New tax laws target multiple taxation, VAT hurdles, and competitiveness under AfCFTA
The Federal Government has outlined a series of incentives in Nigeria’s newly introduced tax laws aimed at revitalising the manufacturing sector and improving the competitiveness of locally produced goods.
The incentives were presented by the Presidential Committee on Fiscal Policy and Tax Reforms during a stakeholders’ engagement with the Manufacturers Association of Nigeria (MAN), themed “From Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers.”
Speaking at the event, the committee’s chairman, Taiwo Oyedele, acknowledged that manufacturers have long struggled under the weight of multiple taxation, high effective tax rates, and complex value-added tax (VAT) compliance requirements.
Oyedele noted that Nigeria’s existing tax structure had made it cheaper to import finished goods than to manufacture locally, even after accounting for freight, insurance, and customs duties.
“Today, you can manufacture in Nigeria and imported alternatives will still land cheaper in our markets,” he said. “That means local manufacturers are struggling to compete at home, let alone within the African Continental Free Trade Area. If nothing changes, businesses will continue to relocate to neighbouring countries and ship goods back into Nigeria.”
He said manufacturers were disproportionately affected by a combination of legal and illegal levies imposed by both state and non-state actors, creating one of the highest effective corporate tax burdens globally.
“We were taxing capital and investment. Manufacturers faced taxes everywhere they turned, and even lawful taxes were often collected unlawfully. This system was unsustainable and had to change,” Oyedele said.
According to him, the reforms are designed to correct these distortions by simplifying the tax system and shifting the focus away from “taxing poverty” toward supporting productive sectors.
Under the new framework, manufacturers are expected to benefit from expanded input VAT claims on assets and services, revised income bands, higher exemption thresholds, and a range of tax reliefs and allowances aimed at lowering effective tax burdens.
The reforms also introduce institutional safeguards, including the creation of a tax ombudsman and withholding tax exemptions targeted at manufacturers and small businesses. These measures are intended to ease compliance challenges, improve dispute resolution, and reduce cash flow pressures, particularly for small and medium-sized manufacturers.
Oyedele explained that several sector-specific VAT changes have also been introduced to support local production. Supplies such as fertilisers, locally produced agricultural chemicals, veterinary medicines, and animal feed have been zero-rated.
In addition, the Finance Minister may suspend the charging and collection of VAT on petroleum products, renewable energy equipment, compressed natural gas (CNG), liquefied petroleum gas (LPG), and other gaseous hydrocarbons.
The new rules also allow manufacturers to deduct input VAT on taxable supplies, including services and fixed assets, from output VAT — provided the costs are directly linked to taxable production. Input VAT related to non-taxable supplies remains non-deductible.
Manufacturers will also be entitled to research and development (R&D) tax deductions, capped at five per cent of annual turnover, aimed at encouraging innovation and productivity improvements.
Reacting to the reforms, Director-General of MAN, Segun Ajayi-Kadir, said their success would depend largely on cooperation from sub-national governments.
He welcomed the fact that at least 10 states have already passed tax laws aligned with the federal framework, a move he said would help curb nuisance taxes and illegal revenue collection.
“The alignment we are seeing at the state level is encouraging,” Ajayi-Kadir said. “It gives manufacturers confidence and strengthens the sustainability of the tax reform agenda.”
The engagement marked a key step in bridging policy intentions with real-world manufacturing challenges, as the Federal Government seeks to reposition the sector as a driver of industrial growth, employment, and exports.
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