Photo caption: Taiwo Oyedele
By Charles Okonji
The much awaited sigh of relief yearned for by the Nigerian manufacturers would be felt as the sector will soon start reaping significant benefits from the tax reforms recently unveiled by the Federal Government.
These benefits will commerce as soon as the policymakers concludes with aligning fiscal policy to the realities of production and industrial growth for the country.
This assurance made at a stakeholders’ engagement hosted by the Manufacturers Association of Nigeria (MAN) in Lagos, where the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, outlined how the new tax laws are designed to ease the burden on manufacturers and stimulate inclusive economic growth.
In his presentation titled; “From Legislative Assembly to Factory Floor: What the New Tax Laws Mean for Nigerian Manufacturers” at MAN House, Ikeja, Oyedele noted that the reforms directly address long-standing complaints by manufacturers over high costs, multiple taxes and policy uncertainty.
Describing the previous tax system as fragmented, complex and regressive, he explained that it stifled growth and placed a disproportionate burden on businesses and ordinary Nigerians.
According to the tax expert; “At the heart of the reforms are targeted incentives for production and local value addition. Locally manufactured sanitary towels, pads and tampons, as well as assistive and disability-related devices, are now classified as exempt supplies, while fertilisers, locally produced agricultural chemicals, veterinary medicines and animal feeds are zero-rated for Value Added Tax (VAT).
“These measures are expected to lower input costs, encourage backward integration and strengthen linkages between manufacturing and agriculture.
“Energy and logistics costs, a major pain point for manufacturers, are also addressed. The reforms empower the Minister to suspend the charging and collection of VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG) and other gaseous hydrocarbons. Industry leaders say this could provide much-needed relief for factories grappling with high power and transportation expenses.
“Crucially, the VAT regime has been retooled to support investment and expansion. Manufacturers can now claim input VAT on taxable supplies, including services and fixed assets, offsetting these against output VAT payable, to the extent that the inputs are used for taxable production.
“A clearer VAT refund framework, alongside self-accounting and withholding VAT provisions, is expected to improve cash flow and reduce disputes with tax authorities.”
On innovation and product development, he pointed out that the new laws introduced a deduction for research and development expenditure, capped at five percent of annual turnover, providing an incentive for manufacturers to invest in new processes, products and technologies.
“In addition, a broader and clearer definition of “manufacturing” now captures activities such as assembling, bottling, mixing, blending, grinding and similar processes, bringing more operators within the scope of available incentives.
“Beyond VAT, the reforms deliver wide-ranging changes aimed at fairness, simplicity and competitiveness. Small and medium-sized companies benefit from a zero percent Company Income Tax rate, while all manufacturers gain from simplified returns, a more business-friendly capital allowance regime and the removal of the Certificate of Acceptance of Fixed Assets requirement. Capital gains tax has been folded into the income tax system, with generous exemptions for modest share disposals, easing the tax impact of restructuring and investment,” He noted.
According to Oyedele, the overarching goal is to stimulate inclusive growth by lowering the overall tax burden, increasing disposable income, moderating inflationary pressures and encouraging formalisation.
“Measures such as tax harmonisation through a single window, reduced multiplicity of taxes, integrated taxpayer identification and risk-based audits are designed to cut compliance costs and improve the ease of doing business.
Safeguards have also been built in to protect taxpayers.
“The introduction of an independent Tax Ombud provides manufacturers with an impartial arbiter to resolve disputes, challenge arbitrary assessments and enhance accountability. Reforms to the withholding tax regime, including exemptions and lower rates for manufacturers, further strengthen cash flow and certainty.”
In his closing remarks, Director-General, MAN, Mr. Segun Ajayi-Kadir, applauded the reforms and commended Oyedele for his commitment to Nigeria’s economic growth.
He assured the association’s full support for successful implementation, adding that the focus had shifted from acceptance to maximising the gains for manufacturers.
“MAN had already engaged with the Tax Ombud in Lagos and received assurances of a constructive working relationship.
“With implementation underway, industry leaders say the new tax laws mark a decisive shift toward a more equitable, competitive and growth-oriented fiscal environment, one that brings tax policy closer to the factory floor and positions Nigerian manufacturing for a stronger future,” Ajayi-Kadir averred.
