Nigeria’s long-awaited tax reform could reshape how manufacturers operate, invest, and plan for growth, but its impact will depend largely on effective implementation, professional services firm Kreston Pedabo has said.
In its review of the Nigeria Tax Act 2025, the firm noted that the legislation reflects a shift toward a more coordinated, incentive-based fiscal framework, particularly for the manufacturing sector, which has long grappled with regulatory complexity, high production costs, and weak infrastructure.
The Act consolidates multiple tax laws into a single framework, a move expected to reduce uncertainty and ease compliance. However, Kreston Pedabo cautioned that poor administration or inconsistent enforcement could erode the intended benefits.
According to Kehinde Folorunsho, Partner for Tax Services at Kreston Pedabo, the reform presents “clear opportunities for manufacturers ready to invest,” though policy design alone, he stressed, will not guarantee success.
Central to the reform are new Economic Development Tax Incentives aimed at priority sectors such as manufacturing. Eligible firms can secure an Economic Development Incentive Certificate, providing a five per cent annual tax credit on qualifying capital expenditure for up to five years, with longer incentive periods available for companies that reinvest profits. Some manufacturing-related transactions are also exempt from stamp duties.
The Act further revises capital allowance rules, offering clearer guidance on deductions for plant, machinery, and industrial buildings. This, Folorunsho said, could improve cash flow by enabling faster recovery of capital costs during expansion or early operations.
In addition, manufacturers can now deduct up to five per cent of turnover spent on research and development from taxable profits, a provision aimed at encouraging innovation and technological upgrades.
On Value Added Tax, the Act maintains the 7.5 per cent rate but exempts certain locally produced goods, including agricultural products, medical supplies, and educational materials. Clearer input VAT credit rules are expected to reduce disputes and limit the buildup of unrecoverable taxes.
Manufacturers in agriculture and agro-processing stand to benefit further from income tax holidays of up to five years, zero-rated VAT on select inputs, and duty-free importation of machinery.
While the measures could enhance profitability and free up resources for expansion, workforce development, and technology investment, Kreston Pedabo warned that success will depend on the capacity of tax authorities and the ability of businesses—especially SMEs—to adapt.
Folorunsho added that although the Act marks progress in fiscal policy, broader challenges such as power supply, transport infrastructure, and access to finance must also be addressed for manufacturers to achieve sustainable gains.