Nigeria’s ambition to attract foreign direct investment (FDI) faces a significant hurdle: a 30 percent Company Income Tax (CIT) rate that exceeds the global average. As nations worldwide lower corporate taxes to approximately 23.5 percent to court mobile capital, Nigeria’s high statutory rate—and its complex web of additional levies—raises acute concerns about the country’s competitiveness.
The impact is stark in the data. The National Bureau of Statistics (NBS) reports that FDI plummeted by over 70 percent in the first half of 2025 compared to the previous quarter, with equity investment suffering a similar drop. The 30 percent CIT rate places Nigeria among the higher tax jurisdictions in Africa, matching Kenya and Zambia but lagging behind rivals like Ghana (25%), South Africa (27%), and Egypt (22.5%). For large enterprises, the burden is compounded by an additional four percent development tax, pushing the effective rate well above the headline figure and creating a drag on profitability compared to nations with fewer secondary levies.
A Reform Effort Met with Polarized Reactions
Against this backdrop, the recently signed tax reform bills, intended to modernize the fiscal landscape, have sparked a fierce debate. Proponents argue the new laws streamline a chaotic system. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, expressed optimism about the long-term vision, disclosing that a proposal to lower the CIT to 25 percent is underway. “We had written the CIT review for 25 percent into the law, but the governors refused it… hoping we can put all of this behind us by the time we finalise the tax law,” Oyedele stated, acknowledging the need to secure approval through the National Economic Council.
The Organized Private Sector has welcomed the simplification. Adewale-Smatt Oyerinde, Director-General of the Nigeria Employers’ Consultative Association (NECA), described the signing as a liberating moment. “Our immediate reaction is ‘uhuru’,” he said. “The challenges of multiplicity of taxes, levies and fees have been a major issue… This bill is the beginning of the reform.” Nick Agule, a chartered accountant, emphasized the legislative achievement, calling it “one of the most significant changes in Nigeria’s legislation.”
Critical Voices and Structural Concerns
Despite these commendations, critical voices warn the high headline rate and timing could backfire. Ikemesit Effiong, Head of Research at SBM Intelligence, cautioned that structural economic stressors remain a deterrent. “The economic and security stressors are significant,” Effiong observed, noting that without addressing the broader environment, “investors will continue to question the Nigerian value proposition.”
The manufacturing sector is particularly wary. Otunba Francis Meshioye, President of the Manufacturers Association of Nigeria (MAN), warned of pass-through effects to consumers as manufacturers struggle with high costs. Political opposition has also been vocal. Senator Ali Ndume criticized the timing, arguing, “You cannot take from who barely has.” Regionally, the Northern Governors Forum, led by Governor Inuwa Yahaya, issued a firm stance against the proposed bill, fearing its VAT model could harm northern states’ economic stability.
The Government’s Revenue Dilemma
The government faces a profound dilemma. The high tax rate is a crucial revenue source for a fiscally constrained administration. In the first half of 2025 alone, CIT revenue surged by nearly 38 percent to N4.76 trillion, accounting for a significant portion of government targets. Analysts warn that lowering the rate without successfully broadening the tax base to include the vast informal sector could worsen the country’s revenue crisis.
Amidst the polarization, some experts maintain a neutral outlook, focusing on execution. A report by Andersen in Nigeria concluded that the true impact will depend on the “modalities for implementation” set out in the coming months.
Ultimately, Nigeria’s tax policy walks a tightrope. While the regime remains favorable for small and medium enterprises (SMEs) to foster local entrepreneurship, the core challenge persists: balancing immediate fiscal needs with the long-term necessity of making Nigeria a globally competitive destination for capital. The success of the reforms will hinge on navigating this complex equation.
