Nigeria’s 15% Minimum Effective Tax Rate Reshapes Investment Strategy for Large Companies
Nigeria has officially introduced a 15 percent Minimum Effective Tax Rate (ETR) for large domestic companies and multinational enterprises, marking a significant shift in the country’s corporate tax landscape. Under Section 57(1)(a) of the Nigeria Tax Act (NTA), qualifying companies whose effective tax rate falls below 15 percent of net income must now pay a top-up tax. This means tax incentives, capital allowances, and strategic tax planning can no longer reduce liabilities beneath the statutory floor, fundamentally changing how investors evaluate corporate returns.
The new rule applies to companies with an annual turnover of N50 billion or more, as well as multinational groups with global revenues of at least £750 million or its equivalent. According to Ajibola Sogunro, tax partner at Forvis Mazars, the reform essentially introduces a minimum tax benchmark for both multinationals and major Nigerian firms. Covered taxes include Company Income Tax (CIT), petroleum profit tax, hydrocarbon taxes, development levies, and priority-sector tax credits — all measured against audited net income rather than turnover. By linking taxation to profitability, the government is closing loopholes that previously allowed firms to significantly lower their effective tax burden.
For investors, the numbers tell a clear story. A company generating N5 billion in pre-tax profit at a previous effective rate of 12 percent would have paid N600 million in tax. Under the new 15 percent minimum, that obligation rises to N750 million — an additional N150 million that could have gone toward dividends, reinvestment, or debt servicing. In high-turnover, low-margin sectors such as banking, telecommunications, and manufacturing, even small increases in effective tax rates can materially affect valuation models and shareholder returns.
The reform also extends beyond Nigeria’s borders. Section 6(3) of the NTA requires Nigerian parent companies to account for subsidiaries operating in jurisdictions where the effective tax rate falls below 15 percent. Israel Ajayi, senior manager at KPMG, explained that if a foreign subsidiary pays less than the minimum threshold abroad, the Nigerian parent must report and pay the difference locally. This strengthens Nigeria’s Controlled Foreign Company (CFC) framework and limits profit-shifting to low-tax jurisdictions. However, authorities say existing treaty mechanisms and unilateral relief provisions will help prevent double taxation.
While smaller businesses with turnover below N100 million remain exempt, and Free Trade Zone operators are largely excluded unless tied to multinational groups, the broader message to large corporations is clear: the era of sub-15 percent effective tax outcomes is over. According to Andersen’s analysis of the Nigeria Tax Act 2025, companies must now adopt a more strategic approach to managing overall effective tax rates, capital structure, and investment timing. For investors, the headline corporate tax rate may remain 30 percent, but the new 15 percent floor is the figure that will increasingly shape profit forecasts, dividend expectations, and long-term investment decisions in Africa’s largest economy.
source: business day