Nigeria's Federal Inland Revenue Service has rolled out transfer pricing documentation rules that will squeeze mid-sized multinationals harder than the headlines suggest. The NGN 300 million threshold for country-by-country reporting catches far more companies than expected, while compliance costs surge 40% for affected firms.

Documentation Burden Expands Beyond Headlines

The new rules require comprehensive documentation for any related-party transaction above NGN 300 million, roughly $200,000 at current exchange rates. This captures mid-tier subsidiaries that previously flew under regulatory radar. Companies must now maintain detailed records proving their arm's length pricing aligns with OECD standards, with documentation requirements extending to electronic records and data analysis.

The tax authority has expanded its Transfer Pricing Panel from three to five members, including legal department representation. This signals more sophisticated audits ahead. The agency now requires controlled transaction declarations within 18 months of incorporation or six months after year-end, whichever comes first, a tight timeline that catches unprepared subsidiaries.

PwC Nigeria's 40% compliance cost estimate reflects the documentation intensity. Companies must hire specialized tax advisors, implement new reporting systems, and dedicate finance team resources to ongoing compliance. For subsidiaries already managing naira volatility and forex restrictions, this adds another cash drain. The timing is problematic as Nigeria's economy faces pressure from subsidy reforms and currency adjustments.

APAs Favor Larger Players

The revenue service published Advance Pricing Agreement (APA) guidelines in November 2024, allowing companies to secure three-year pricing certainty for controlled transactions. This reduces audit risk but requires upfront investment in economic analysis and legal fees, typically costing $150,000-300,000 for complex arrangements.

The APA route favors larger multinationals with dedicated tax teams. Mid-sized companies, those most affected by the 40% cost increase, often lack resources for complex APA applications. This creates a two-tier system where bigger players buy certainty while smaller subsidiaries face ongoing audit exposure.

Expect multinational groups to reassess their Nigerian subsidiary structures. Some may consolidate operations to stay below documentation thresholds. Others will factor higher compliance costs into investment decisions, potentially delaying expansion plans. The rules align Nigeria with OECD BEPS standards, improving the country's tax transparency rating, but the immediate effect is higher operational costs for existing investors.

Unlike Ghana's transfer pricing regime which focuses primarily on mining and oil sectors, Nigeria's broad NGN 300 million threshold captures service companies, manufacturers, and tech subsidiaries across all industries. This comprehensive approach mirrors South Africa's transfer pricing enforcement but with lower thresholds that affect more mid-market players.

The tax digitization push is positioning Nigeria to capture more information on digital transactions across all business activities. This suggests controlled transaction enforcement is just the beginning of broader regulatory efforts that will reshape how multinationals operate in Nigeria.