Nigeria's New Tax Reform: A Complete Guide for Manufacturers

The manufacturing sector has long been the backbone of Nigeria's quest for economic diversification and industrialisation. Yet for years, Nigerian manufacturers have grappled with a tax system that seemed designed to work against them rather than for them—a fragmented maze of overlapping taxes at federal, state, and local levels, high cumulative tax burdens eroding profitability, and policy uncertainty that made long-term planning nearly impossible.

That's now changing. With the passage of the Nigeria Tax Act 2025 and the Joint Revenue Board of Nigeria (Establishment) Act 2025, the Federal Government has embarked on the most comprehensive tax reform in the country's history. These new laws, which took effect on 1st January 2026, aim to create a unified, fair, and competitive tax framework that positions Nigeria as a destination for manufacturing investment.

In this guide, we'll break down exactly what these reforms mean for your manufacturing business—the opportunities, the obligations, and the practical steps you need to take to stay compliant while maximising the benefits available to you.

The Problems the Reform Seeks to Address

Before diving into the new provisions, it's worth understanding why these changes were necessary. The Presidential Fiscal Policy and Tax Reforms Committee identified several critical issues plaguing the old system:

Tax Duplicity and Multiplicity: Manufacturers faced a bewildering array of overlapping taxes and levies at federal, state, and local levels. This significantly increased the cost of doing business and created compliance nightmares. The same activity might attract different taxes from different authorities, with no coordination between them.

Disproportionate Burden on the Formal Sector: While the informal sector largely operated outside the tax net, compliant manufacturers bore an excessive share of the tax burden. This created an uneven playing field where tax compliance became a competitive disadvantage.

VAT Recovery Challenges: Capital-intensive manufacturers, particularly those making significant investments in plant and equipment, struggled to recover input VAT. The old system created cash flow challenges and effectively increased the cost of capital investment.

Policy Uncertainty: Frequent and sudden changes in fiscal policies, often without adequate consultation, made it impossible for manufacturers to plan with confidence. Investment decisions that made sense one year could become uneconomical the next due to policy shifts.

Complex Compliance Requirements: Multiple filing requirements, different deadlines, and inconsistent interpretations of tax law by different authorities added significant administrative burden and cost to doing business.

The Nigeria Tax Act 2025: Key Goals and Structure

The Nigeria Tax Act 2025 is a consolidation law that repeals and replaces multiple existing tax statutes including the Companies Income Tax Act, Value Added Tax Act, Personal Income Tax Act, Capital Gains Tax Act, and Stamp Duties Act, among others. Its stated objective is to provide "a unified fiscal legislation governing taxation in Nigeria."

For manufacturers, understanding how the Act defines your activities is the starting point.

What Qualifies as "Manufacturing"?

Under Section 202 of the Nigeria Tax Act 2025, "manufacturing" is defined as:

"a process by which a commodity is finally produced, including assembling, bottling, mixing, blending, grinding, cutting, bending, twisting and joining or any other similar activity."

This broad definition encompasses a wide range of manufacturing activities, from heavy industrial production to food and beverage processing, textile manufacturing, and assembly operations. If your business transforms raw materials or components into finished products through any of these processes, you're covered.

Key Tax Reforms Affecting Manufacturers

1. Companies Income Tax (CIT) Changes

Rate Reduction Plans: The reform includes a planned reduction in the Companies Income Tax rate from 30% to 25% for large companies, making Nigeria more competitive regionally.

Zero Percent CIT for Small and Medium Companies: Small companies (those with gross turnover of ₦50,000,000 or less and total fixed assets not exceeding ₦250,000,000) now enjoy a 0% CIT rate. This provides significant relief for small-scale manufacturers.

Elimination of Minimum Tax: The controversial minimum tax on companies' turnover/capital has been eliminated. Previously, even loss-making companies had to pay minimum tax—a provision that particularly hurt manufacturers during downturns or start-up phases.

Simplified Capital Allowance Regime: The reform eliminates the Capital Allowance for Assessment (CAFA) requirement, streamlining the process for claiming capital allowances on plant, machinery, and equipment.

2. Value Added Tax (VAT) Reform

The VAT reforms are particularly significant for manufacturers:

Full Input VAT Recovery: Section 156 of the Act now allows taxable persons to deduct input VAT incurred on any taxable supply, including services and fixed assets, from their output VAT. This is a major shift, especially for service businesses and capital-intensive manufacturers who previously couldn't recover VAT on many inputs.

The provision states:

"Input tax incurred by a registered person on any taxable supply, including services and fixed assets made to such person, may be deducted from the tax payable by the person on its taxable supplies... but only to the extent that the input tax was incurred for the purpose of consumption, use or supply in the course of making taxable supplies."

Important: Input VAT must be claimed within five years after the end of the tax period in which it was incurred.

VAT on Exempt and Mixed Supplies: Where input VAT is incurred in making both taxable and non-taxable supplies, only the proportion relating to taxable supplies may be deducted.

VAT Refund System: Manufacturers whose supplies are zero-rated (such as exporters) can request refunds of VAT paid on inputs used in production.

Self-Accounting and Withholding VAT: The Act provides for collection of VAT by persons other than the supplier, with specific withholding obligations for certain categories of purchasers.

3. VAT Exemptions and Zero-Rating Relevant to Manufacturing

Exempt Supplies (no VAT charged, no input recovery):

• Locally manufactured sanitary towels, pads or tampons

• Assistive devices and disability-related products (hearing aids, wheelchairs, braille materials)

• Baby products

• Tractors, ploughs, and other agricultural equipment

• Military hardware and locally manufactured uniforms for security agencies

Zero-Rated Supplies (0% VAT charged, full input recovery):

• Basic food items

• All medical and pharmaceutical products

• Educational books and materials

• Fertilisers

• Locally produced agricultural chemicals

• Locally produced veterinary medicine

• Animal feeds

• Goods and services purchased for use in the production of export goods

VAT Suspension: The Minister has power to suspend VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG), and other gaseous hydrocarbons by Order.

4. Withholding Tax (WHT) Exemptions for Manufacturers

One of the most celebrated provisions for the manufacturing sector is the WHT exemption framework. The reforms provide exemptions for manufacturers and small businesses, with taxpayer-issued credit notes streamlining the system.

Note: While these exemptions are provided in the law, some manufacturers have reported inconsistent implementation, with certain companies still deducting WHT from their invoices. This is an area to monitor, and where disputes arise, the new Tax Ombud (discussed below) can be helpful.

5. Research and Development (R&D) Deduction

Section 165 of the Nigeria Tax Act provides a specific deduction for research and development expenditure:

"There shall be deducted the amount incurred in that period by that company for research and development... The deduction to be allowed to a company under subsection (1) for any year of assessment shall not exceed an amount which is equal to 5% of the turnover for that year."

For manufacturers investing in product development, process improvement, or innovation, this represents a significant tax-efficient way to fund R&D activities. Important: If you subsequently sell or transfer the outcome of R&D to another person for exploitation or commercialisation, the proceeds are taxable under Chapter Two of the Act.

Economic Development Tax Incentives for Priority Manufacturing Sectors

Chapter Eight, Part II of the Nigeria Tax Act establishes the Economic Development Tax Incentive (EDTI) scheme—a modernised version of the old Pioneer Status programme. Manufacturing is prominently featured among the priority sectors.

Priority Manufacturing Sectors and Investment Thresholds

The Tenth Schedule to the Act lists the following manufacturing-related priority sectors with their minimum investment requirements and incentive periods:

How to Apply for EDTI

1. Application: Submit to the Executive Secretary of the Nigerian Investment Promotion Commission (NIPC) with a non-refundable fee of 0.1% of qualifying capital expenditure (maximum ₦5,000,000)

2. Requirements: The application must demonstrate commitment to the minimum capital requirement, provide ownership details, specify planned qualifying capital expenditure, and indicate the proposed production day

3. Approval Process: NIPC recommends to the Minister, who then recommends to the President for final approval

4. Certificate Issuance: Once approved, the EDTI certificate is issued and the company becomes a "priority company"

Benefits of EDTI

Priority companies receive significant tax credits during their incentive period, calculated based on their qualifying capital expenditure and the provisions of Section 177 of the Act. The incentive period can range from 10 to 20 years depending on the sector.

Important Conditions:

• Production must commence within 12 months of the proposed production day

• The company must maintain proper books and records for priority products

• Annual returns of profits must be filed with evidence of meeting qualifying criteria

• EDTI cannot be combined with similar incentives under other laws

Capital Gains Tax (CGT) Reforms

The Nigeria Tax Act 2025 incorporates capital gains taxation into the main income tax framework with notable exemptions:

Share Disposal Exemption: Gains from disposal of shares in any Nigerian company are exempt where:

• Disposal proceeds in aggregate are less than ₦150,000,000 AND the chargeable gain does not exceed ₦10,000,000 in any 12 consecutive months

• Proceeds from disposal are reinvested within the same year of assessment in acquisition of shares in the same or other Nigerian companies

WHT on Bonus Shares: Eliminated

Stock Market Investors: All investors are eligible for CGT exemption either unconditionally or subject to reinvestment conditions

The Tax Ombud: Your Advocate Against Unfair Treatment

One of the most significant institutional innovations of the reform is the establishment of the Office of the Tax Ombud under the Joint Revenue Board of Nigeria (Establishment) Act 2025.

What the Tax Ombud Can Do for Manufacturers

The Tax Ombud serves as an independent and impartial arbiter to review and resolve complaints relating to tax, levy, regulatory fees, charges, customs duty or excise matters. Key functions include:

• Investigate Complaints: Receive and investigate complaints lodged by taxpayers regarding actions or decisions of tax authorities

• Mediation and Conciliation: Resolve disputes through informal, fair and cost-effective procedures

• Institute Legal Proceedings: The Ombud can institute legal proceedings on behalf of taxpayers

• Systemic Issues: Identify and review systemic and emerging fiscal policy issues in collaboration with relevant agencies

• Watchdog Function: Act as a watchdog against arbitrary fiscal policy by government or its agencies

• Moderation of Excessive Fees: The Act specifically mentions moderation of excessive regulatory fees

How to Lodge a Complaint

1. Complaints can be lodged in writing or through any platform provided by the Office

2. You can only lodge a complaint if the issue is unresolved by the relevant agencies

3. Anonymous complaints are not entertained

4. The Ombud will investigate within 14 days (extendable by 7 days)

5. Services are free—the Office does not charge fees

Important Limitations

The Tax Ombud cannot:

• Interpret tax legislation (except as it relates to operational, procedural or administrative issues)

• Review matters that are already before a court or tribunal

• Determine tax liability or issue assessments

The Tax Appeal Tribunal: Formal Dispute Resolution

For disputes that cannot be resolved informally, the Tax Appeal Tribunal (TAT) provides a formal adjudication mechanism. Key features under the new law:

Expanded Jurisdiction: The TAT now has power to adjudicate on tax disputes arising from the Nigeria Tax Act 2025, Nigeria Tax Administration Act 2025, or any other tax law made by the National Assembly

Lower Pre-Deposit Requirement: To appeal an assessment, the deposit requirement is now the lower of:

• The tax charged for the preceding year of assessment, or

• One-half (50%) of the tax charged by the assessment under appeal

Appeal Timeline: Appeals must be filed within 30 days of receiving the assessment or decision, though the Tribunal may entertain late appeals where there was sufficient cause for delay

Representation: You may appear in person or authorise legal practitioners, tax professionals with requisite knowledge, or any of your officers to represent you

Compliance Requirements and Penalties

Key Compliance Obligations

E-Invoicing and Fiscalisation: Section 158 requires taxable persons making taxable supplies to implement the fiscalisation system deployed by the Nigeria Revenue Service (NRS, formerly FIRS). This may include electronic devices, software solutions, or communication systems for electronic invoicing and data transfer.

VAT Invoicing Requirements: Every VAT invoice must contain:

• Supplier's Tax ID

• Sequential invoice number

• Name and address of supplier

• Incorporation/business registration number

• Date of supply

• Name of purchaser/client

• Gross amount of transaction

• VAT charged and rate

Record Keeping: Proper records must be maintained to support input VAT claims, capital allowance claims, and EDTI benefits.

Penalties for Non-Compliance

While specific penalties are largely contained in the Nigeria Tax Administration Act 2025, the Nigeria Tax Act 2025 makes clear that:

• Expenses on which VAT is due but not charged cannot be deducted for income tax purposes

• Imported items on which applicable import duty or levy was not paid cannot be deducted

• Qualifying capital expenditure excludes items where VAT was due but not charged

• EDTI certificates can be suspended or cancelled for non-compliance, with benefits withdrawn

• Cross-validation of expenses through fiscalisation and Tax ID harmonisation enables authorities to identify non-compliance

The message is clear: compliance with the new VAT regime is not optional, and non-compliance will have consequences beyond just the VAT itself.

Government Resources for Learning More

Presidential Fiscal Policy and Tax Reforms Committee:

• Website: fiscalreforms.ng

• Email: enquiries@fiscalreforms.ng

• WhatsApp: 08109753151

• Social Media: @fiscalreformsng (Twitter/X, Instagram, TikTok); Fiscal Reforms Nigeria (LinkedIn, Facebook, YouTube)

Nigeria Revenue Service (NRS): The Federal Inland Revenue Service has been renamed the Nigeria Revenue Service. Check their official website and TaxPro Max portal for guidance, forms, and e-filing services.

Nigerian Investment Promotion Commission (NIPC): For EDTI applications and guidance on qualifying for economic development incentives.

Frequently Asked Questions

Q: When does the new Tax Law take effect? A: The Nigeria Tax Act 2025 took effect on 1st January 2026 for assessment purposes.

Q: Which version of the tax law is legally binding—the gazetted copy or National Assembly-approved version? A: This has been a source of confusion. The certified true copy as published in the Official Gazette and assented to by the President is the legally binding version. Where discrepancies exist, manufacturers should seek clarification and may use the Tax Ombud for guidance on specific provisions.

Q: What protections exist for manufacturers who complied in good faith with one version? A: The savings provisions in Section 199 provide that anything done before commencement under repealed laws shall continue to have effect. However, for the transition period specifically, seeking professional advice is recommended.

Q: Should VAT be computed on a cash or accrual basis? A: The time of supply rules in Section 147 generally follow the earlier of payment, issuance of invoice, or delivery of goods/provision of services. For manufacturing with progressive payments, each payment triggers a supply.

Q: How do I treat R&D expenses? A: R&D expenses are deductible under Section 165 up to 5% of turnover. Ensure you can document and demonstrate that expenses qualify as research and development activities.

Q: Can I claim both EDTI and other tax incentives? A: No. Section 183 states that any company granted economic development tax credit shall not benefit from similar tax incentives under the Act or any other law.

Preparing Your Manufacturing Business for Compliance

Here's a practical checklist for manufacturers to ensure compliance and maximise benefits under the new tax regime:

Immediate Actions

1. Review and Update Your Tax Status

• Confirm your company's classification (small company vs. other)

• Verify your Tax ID is current and properly registered

• Update your registration details with NRS if needed

2. Implement Proper Record Keeping for Input VAT Recovery

• Establish systems to track all input VAT paid on purchases

• Ensure all suppliers provide compliant VAT invoices

• Segregate records for taxable vs. non-taxable supplies if applicable

• Implement a process to claim input VAT within the 5-year window

3. Prepare for E-Invoicing

• Assess your current invoicing systems

• Plan for integration with NRS fiscalisation requirements

• Train staff on new invoicing requirements

• Ensure all required fields are captured on invoices

4. Evaluate EDTI Eligibility

• Review whether your manufacturing activities fall within priority sectors

• Calculate whether your capital expenditure meets minimum thresholds

• Assess the cost-benefit of applying for EDTI certificate

• Engage with NIPC for preliminary guidance

5. Calculate and Document Benefits

• Quantify available capital allowances under the new regime

• Document R&D expenditure for the 5% turnover deduction

• Assess zero-rated and exempt supplies in your operations

• Model your expected tax position under the new framework

Ongoing Compliance

• File returns on time

• Maintain proper records for all deductions and credits claimed

• Stay informed about regulations and guidance from NRS

• Engage professional tax advisors for complex matters

How Mantis Can Help

Managing tax compliance as a manufacturer can be overwhelming, especially with new requirements like e-invoicing and proper VAT tracking. That's why we built Mantis—a mini-ERP designed specifically for Nigerian manufacturers.

What Mantis Does

Inventory Management: Track raw materials, work-in-progress, and finished goods with real-time visibility across your operations.

Automated VAT Calculations: Mantis automatically calculates VAT on your transactions, distinguishing between standard-rated, zero-rated, and exempt supplies. This ensures you never miss claiming input VAT you're entitled to.

E-Invoicing Integration: Our invoicing module is designed to connect with the NRS (formerly FIRS) fiscalisation system, ensuring your invoices meet all regulatory requirements and are automatically transmitted as required.

Job Management: Manage production jobs on your factory floor, tracking costs and outputs to support accurate profit calculations.

Accounting Integration: With accounting features coming soon, Mantis will help streamline your tax filing process by maintaining the records you need in the format required.

Whether you're a small manufacturer just getting started or an established operation looking to streamline compliance, Mantis gives you the tools to focus on what you do best—making things—while we help you stay on the right side of the tax laws.

The information in this article is for general guidance only and does not constitute tax advice. Given the complexity of tax matters and the evolving nature of implementation guidance, manufacturers should consult with qualified tax professionals for advice specific to their circumstances.

About the Author: This guide was prepared to help Nigerian manufacturers navigate the new tax landscape. For more information about Mantis and how we can help your manufacturing business, contact us at info@trymantis.com.