* Tax reforms aim to fix fiscal architecture, not about revenue, says Tegbe
Nigeria’s manufacturing sector is expected to undergo significant changes following the implementation of the Nigeria Tax Act 2025, which introduces sweeping reforms, an accounting firm, Kreston Pedabo, said yesterday.
Kreston Pedabo, in a newsletter made available to journalists, noted that the reform could ease long-standing tax-related pressures faced by manufacturers while addressing infrastructure deficits and high operating costs.
Its Partner in Tax Services, Kehinde Folorunsho, said while the new acts marked a major shift in the fiscal framework by consolidating several existing tax laws, the unified regime’s poor implementation may affect manufacturers negatively.
One of the major changes under the acts is the introduction of economic development tax Incentives for companies operating in designated priority sectors, including manufacturing.
Folorunsho explained that qualifying firms can apply for economic development incentive certificates, which provide a five per cent annual tax credit on qualifying capital expenditure for up to five years.
Companies that reinvest profits may also benefit from extended incentive periods, while certain manufacturing-related instruments are exempt from stamp duties, he stressed.
According to Kreston Pedabo, the incentives are intended to encourage investment in local production, reduce reliance on imports and strengthen Nigeria’s industrial capacity.
The reform also enhances provisions on capital allowances, offering clearer guidance on the treatment of expenditure on plant, machinery and industrial buildings.
Folorunsho said the changes would allow manufacturers to recover capital costs more efficiently, improving cash flow, particularly in the early years of operation.
Another key provision, he said, is the introduction of research and development deductions, which allow manufacturers to deduct up to five per cent of their turnover from taxable profits.
Folorunsho said the measure would promote innovation, product development and technological advancement within the sector.
On indirect taxation, he noted that the new template simplifies value-added tax administration by retaining the VAT rate at 7.5 per cent while exempting certain locally-produced goods, including agricultural products, medical supplies and educational materials.
It also introduces clearer rules on input VAT credits, which Kreston Pedabo said would reduce disputes and minimise the risk of multiple taxation on raw materials and capital equipment.
Manufacturers involved in agriculture and agro-processing are expected to benefit from additional incentives under the acts. These include income tax exemptions for the first five years of operation, zero-rated VAT on locally produced animal feeds, fertilisers and veterinary medicines and duty exemptions on imported machinery used for agricultural production.
Folorunsho said the combined effect of the measures could improve manufacturers’ cash flow and profitability, allowing them to reinvest in expansion, skills development and technology upgrades.
Meanwhile, the tax reforms are fundamentally about rebuilding the country’s broken fiscal architecture rather than mere revenue generation, the Chairman of the National Tax Policy Implementation Committee, Joseph Tegbe, has said.
Speaking on the Nigerian Tax Acts 2025, Tegbe, a fellow of the Institute of Chartered Accountants and former Senior Partner at KPMG Africa, argued that decades of mischaracterisation have obscured the true purpose of the reforms, which he described as laying foundations for a modern and functional economy.
“Nigeria’s fiscal failure has never been the absence of wealth. It has been the absence of structure,” Tegbe stated in self-authored article, noting that the country has long operated a fiscal system over-dependent on volatile oil revenues, administratively weak and largely disconnected from the productive economy.
At the core of the new tax laws, Tegbe explained, is the objective of reconnecting Nigeria’s economy to the state through improved visibility and coordination of economic activity. He emphasised that broadening the tax net serves this purpose rather than extraction alone.
The reforms also seek to modernise fiscal administration by replacing manual processes and discretionary enforcement with digital compliance and harmonised frameworks suitable for a 21st-century economy.
“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 rent-seeking and arbitrariness that have long deterred investment in Nigeria.
“A significant feature of the reforms is the protection of low-income earners and small businesses. Under the new acts, individuals earning up to N800,000 yearly will pay zero tax, compared to the previous threshold of N300,000, which attracted a seven per cent tax rate.
“One does not tax the seed, one nurtures it to blossom,” Tegbe said, explaining that the reforms aim to preserve livelihoods, encourage formal participation and allow small enterprises to grow organically.
Critical sectors, including healthcare, education, and agriculture, have also been protected through expanded zero-rated VAT items, reducing cost pressures and supporting access to essential materials.
“A digital tax system is not only more efficient; it is fairer and more transparent,” he said, noting that it lowers compliance costs, improves accuracy, and builds trust between taxpayers and government,” he explained.
