….New law to ease cost pressures, boost investment, says Tegbe
Nigeria’s manufacturing sector is set to benefit from wide-ranging incentives and clearer tax rules under the Nigeria Tax Act 2025, with experts saying the reforms could unlock investment, improve cash flow and strengthen local production.
An accounting firm, Kreston Pedabo, said the new tax regime introduces measures designed to reduce long-standing tax burdens on manufacturers while addressing key challenges such as infrastructure gaps and high operating costs.
In a newsletter made available to journalists, the firm noted that the reforms consolidate multiple tax laws into a single framework, a move expected to simplify compliance and enhance transparency across the sector.
Its Partner in Tax Services, Kehinde Folorunsho, described the reforms as a major shift in Nigeria’s fiscal landscape, adding that effective implementation would be critical to maximising benefits for manufacturers.
One of the standout features of the new law is the introduction of economic development tax incentives for firms operating in priority sectors, including manufacturing. According to Folorunsho, eligible companies can obtain economic development incentive certificates, granting them a five per cent annual tax credit on qualifying capital expenditure for up to five years.
He said firms that reinvest profits could enjoy extended incentive periods, while certain manufacturing-related instruments have been exempted from stamp duties, further reducing operating costs.
Kreston Pedabo explained that the incentives are aimed at stimulating investment in local production, cutting import dependence and enhancing Nigeria’s industrial capacity.
The reforms also strengthen capital allowance provisions, providing clearer guidance on expenditure related to plant, machinery and industrial buildings. Folorunsho said this would enable manufacturers to recover capital costs more efficiently, improving cash flow, especially during the early years of operation.
In addition, the Act introduces research and development deductions, allowing manufacturers to deduct up to five per cent of turnover from taxable profits. Folorunsho noted that the measure would encourage innovation, product development and technological advancement across the sector.
On indirect taxation, the new framework retains the value-added tax (VAT) rate at 7.5 per cent while exempting selected locally produced goods, including agricultural products, medical supplies and educational materials. Clearer rules on input VAT credits are also expected to reduce disputes and minimise multiple taxation on raw materials and capital equipment.
Manufacturers operating in agriculture and agro-processing are poised to gain further benefits, including income tax exemptions for the first five years of operation, zero-rated VAT on locally produced animal feeds, fertilisers and veterinary medicines, as well as duty exemptions on imported agricultural machinery.
Folorunsho said the combined impact of the reforms could significantly improve profitability, enabling manufacturers to reinvest in expansion, skills development and technology upgrades.
Meanwhile, the Chairman of the National Tax Policy Implementation Committee, Joseph Tegbe, said the reforms are focused on rebuilding Nigeria’s fiscal architecture rather than merely boosting government revenue.
In a self-authored article on the Nigeria Tax Acts 2025, Tegbe, a fellow of the Institute of Chartered Accountants and former senior partner at KPMG Africa, said the reforms are designed to lay the foundation for a modern, functional economy.
“Nigeria’s fiscal failure has never been the absence of wealth; it has been the absence of structure,” Tegbe said, noting that the country has long depended on volatile oil revenues and weak fiscal administration.
He explained that the new tax laws aim to reconnect economic activity with the state through improved coordination and visibility, stressing that broadening the tax net is about inclusion, not extraction.
The reforms also seek to modernise tax administration by replacing manual processes and discretionary enforcement with digital systems and harmonised frameworks.
“Investors, businesses and households do not fear taxes as much as they fear uncertainty,” Tegbe said, adding that a transparent, rules-based system would reduce arbitrariness and rent-seeking, thereby encouraging investment.
He highlighted protections for low-income earners and small businesses, noting that individuals earning up to N800,000 annually will now pay zero tax, up from the previous N300,000 threshold that attracted a seven per cent rate.
“One does not tax the seed; one nurtures it to blossom,” Tegbe said, explaining that the reforms are designed to preserve livelihoods, encourage formal participation and support organic growth.
Critical sectors such as healthcare, education and agriculture have also been protected through expanded zero-rated VAT items, helping to lower costs and improve access to essential goods.
“A digital tax system is not only more efficient, it is fairer and more transparent,” Tegbe said, adding that it would reduce compliance costs, improve accuracy and build trust between taxpayers and government.
