By Yinka Kolawole
Nigerian manufacturers are set to benefit from performance-based incentives with the implementation of the Nigeria Tax Act (NTA) 2025, which took effect from January 1, 2026.
Analysing the new legislation, Kehinde Folorunsho, Partner, Tax Services at Kreston Pedabo Professional Services, said the Act represents one of the most far-reaching overhauls of Nigeria’s tax system in decades, replacing a patchwork of tax laws with a single framework that directly links fiscal policy to industrial development.
Folorunsho noted that the Act shifts the focus of taxation from revenue collection alone to investment stimulation, particularly in priority sectors such as manufacturing.
“For manufacturers, the conversation is no longer just about compliance, but about structuring operations to take advantage of incentives while managing new obligations. The reform creates clear opportunities for manufacturers willing to invest,” he said.
A central feature of the new law is the introduction of Economic Development Tax Incentives (EDTI) for designated priority sectors, including manufacturing, agro-processing, mining, and renewable energy. Under the scheme, qualifying manufacturers can claim a five percent annual tax credit on eligible capital expenditure for up to five years. Companies that produce “priority products” as defined in the Act can obtain an Economic Development Incentive Certificate. This certificate grants a 5% annual tax credit on qualifying capital expenditure for up to five years.
Furthermore, firms that demonstrate they are reinvesting 100% of their profits back into the expansion of these priority sectors may qualify for even longer incentive periods, essentially creating a pathway for sustained industrial growth.
To improve the immediate financial health of manufacturers, the Act also introduces a 5% turnover deduction for research and development expenses and revises capital allowance rules to offer uniform annual rates of 10%, 20%, or 25% depending on the asset type.
This change is intended to simplify cost recovery for machinery and industrial buildings, which have historically been a point of dispute between taxpayers and authorities. Additionally, the Act consolidates several existing levies – such as the Tertiary Education Tax and the NASENI Levy – into a single 4% Development Levy on assessable profits, significantly reducing the administrative burden on large firms.
The VAT regime has also been modified to support local production while protecting consumer purchasing power. While the headline VAT rate remains at 7.5%, the Act provides zero-rating for essential locally produced goods, including basic food items, medical supplies, and educational materials.
Smaller manufacturers with an annual turnover of N50 million or less now enjoy a 0% corporate income tax rate and are exempt from charging VAT, provided they remain compliant with regular filing requirements. For larger multinational entities, the law introduces a 15% Minimum Effective Tax Rate to ensure Nigeria remains aligned with global tax standards. Folorunsho said the combined effect of these measures could lower production costs, improve margins and strengthen the competitiveness of Nigerian manufacturers against imported alternatives.
Recall that during the unveiling of the new tax Act, Minister of Finance and Coordinating Minister of the Economy, Wale Edun, had said that the legislation is aimed at boosting local manufacturing by offering a range of incentives designed to attract investment, create jobs, and reduce reliance on imported goods.
He noted that under the new law, manufacturers operating within the country will benefit from tax rebates, reduced corporate tax rates, and exemptions on duties for importing raw materials and industrial machinery.
According to him, the measures are intended to lower production costs and encourage both existing and new firms to expand local operations.
“Local manufacturing is key to economic growth, job creation, and long-term sustainability. These incentives are meant to make our industries more competitive both regionally and globally,” the minister stated.
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