The federal government has retained Nigeria’s corporate income tax (CIT) rate at 30 percent for medium and large companies under the newly signed Nigerian Tax Act (NTA), set to take effect from January 1, 2026. However, small businesses will continue to enjoy a zero percent CIT rate — a move that offers relief for Nigeria’s struggling micro and small enterprises but raises critical questions about the country’s broader investment climate.
What Does the New Tax Framework Say?
According to the provisions of the NTA, small companies, defined as those with an annual turnover not exceeding ₦50 million and total fixed assets of ₦250 million or less, will remain exempt from corporate income tax.
“Tax shall be levied, for each year of assessment in respect of total profits of every company, in the case of a small company, at 0%; and (b) any other company, at the rate of 30 percent,” the Act states.
However, companies that offer professional services, including consulting, planning, and advisory services, do not qualify for the small company exemption, regardless of their turnover. These businesses are deemed to require higher technical expertise and earnings potential, and therefore remain within the 30 percent tax bracket.
The law also introduces a minimum effective tax rate of 15 percent for large corporations, particularly those part of multinational enterprise (MNE) groups or companies with a turnover of ₦20 billion and above. If their tax liabilities fall below this threshold due to tax reliefs or incentives, they will be required to pay additional tax to meet the 15 percent minimum.
Capital Gains Tax Scrapped
Another significant development is the repeal of the Capital Gains Tax Act, which previously imposed a 10 percent tax on profits made from the sale of assets such as stocks, property, and businesses. Under the NTA, this levy has now been absorbed into the broader corporate income tax structure. While this simplifies tax administration, it may alter how companies account for asset disposals in their financial reporting.
What It Means for the Economy
1. Relief for Small Businesses
The continued exemption for small businesses underscores the government’s commitment to encouraging grassroots entrepreneurship, especially amid rising inflation and operating costs. This decision is expected to stimulate economic activity in the informal sector and lower barriers to entry for new businesses.
2. Pressure on Large and Professional Firms
Maintaining the 30 percent CIT rate for large companies and excluding professional services firms from small business relief could dampen investor enthusiasm, especially as businesses grapple with energy costs, FX volatility, and infrastructure challenges. These sectors, which already operate with slim margins, may find the environment less competitive compared to other emerging markets with lower tax rates.
3. Clarity vs. Competitiveness
On the positive side, the consolidation of capital gains tax into CIT may reduce compliance complexity and loopholes. But at 30 percent, Nigeria’s CIT remains one of the highest in Africa. Countries like Kenya (30%), Ghana (25%), and Rwanda (28%) offer more attractive alternatives. This could influence location decisions for foreign investors and multinational corporations.
4. Ongoing Reform Proposals
The law’s current structure does not reflect the proposed tax cut to 25 percent, as recommended by Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. Oyedele had suggested a 5 percent reduction in CIT to encourage economic growth and reduce the tax burden on businesses.
“We believe reducing the corporate tax rate to 25 percent will promote job creation, expand the tax base, and attract more investment,” Oyedele said earlier this year.
Although the National Assembly had previously considered cutting CIT to 27.5 percent in 2025 and further to 25 percent in 2026, the current Act does not reflect these revisions, raising concerns that the law may not align with reformist intentions unless amended before implementation.
Bottom Line
The Nigerian Tax Act 2026 strikes a delicate balance: offering much-needed relief to small enterprises while preserving significant revenue streams from larger businesses. Whether this approach can foster inclusive economic growth will depend on complementary reforms, fiscal discipline, and the government’s ability to create an enabling environment for all tiers of the private sector.
As 2026 approaches, stakeholders, from small shop owners to multinational CEOs, will be watching closely to see if further tax reforms will align with the pressing need for job creation, competitiveness, and economic resilience.
