FG cuts corporate tax, frees N1.4trn for companies next year
FG cuts corporate tax, frees N1.4trn for companies next year
The federal government of Nigeria is set to forfeit about N1.4 trillion in revenue in 2026 due to a planned reduction in the corporate income tax (CIT) rate from 30% to 25%, as stipulated in the New Tax Act 2025, which takes effect on January 1, 2026. The reform is part of a broader tax overhaul aimed at stimulating economic growth, encouraging business investment, and creating jobs rather than relying on high taxation to raise revenue.
Key points of the reform include:
1. Corporate Tax Reduction:
o Slashing CIT from 30% to 25% is expected to give businesses N1.4 trillion, effectively leaving more funds for investment and expansion.
o While the cut reduces government revenue in the short term, officials argue that a growing economy will eventually generate more sustainable revenue than high taxes.
2. Value Added Tax (VAT) Updates:
o Businesses will be able to claim input VAT credits on assets, overheads, and services, which was previously disallowed.
o Essentials like bread, food, education, and healthcare will be zero-rated, allowing businesses to charge 0% VAT while reclaiming VAT on inputs, thus reducing production costs.
3. Objectives of the Reforms:
o Simplify Nigeria’s tax system and remove bureaucratic bottlenecks.
o Lower the cost of doing business, widen the tax base, and encourage investment and job creation.
o Avoid introducing new levies, instead focusing on enabling businesses to thrive.
4. Implementation and Oversight:
o The reforms are embedded in four new tax acts effective from January 2026.
o A National Tax Policy Implementation Committee, chaired by tax expert Mr. Joseph Tegbe, has been established to ensure smooth and effective rollout.
Overall, the government is prioritizing economic growth over immediate revenue collection, betting that reduced taxes and lower business costs will boost investment, increase employment, and eventually expand the tax base, leading to higher long-term revenue.
The Sun, 15 Dec 2025
