The implementation of Nigeria's landmark Nigeria Tax Act 2025 faces significant practical hurdles that could undermine its effectiveness, according to a leading business expert. Dele Oye, Chairman of the Alliance for Economic Research and Ethics (AERE), has pinpointed specific provisions, including a controversial cap on rental expense relief and restrictions on foreign exchange deductions, as major obstacles.
The Rent Relief Paradox and Forex Deduction Hurdles
In a critical examination titled 'The Nigeria Tax Act 2025: A Critical Examination of Consolidation, Implementation Challenges, and Institutional Identity Crisis', Oye argued that the legislation contains structural flaws. He highlighted that the act limits deductible rental expenses for individual taxpayers to N500,000 per year, a figure he described as "embarrassingly low" for major economic hubs like Lagos, Abuja, and Port Harcourt.
Oye stated that this fixed threshold fails to account for Nigeria's inflationary reality and the devaluationary pressure on the Naira, making the relief insignificant for most urban professionals and small business owners. He termed this the "Rent Relief Paradox," suggesting it acts more as a decorative measure than a genuine safety net. Furthermore, he criticised the restrictions that prevent businesses from deducting actual foreign exchange losses incurred in Nigeria's volatile currency market, creating another barrier for enterprises.
Institutional Identity Crisis at the New Revenue Service
Beyond specific clauses, Oye raised concerns about the institutional shift brought by the act. The legislation establishes the Nigeria Revenue Service (NRS) as the successor to the Federal Inland Revenue Service (FIRS). However, Oye sees an "institutional identity crisis" brewing. He warned that the NRS's expanded mandate, which appears to venture into investment policy, risks eclipsing its core function of revenue collection with the more nuanced task of attracting investment.
"The growth of power is an institutional identity crisis where the primary purpose of revenue extraction is likely to eclipse the nuanced task of attracting investment," Oye, who is also Chairman of the Nigeria-Türkiye Business Council (NTBC), explained in his paper.
Calls for Strategic Incentives and Learning from Other Sectors
The former chairman of the Organised Private Sector of Nigeria (OPSN) urged policymakers to adopt a more holistic approach. He recommended learning from challenges faced in other sectors, such as Nigeria's pharmaceutical industry, where finance and incentives are crucial for development.
Oye concluded that for the new tax regime to succeed, it requires more than just a legal framework. It needs strategic financial incentives to support technology adoption and enhance compliance mechanisms among taxpayers and businesses across the country.
