Nigeria’s long-anticipated tax reform could significantly redefine how manufacturers operate, invest and plan for growth, but its success will largely depend on effective implementation, professional services firm Kreston Pedabo has said.
In an assessment of the Nigeria Tax Act 2025, the firm noted that the law signals a clear policy shift towards a more coordinated and incentive-driven fiscal environment, particularly for the manufacturing sector, which has struggled for years with regulatory complexity, high production costs and weak infrastructure.
According to Kreston Pedabo, the new Act departs from Nigeria’s previously fragmented tax regime by consolidating multiple tax statutes into a single framework. While this harmonisation is expected to reduce uncertainty and compliance burdens for businesses, the firm warned that weak administration or uneven enforcement could undermine the intended benefits.
Partner, Tax Services at Kreston Pedabo Professional Services, Kehinde Folorunsho, said the reform presents “clear opportunities for manufacturers willing to invest,” but stressed that sound policy design alone will not guarantee positive outcomes.
At the core of the reform are newly introduced Economic Development Tax Incentives targeted at priority sectors such as manufacturing. Under the scheme, eligible companies can obtain an Economic Development Incentive Certificate, which grants a five per cent annual tax credit on qualifying capital expenditure for up to five years. Companies that reinvest profits may access extended incentive periods, while some manufacturing-related transactions are exempt from stamp duties.
Pedabo said the incentives are designed to tilt investment decisions in favour of local production and industrial expansion, particularly at a time when manufacturers face mounting pressure from import costs and foreign exchange volatility.
Beyond incentives, the Act revises capital allowance rules, providing clearer guidance on deductions for plant, machinery and industrial buildings. Folorunsho explained that this could ease cash-flow pressures by enabling manufacturers to recover capital costs more quickly during the early stages of operation or expansion.
The legislation also introduces research and development deductions, allowing manufacturers to deduct up to five per cent of turnover from taxable profits where spending is linked to innovation. According to Pedabo, this provision could encourage product development and technology upgrades—areas where many local manufacturers have historically lagged due to funding constraints.
Changes to Value Added Tax (VAT) administration also feature prominently in the reform. While the VAT rate remains at 7.5 per cent, the Act exempts certain locally produced goods, including agricultural products, medical supplies and educational materials. Clearer rules on input VAT credits are expected to reduce disputes and prevent the accumulation of unrecoverable taxes on raw materials and capital equipment.
Manufacturers operating within the agriculture and agro-processing value chain are expected to enjoy additional benefits, including income tax exemptions for the first five years of operation, zero-rated VAT on selected inputs such as fertilisers and animal feeds, and duty-free importation of machinery for agricultural production.
Pedabo said the combined effect of these measures could strengthen profit margins and free up resources for expansion, workforce development and technology investment, ultimately improving the competitiveness of locally manufactured goods.
However, the firm cautioned that the reforms will test the capacity of tax authorities and the readiness of businesses to adapt. Folorunsho stressed that effective administration, strong oversight and widespread taxpayer education—particularly for small and medium-sized manufacturers—will be essential to prevent abuse and ensure fair access to incentives.
He added that while the Nigeria Tax Act 2025 represents a positive shift in fiscal policy, it cannot on its own address deeper structural challenges such as unreliable power supply, poor transport infrastructure and limited access to finance.
“Tax reform is an important foundation,” Folorunsho said, “but it must be supported by broader industrial and infrastructure policies for manufacturers to achieve lasting gains.”
