Nigeria’s newly implemented tax framework has raised concerns after KPMG Nigeria identified “errors, inconsistencies, gaps, and omissions” in the new tax laws that took effect on January 1, 2026. The professional services firm warned that failure to address these issues could undermine the overall objectives of the tax reforms.
Nigeria’s tax overhaul, which aims to improve the country’s low tax-to-GDP ratio and modernize its tax system, is built around four major legislations: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. The laws were signed by President Bola Ahmed Tinubu in June 2025.
KPMG’s review highlighted several areas of concern, including the calculation of capital gains, which does not adjust for inflation. This approach is problematic given Nigeria’s prolonged high-inflation environment, with headline inflation remaining in double digits for eight consecutive years. The firm recommended introducing a cost indexation mechanism to adjust asset values for inflation.
The firm also drew attention to the taxation of indirect transfers by non-residents, which could affect foreign investment. With foreign direct investment inflows into Nigeria remaining below pre-2019 levels, KPMG advised the Nigerian tax authorities to issue comprehensive administrative guidelines to clarify scope, thresholds, and reporting obligations.
Other issues identified include the restriction on deducting foreign-currency expenses beyond their naira equivalent at the official Central Bank of Nigeria exchange rate, which could increase taxable profits and overall tax liabilities. KPMG also flagged the disallowance of deductions on expenses where VAT was not charged, even if the costs were entirely business-related.
The firm highlighted ambiguities around the compliance obligations of non-resident companies, which could create uncertainty and discourage foreign participation. KPMG recommended harmonizing the relevant provisions of the Nigeria Tax Act and the Nigeria Tax Administration Act, with explicit exemptions for non-resident companies whose tax obligations have been fully settled through withholding tax.
As Nigeria undertakes its most extensive tax reform in decades, KPMG’s concerns underscore the need for clarity, consistency, and alignment with international best practices. Without timely amendments, businesses may face higher costs, foreign investors could remain cautious, and capital markets may continue to experience volatility. The success of the overhaul will depend on addressing these issues and providing a stable and predictable tax environment.
