President Tinubu Signs Four Major Tax Reform Bills
Investment Research Weekly Market Commentary | Jun 30, 2025
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President Tinubu Signs Four Major Tax Reform Bills
On Thursday, June 26, 2025, President Bola Tinubu signed four important tax reform bills into law. These new laws are expected to reshape Nigeria’s tax and revenue systems.
The reforms aim to improve tax administration, increase government revenue, ease the business environment, and attract both local and foreign investments.
Overview of the Four Tax Reform Bills and Key Highlights
Higher Exemption Threshold for Small Companies
Small companies (with turnover ≤ ₦100 million and fixed assets ≤ ₦250 million) are now exempt from:
Companies Income Tax (CIT).
Capital Gains Tax (CGT).
The new Development Levy.
Increased Capital Gains Tax (CGT)
CGT for companies raised from 10% to 30%.
Individuals now pay CGT based on their personal income tax rate.
Tax on Indirect Share Transfers
CGT now applies to indirect sales of shares in Nigerian companies (e.g. offshore holding structures).
Share sale exemption threshold increased to ₦150 million, provided gains do not exceed ₦10 million.
Introduction of Development Levy
Companies (excluding small ones) to pay 4% of assessable profit.
Consolidates multiple existing levies: Tertiary Education Tax (TET), IT Levy, NASENI Levy, and Police Trust Fund.
Minimum Effective Tax Rate (ETR)
Multinational companies (turnover ≥ €750 million or ₦50 billion) must pay at least 15% tax on net income.
Nigerian parent companies must pay a “top-up tax” if subsidiaries fall below the threshold.
Controlled Foreign Companies (CFC)
Tax will apply to the undistributed profits of foreign subsidiaries controlled by Nigerian companies.
Expanded Tax Net for Non-Resident Companies
Tax applies to activities of non-residents, even if not physically conducted in Nigeria.
Includes Engineering, Procurement, and Construction (EPC) contracts.
Minimum Tax for Non-Residents
Non-resident companies must pay minimum tax based on EBIT, not less than 4% of income or applicable WHT.
Revised Free Zone Tax Exemptions
Tax exemption applies only if ≤25% of sales are to the Nigerian customs territory.
From January 1, 2028, companies will lose full exemption if they sell any products within Nigeria.
New Economic Development Incentive (EDI)
Replaces Pioneer Status with 5% annual tax credit on qualifying capital expenditures for 5 years.
Unused credits can be rolled over for another 5 years.
Progressive Personal Income Tax (PIT)
Income of ₦800,000 or less is now tax-free.
Top PIT rate increased to 25%.
Compensation exemption threshold raised to ₦50 million.
Defined Residency for PIT
PIT now applies to the global income of residents.
Broader definition includes economic and family ties to Nigeria.
Introduction of Tax Ombuds Office
New office to resolve tax-related complaints and act as an independent liaison between taxpayers and tax authorities.
Expanded Input VAT Recovery
Businesses can now recover VAT on all purchases, including assets and services.
Zero-Rated VAT on Essentials
More goods and services are now VAT-free, including food, medicines, books, electricity, medical equipment, tuition, and exports (excluding oil and gas).
Mandatory VAT Fiscalisation and E-Invoicing
All businesses must adopt e-invoicing systems for VAT compliance.
Revised VAT Revenue Sharing Formula
FG’s VAT share reduced from 15% to 10%.
States and LGAs now receive 55% and 35% respectively.
Stronger Penalties for Non-Compliance
Late filing: ₦100,000 first month, ₦50,000 for each subsequent month.
₦5 million fine for awarding contracts to non-tax-compliant entities.
Penalties for obstructing tax tech deployment or misleading tax officers.
Mandatory Tax Planning Disclosure
Companies must report any tax planning activities that offer a tax advantage.
FIRS Renamed and State IRS Autonomy
FIRS is now the Nigeria Revenue Service (NRS).
State IRS are now autonomous with provisions for joint audits and collaboration with the NRS.
Key Takeaways:
The tax reforms simplify Nigeria’s tax system, improving the business environment and investor confidence.
They aim to boost non-oil revenue and strengthen Nigeria’s fiscal position.
The reforms could drive market optimism, especially in key sectors like banking and manufacturing.
FX Update
Naira Strengthens to ₦1,539 at Official Market
The naira appreciated during the week under review. At the official market, it gained 0.52%, closing at ₦1,539/$1, compared to ₦1,547/$1 the previous week. In the parallel market, the naira also strengthened, appreciating by 2.49% to trade at an average of ₦1,565/$1, up from ₦1,605/$1 recorded the previous week.
Nigeria's external reserves experienced a slight 0.98% decrease over the past week, dropping from $37.74 billion to $37.37 billion as at June 26, 2024.
This is the lowest level recorded so far this year.
Key Takeaways:
The naira strengthened in the official market but remains weaker in the parallel market, where rates are higher. This gap underscores the continued difficulty small businesses face in accessing dollars through official channels due to limited supply.
The recent decline in external reserves further signals potential pressure on foreign exchange liquidity and raises concerns about the CBN’s ability to maintain consistent currency support.
Remember to save dollar-based goals in dollars, which can be done with apps like Ladda.
Equities Update
Nigerian Stock Market Hits Record High, Crosses 120,000 Mark
The Nigerian stock market ended on a strong note on Wednesday, June 25, with the All-Share Index (ASI) gaining 1,466.87 points to close at 121,257.69—breaking past the 120,000 mark for the first time ever.
This marks a 1.22% increase from the previous day’s close of 119,790.82, fueled largely by strong performances from key trillion-naira stocks (SWOOTs) like International Breweries, Zenith Bank, and BUA Cement.
The Nigerian equities market concluded the week ending June 27, 2025, with a positive performance, as the NGX All-Share Index (ASI) recorded an appreciation of +1.57%. This brings the year-to-date (YTD) performance of the ASI to a robust +16.58%
Sectoral Performance Overview:
A sector-by-sector analysis reveals across the board:
The Banking Sector saw a significant gain of +2.59% for the week, and its YTD performance stands at +19.36%.
The Insurance Sector demonstrated positive momentum, closing up by +3.67% for the week, and its YTD performance stands at +4.50%.
The Consumer Goods Sector continued its strong performance, closing up by +3.73% for the week, and boasts an impressive YTD return of +51.02%.
The Oil and Gas Sector experienced a notable loss of -2.23% for the week, though its YTD performance remains negative at -9.86%.
The Industrial Goods Sector recorded a positive gain of +3.92% for the week, though its YTD return remained at +2.27%.
Key Takeaway:
The sustained upward trend of the All-Share Index has been fuelled by strong corporate earnings, reflecting the resilience of Nigerian companies despite broader economic challenges.
Fixed Income Update
Mixed Movements in T-Bill Yields, Bond Yields Slightly Decline
As of June 27, 2025, treasury bill yields showed mixed movements.
91-day T-Bill: Yield decreased from 18.35% to 17.83%, a decrease by 2.83%.
182-day T-Bill: Yield increased from 20.59% to 20.73%, an increase by 0.68%.
364-day T-Bill: Yield decreased from 21.93% to 21.36%, a decrease by 2.60%.
The yield on the benchmark bond is currently at 18.08%.
Key Takeaway:
As of June 27, 2025, T-bill yields showed mixed movements, with the 91-day and 364-day yields declining by 2.83% and 2.60% respectively, indicating improved short-term liquidity and lower risk sentiment. In contrast, the 182-day yield rose slightly by 0.68%, suggesting some caution around the mid-term outlook. Meanwhile, the benchmark bond yield held steady at 18.08%, reflecting stable investor confidence in Nigeria’s medium-term fiscal conditions.
You can invest in treasury bills to save for your short-term goal on rent, schools, fees, etc. through Ladda—a fintech app that helps you save at high returns.
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