Nigerian manufacturers can now access performance-based tax incentives under the Nigeria Tax Act 2025, which took effect on January 1, 2026. The Federal Inland Revenue Service (FIRS) will administer these incentives, marking a major shift in the country's tax policy. The Act replaces older, fragmented tax laws with a unified framework. It aims to boost industrial output and attract investment. Manufacturers must meet specific performance criteria to qualify. The incentives include reduced corporate income tax rates and accelerated depreciation allowances. The FIRS has already begun processing applications. Companies like Dangote Cement, Flour Mills of Nigeria, and Nigerian Breweries are expected to benefit significantly. The new law requires manufacturers to increase local production by at least 15% annually to qualify for full incentives. Firms must also submit quarterly performance reports to the FIRS. The application fee is ₦50,000 (about $33 USD), with approvals taking up to 60 days. The government projects these changes will increase manufacturing sector growth by 3-5% annually. Nigeria's manufacturing sector contributed 9.2% to GDP in 2025, according to National Bureau of Statistics data. The sector employs over 5 million people. The new tax incentives could create an additional 200,000 jobs by 2028. The Act also introduces digital tax filing requirements. All manufacturers must file returns electronically through the FIRS portal starting July 2026. Non-compliance risks penalties of up to ₦5 million (about $3,300 USD). The Nigerian Economic Summit Group estimates the reforms could boost manufacturing investment by $2 billion over five years. The Central Bank of Nigeria reports manufacturing exports grew by 8.7% in 2025. The new tax framework aligns with Nigeria's National Development Plan 2021-2025. It prioritizes sectors like food processing, textiles, and pharmaceuticals. Companies must maintain detailed production records for audit. The FIRS will conduct random audits to verify performance claims. Successful applicants receive tax clearance certificates valid for three years. The incentives are renewable upon meeting continued performance targets. The government aims to reduce Nigeria's manufacturing import dependency from 70% to 50% by 2030. The new law includes provisions for small and medium enterprises (SMEs). SMEs with annual turnover below ₦25 million (about $16,500 USD) get simplified compliance procedures. The Manufacturers Association of Nigeria (MAN) has welcomed the reforms. MAN represents over 3,000 manufacturing firms across Nigeria. The association notes that previous tax systems were cumbersome and inconsistent. The new performance-based approach rewards actual economic contribution. This could help Nigeria compete better regionally. The African Continental Free Trade Area (AfCFTA) implementation increases pressure for competitive manufacturing. Nigeria's manufacturing sector faces challenges like infrastructure gaps and high energy costs. The tax incentives alone may not solve all issues. But they provide immediate financial relief for compliant firms. The government plans to review the incentives every two years. Adjustments will be based on sector performance and economic conditions. The FIRS has trained 500 staff to handle the new tax regime. Manufacturers should prepare for stricter compliance monitoring. Early adopters may gain first-mover advantages in their industries.

Why It Matters

These tax changes matter because they directly link government support to business performance. Manufacturers must now prove their economic value to receive benefits. This shifts Nigeria from blanket subsidies to targeted incentives. The reforms could make Nigerian manufacturing more competitive in Africa. The AfCFTA creates a continental market of 1.3 billion people. Nigerian manufacturers need every advantage to capture this opportunity. The performance requirements encourage efficiency and innovation. Companies that invest in local production get rewarded. This aligns with Nigeria's goal to diversify its economy away from oil. The oil sector still dominates government revenue. Boosting manufacturing can create more stable jobs and exports. The new tax system also simplifies compliance. A unified law reduces confusion from multiple tax regulations. This saves time and resources for businesses. The digital filing requirement modernizes tax administration. It reduces corruption risks associated with manual processes. The incentives come at a critical time. Global supply chain shifts offer Nigeria a chance to attract manufacturing investment. Companies looking to nearshore production may find Nigeria more appealing. The tax benefits could tip investment decisions in Nigeria's favor. But success depends on consistent implementation. The FIRS must apply the rules fairly and transparently. Manufacturers need certainty to plan long-term investments. The two-year review cycle allows for adjustments based on real-world results. This pragmatic approach increases the reforms' sustainability.

What Businesses Should Watch

Businesses should watch several key aspects of the new tax regime. First, monitor the FIRS application process closely. Delays or inconsistencies could affect planning. Second, track performance metrics rigorously. The 15% annual production increase requirement is strict. Companies must document progress meticulously. Third, prepare for digital transition. Electronic filing becomes mandatory in July 2026. Ensure your accounting systems are compatible with FIRS portals. Fourth, watch for sector-specific guidelines. The government may issue additional rules for industries like automotive or steel. Fifth, note the SME provisions. Smaller manufacturers have different thresholds and procedures. Sixth, observe how the FIRS conducts audits. Early audits will set precedents for compliance expectations. Seventh, consider the renewable nature of incentives. Three-year certificates require ongoing performance. Plan beyond short-term gains. Eighth, watch regional competition. Other African countries may introduce similar reforms. Nigeria's incentives must remain competitive. Ninth, monitor infrastructure improvements. Tax benefits alone won't solve power or transport issues. Government plans for infrastructure matter. Tenth, engage with industry groups like MAN. Collective advocacy can address implementation challenges. Businesses should also watch currency stability. The naira's value affects cost calculations for performance targets. Finally, watch global economic trends. Recessions or trade shifts could impact Nigeria's manufacturing goals. Proactive companies will adapt quickly to these factors. The new tax laws offer real opportunities. But they demand careful management and vigilance.