Chairman of the Alliance for Economic Research and Ethics (AERE), Dele Oye, has said the rent relief, which caps deductible rental expenses at N500,000 yearly, and the restrictions on forex deductions are among hurdles that could hinder the implementation of the Nigeria Tax Act 2025.
The restrictions on forex deductions prevent businesses from deducting actual foreign exchange losses when sourcing funds in Nigeria’s volatile currency market
According to the former chairman of the Organised Private Sector of Nigeria (OPSN), while the reform is the most significant legislative change to the Nigerian income tax environment in the Fourth Republic, there are structural ‘glitches’ that demonstrate a disconnect from Nigerian reality.
Oye, who is also Chairman of the Nigeria-Türkiye Business Council (NTBC), spoke in a paper, ‘The Nigeria Tax Act 2025: A Critical Examination of Consolidation, Implementation Challenges, and Institutional Identity Crisis’.
He said: “Perhaps the most criticised clause in the new Act is the limit on relief for individual taxpayers. The Act decrees that taxpayers will be allowed to deduct rental expenses capped at N500,000 per year. Considering Nigeria’s primary economic hubs, including Lagos, Abuja and Port Harcourt, this figure is embarrassingly low. Given the inflationary and ‘devaluationary’ pressures on property values, N500,000 yearly is a drop in the bucket versus the actual rent expense of most average urban professionals and small business owners.
“The ‘Rent Relief Paradox’ is emblematic of a failure to properly index tax benefits to inflationary realities. By establishing fixed, static and extremely low thresholds, the government progresses towards a ‘decorative doormat’ as opposed to a safety net. For many taxpayers, the time and effort needed to collect documentation and submit for relief expenses may outweigh the aggregate tax savings.”
For Oye, the Nigeria Tax Act 2025 brings significant changes to Nigeria’s fiscal architecture, most notably, the establishment of the Nigeria Revenue Service (NRS) as the successor to the Federal Inland Revenue Service.
He added: “While there appears to be rebranding in the service used to administer taxes, the legislation suggests an expansion of the mandate of the revenue authority into investment policy.”
The growth of power is an institutional identity crisis where the primary purpose of revenue extraction is likely to eclipse the nuanced task of attracting investment.”
He urged policymakers to consider the experiences of other sectors in addressing challenges.
“For instance, the complexities encountered in Nigeria’s pharmaceutical industry, as analysed in a recent study, highlight the importance of finance and incentives in encouraging sectoral development. Learning from these challenges, the Nigeria Tax Act 2025 requires not only legal frameworks but also strategic financial incentives to support technology adoption and enhance compliance mechanisms.”
