysts describe as “abrupt and ambiguous,” potentially undermining one of Nigeria’s historical investment magnets.
Additional provisions expand the taxation of digital assets and introduce more progressive personal income tax bands.
The report pointed out that the 200 per cent increase in would dampen long-term capital formation and discourage M&A transactions and startup investment.
“Private equity and venture capital ecosystems rely heavily on successful exits,” the report notes, arguing the reform could slow innovation.
The Alliance warned that the 4 per cent levy may disproportionately impact sectors operating on thin margins, worsening cost pressures, adding that the removal of blanket tax incentives may push investors toward regional competitors such as Ghana, Rwanda and Ethiopia, where business costs are falling and regulatory environments are stabilising.
The report, however, identified potential long-term benefits of the law, including that the 15% minimum tax could create fairer competition between multinationals and domestic firms, consolidating multiple levies into a single Development Levy may reduce administrative complexity; SME exemptions remain intact, enabling smaller businesses to reinvest and expand; and if well implemented, the Act could broaden the tax base and boost fiscal transparency.
The report also compares Nigeria’s reforms with policy directions in other African economies:
The Alliance proposed measures to balance revenue generation with economic growth, including, moderate the CGT increase through a phased approach beginning at 15%; Redesign FTZ incentives rather than scrapping them entirely; Issue clear implementation guidelines through the Federal Inland Revenue Service; and Align tax reforms with AfCFTA goals to improve competitiveness.
It warned that without strategic adjustments, the Nigeria Tax Act, 2025 could “function more as a constraint than a catalyst” for investment and growth.
