Nigeria’s newly implemented tax framework has raised concerns after KPMG Nigeria identified “errors, inconsistencies, gaps, and omissions” in the 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 reforms, which aim to improve the country’s low tax‑to‑GDP ratio and modernize its tax system.
The overhaul is built around four major pieces of legislation: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. All were signed by President Bola Ahmed Tinubu in June 2025.
KPMG’s review highlighted several areas of concern. First, the calculation of capital gains does not adjust for inflation, a problem in Nigeria’s prolonged high‑inflation environment, where headline inflation has remained in double digits for eight consecutive years. The firm recommended introducing a cost‑indexation mechanism to adjust asset values for inflation. Second, the taxation of indirect transfers by non‑residents could affect foreign investment; with foreign direct investment inflows still below pre‑2019 levels, KPMG advised the tax authorities to issue comprehensive administrative guidelines clarifying 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 when the costs were entirely business‑related. Additionally, ambiguities around the compliance obligations of non‑resident companies could create uncertainty and discourage foreign participation.
To address these problems, KPMG recommended harmonising 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, these 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, predictable tax environment.
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