A recent evaluation conducted by the Alliance for Economic Research and Ethics LTD/GTE has highlighted concerns regarding the possible economic consequences of the Nigeria Tax Act, 2025. 

The report cautions that multiple provisions could diminish business profitability, discourage investors, and reduce Nigeria's competitiveness in the African market. 

The Act, which received presidential assent in June 2025 and is scheduled to come into effect on January 1, 2026, represents one of the most significant tax reforms the country has seen in decades, merging over a dozen tax regulations into a single framework. 

The Alliance's report sharply criticizes several major changes, stating, “The dramatic rise in the Capital Gains Tax, the introduction of a new Development Levy, the uncertainty surrounding the Free Trade Zones, and the peculiar structuring of the Single Window Trade Platform pose serious threats to the vital investment and business development Nigeria needs to ensure its long-term economic viability.” 

As per the analysis, the government's declared goal is to modernize tax collection, prevent revenue losses, and enhance public funding amid declining oil revenues and increasing debt levels. The official aim is to “streamline administration, reduce tax evasion, and ensure all sectors contribute their fair share to national progress.” However, the report indicates that businesses and investors are increasingly voicing concerns about what they see as steep new obligations introduced without sufficient transitional provisions. 

One of the most debated changes is the rise in Capital Gains Tax for corporations from 10% to 30%, bringing it in line with the corporate income tax rate. The Alliance characterizes this adjustment as “a massive shock to the investment environment,” with analysts warning it could lead to decreased returns for private equity, venture capital, and foreign investors. 

The report cautions that the 200% increase in CGT is likely to hamper long-term capital development and deter merger and acquisition activities as well as investments in startups. 

The report underscores the adverse effects on the innovation sector, remarking: “Private equity and venture capital landscapes depend significantly on successful exits,” contending that the reform could impede innovation. 

Additionally, the Act imposes a four percent Development Levy on assessable profits, which replaces various existing levies. While government representatives assert that the levy will finance national development initiatives, experts caution that it might compress profit margins, particularly for manufacturers, retailers, and agribusinesses. The Alliance warns that the 4% levy may have an outsized impact on sectors operating on narrow margins, amplifying cost pressures. 

In accordance with OECD standards, Nigeria has established a 15% minimum tax rate for multinationals with revenues exceeding €750 million and domestic companies with earnings above N50 billion. Furthermore, the Act eliminates long-standing tax exemptions for operators in Free Trade Zones, a move analysts describe as “sudden and unclear,” which could undermine one of Nigeria’s traditional investment attractions. Additional provisions broaden the taxation of digital assets and introduce more progressive income tax brackets. 

The report suggests that the withdrawal of general tax incentives might drive investors toward regional rivals such as Ghana, Rwanda, and Ethiopia, where business expenses are decreasing and regulatory frameworks are stabilizing. 

It also observes that the minimum tax regime and other new regulations will necessitate intricate reporting processes, which could raise administrative costs for large companies. 

Despite these challenges, the analysis acknowledges potential long-term advantages: The 15% minimum tax could ensure fairer competition between multinational and domestic firms; merging various levies into one Development Levy might simplify administration; SME exemptions remain in place, allowing smaller businesses to reinvest and grow; and if implemented effectively, the Act could broaden the tax base and enhance fiscal transparency.