FG highlights incentives to boost manufacturing under new tax laws

The Federal Government, through the Presidential Committee on Fiscal Policy and Tax Reforms, has outlined key incentives in Nigeria’s new tax laws aimed at strengthening the manufacturing sector and improving its competitiveness. Speaking at a stakeholder engagement with the Manufacturers Association of Nigeria (MAN), the committee’s chairman, Taiwo Oyedele, explained that the reforms were introduced to address long-standing challenges faced by manufacturers, including multiple taxation, high effective tax rates, and complex VAT compliance under the previous tax regime.

Oyedele noted that Nigerian manufacturers have struggled to compete even in the domestic market, as imported goods often arrive cheaper despite freight and duties. This situation, he warned, risks pushing businesses to relocate to neighboring countries such as Ghana or Benin Republic and export back into Nigeria, undermining local industrial growth and Nigeria’s position under the African Continental Free Trade Area (AfCFTA). He emphasized that manufacturers were particularly burdened by a mix of legal and illegal levies imposed by state and non-state actors, resulting in one of the highest corporate tax burdens globally and discouraging investment.

According to him, the new tax reforms are designed to make the system fairer, simpler, and more supportive of productive sectors. Manufacturers are expected to benefit from expanded input VAT claims on assets and services, revised income bands, higher exemption thresholds, and various reliefs and allowances aimed at lowering effective tax burdens. Additional measures include the introduction of a tax ombudsman and targeted withholding tax exemptions to ease compliance, resolve disputes faster, and reduce cash-flow pressures, especially for small manufacturers and MSMEs within the value chain.

The reforms also provide sector-specific support, such as zero-rating VAT on items like fertilizers, locally produced agricultural chemicals, veterinary medicines, and animal feeds. There is also provision for suspending VAT on petroleum products, renewable energy equipment, CNG, LPG, and other gaseous hydrocarbons by ministerial order. Furthermore, manufacturers can deduct input VAT on taxable supplies and claim R&D deductions capped at 5 percent of annual turnover, provided they relate to taxable production.

In his response, MAN’s Director-General, Segun Ajayi-Kadir, stressed that the success of the reforms depends largely on alignment by state governments. He welcomed the fact that at least 10 states have already passed laws consistent with the federal framework, noting that this development would help eliminate nuisance taxes and illegal collections that have long hindered manufacturers. He expressed optimism that wider state adoption would support both manufacturers and the long-term sustainability of the tax reform agenda.