How Nigeria’s Tax Act could unlock billions in non-oil exports

Nigeria’s recently enacted Tax Act 2025 could mark a turning point for the country’s non-oil export sector by removing longstanding tax uncertainties and offering stronger incentives for investors, according to commercial and investment lawyer Timothy Shobiye.

In a detailed report, Shobiye, who has over 16 years of experience in commercial legal practice, said the Act simplifies tax rules for exporters, encourages the repatriation of export earnings through the banking system and improves investment returns by exempting qualifying export profits and dividends from income tax.

The reforms come as the Federal Government intensifies efforts to diversify the economy away from crude oil, with agricultural exports such as cocoa, sesame seeds, cashew nuts, soya beans and ginger emerging as increasingly important sources of foreign exchange.

“The Tax Act does more than amend tax provisions; it signals a clear commitment by the Federal Government to promote export-led growth, increase foreign exchange inflows and attract investment into the non-oil sector,” Shobiye said.

President Bola Tinubu signed the Nigeria Tax Act into law last year as part of a broader fiscal reform agenda aimed at improving the country’s tax system and boosting economic growth. The legislation also reflects the work of the Coordinating Minister of the Economy and Minister of Finance, Taiwo Oyedele, the chairman of the Nigeria Revenue Service, Zacch Adedeji, and other stakeholders involved in the reform process.

For years, exporters operated under provisions contained in the Companies Income Tax Act (CITA), which exempted export profits from company income tax provided export proceeds were repatriated and reinvested in machinery, equipment, raw materials and other assets used for export operations.

However, disagreements over the interpretation of the law created uncertainty across the sector. According to Shobiye, one of the biggest disputes centred on whether the tax incentive applied only to manufacturing exporters or also covered companies exporting agricultural commodities without significant processing.

While many tax professionals argued that the law covered all exporters that met the repatriation requirements, some tax officials interpreted the provision as applying mainly to manufacturers, exposing exporters to prolonged tax disputes during audits.

Another challenge was that companies risked losing the exemption once export profits were distributed as dividends rather than retained for reinvestment.

The uncertainty also influenced how export businesses were financed, with many investors preferring shareholder loans instead of equity investments to minimise potential tax liabilities.

The Tax Act seeks to address many of those concerns.

Under Section 163(1)(v), profits earned from exports by Nigerian companies, excluding firms operating in the petroleum value chain, are exempt from income tax provided export proceeds are repatriated through approved banking channels.

Unlike the previous regime, exporters are no longer required to prove that export earnings were reinvested in specified assets before qualifying for the tax exemption.

Instead, compliance now hinges largely on processing exports through the Nigeria Export Proceeds (NXP) system and ensuring foreign exchange earnings are returned through authorised banks.

Shobiye said the changes provide greater certainty for exporters and significantly improve after-tax returns for investors. The Act also introduces another incentive by exempting dividends paid by wholly export-oriented companies from income tax, a move expected to make the sector more attractive to both local and foreign investors.

The managing partner of Mathmer Legal Practitioners noted that the combination of tax-free export profits and qualifying dividend exemptions could strengthen investment across Nigeria’s agricultural export value chain, from production to logistics and processing.

Despite welcoming the reforms, he cautioned that one provision may require further clarification.

Shobiye expressed concern over the Act’s use of the phrase “wholly export” in relation to dividend exemptions, noting that many exporters still sell a small portion of their products domestically for quality control, inventory management or supply to local processors.

“A strict interpretation could deny income tax exemption to companies that are overwhelmingly export-oriented but not exclusively so,” he said, suggesting that terms such as “principally engaged in export” or “substantially export-oriented” would better reflect commercial realities.

He added that future regulations or administrative guidelines should clarify the provision to avoid unintended consequences for businesses.

Beyond tax savings, Shobiye said the reforms have the potential to boost foreign exchange inflows, create rural jobs, encourage agricultural production and reduce Nigeria’s long-standing dependence on oil revenues if implemented consistently.

“For a country seeking sustainable prosperity beyond petroleum, the Act is indeed a renewed hope for non-oil exporters,” he said.