Nigeria must align fiscal, trade policies for industrial growth –Analysts

Economists, tax experts, investment analysts have called for stronger alignment between Nigeria’s fiscal reforms and broader industrial and trade policies, warning that gaps in implementation, policy uncertainty, and weak institutional trust could undermine enterprise growth and weaken investor confidence.

The concerns were raised at the 28th Annual Conference of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja, where stakeholders examined how taxation, competitiveness, and investment climate reforms can be better structured to support productivity and sustainable economic growth.

In his paper presentation on Taxation, Business Competitiveness and Investment Climate: Aligning Fiscal Reforms and Enterprise Growth, Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria (MAN) Manufacturers Association of Nigeria, argued that modern tax systems are no longer judged solely by revenue performance but by how effectively they support productive enterprises, capital formation, and long-term economic resilience.

Ajayi-Kadir noted that although policymakers often emphasise the principle of “taxing the fruits and not the tree,” sustaining revenue generation requires protecting the productive base, which he described as the foundation of economic stability.

He stressed that global best practice increasingly prioritises regulatory certainty, investment attraction, and industrial productivity over a narrow focus on statutory tax rates.

He said Nigeria’s ongoing fiscal reforms continue to raise questions around investor perception, compliance efficiency, and business confidence, warning that taxation remains a key component of the ease of doing business and must be carefully structured to avoid discouraging enterprise growth.

Ajayi-Kadir added that Nigeria’s economic trajectory is unfolding within a highly competitive regional and global environment, particularly under the African Continental Free Trade Area framework, where countries are competing for investment and value chain participation.

While acknowledging projections pointing toward a potential $1 trillion economy by 2030, he said such ambition depends on sustained policy credibility and consistent implementation.

He argued that taxation and competitiveness must be assessed beyond headline rates, focusing instead on compliance burden, administrative efficiency, and policy predictability. According to him, investors respond to a mix of fiscal and institutional factors, meaning that even low tax regimes can become unattractive when compliance costs and uncertainty are high.

He identified compliance costs as a major constraint, especially for small and medium enterprises, while noting that policy uncertainty increases risk premiums and raises the cost of capital.

He also highlighted fragmentation across different tiers of government as a structural challenge that complicates administration and reduces efficiency.

“Effectiveness of any tax system depends on coherence, predictability, and administrative efficiency, arguing that a simple but consistently implemented framework delivers better outcomes than a complex system with weak enforcement”, Ajayi-Kadir said.

He also noted that Nigeria’s narrow tax base places a disproportionate burden on a limited number of compliant taxpayers, while weak trust and limited implementation capacity continue to undermine voluntary compliance.

He said ongoing efforts toward a unified tax framework are aimed at addressing these structural weaknesses, but warned that success will depend on consistent implementation across all levels of government, as well as deliberate efforts to expand the tax base while easing pressure on existing taxpayers.

Despite these concerns, he maintained that taxation can serve as a powerful instrument for economic transformation when designed as an enabler of growth rather than a purely revenue-driven tool.

He cited countries such as Vietnam, where targeted tax incentives and reduced corporate tax rates supported manufacturing expansion, export growth, and stronger integration into global supply chains.

Also speaking, Oyebode Oyetunde, tax and fiscal policy expert urged deeper alignment between fiscal reforms and industrial realities, warning that even well-designed policies could fail if implementation gaps and structural inefficiencies persist.

Oyetunde said international experience shows that tax systems deliver stronger economic outcomes when aligned with industrial strategy, citing Rwanda’s reforms in tax administration and digital compliance, which reduced administrative burdens, improved ease of doing business, and attracted manufacturing investment.

He also referenced Nigeria’s Economic Development Incentive (EDI), designed to stimulate reinvestment and industrialisation through targeted tax credits on qualified capital expenditure, which may extend up to 10 years for capital-intensive projects in key sectors.

While acknowledging the 2026 Fiscal Policy Measures effective from April 1, aimed at reducing input costs for industries, he warned that execution gaps could undermine their impact.

He specifically pointed to the 90-day grace period for importers under pre-existing trade arrangements, describing it as a provision that protects committed capital but creates what he termed a “compliance cliff edge,” particularly for manufacturers affected by supply chain disruptions and foreign exchange pressures in early 2026.

Oyetunde cautioned that misalignment between policy timelines and real sector conditions could convert reforms into operational bottlenecks.

He called for more flexible implementation mechanisms, including pre-arranged compliance assessments and adaptive grace periods aligned with production cycles.

He stressed that fiscal reforms must be structured around the needs of the productive sector, especially manufacturing, which he described as central to value chain development, job creation, foreign exchange stability, and economic resilience.

He further called for urgent tax harmonisation across tiers of government, noting that fragmentation remains one of the most significant constraints on businesses after energy costs.

According to him, consolidation of overlapping taxes would immediately free up capital for investment, expansion, and technology adoption.

Oyetunde also advocated innovation-driven incentives, improved SME scaling support, more predictable tax administration, fiscal stress tests for new policies, and medium-term fiscal stability frameworks.

“Nigeria has moved beyond the stage of designing reforms and must now focus on effective implementation”, he said.