Nigeria’s 4% development levy to reshape how companies calculate, remit tax

Nigeria’s new 4 percent development levy, which replaces four separate sector-specific taxes, is set to reshape how companies calculate and remit their statutory obligations by unifying multiple payments into a single charge on assessable profits.

The reform aims to simplify a historically fragmented corporate tax environment, reduce compliance complexities, and make statutory obligations more predictable for businesses across all sectors.

According to Bolutife Desile, an Associate in the Tax team at ǼLEX Legal Practitioners and Arbitrators, the consolidation offers a clear advantage in ease of doing business.

“By consolidating these multiple levies into one, businesses might benefit from a less fragmented tax system. Instead of juggling several sector-specific levies, they now deal with a single charge,” he said.

He added that the change could reduce administrative burdens for both companies and tax authorities, improve compliance rates, and lower the overall cost of corporate tax administration, creating a smoother environment for businesses to operate.

The levy is contained in Section 59 of the Nigeria Tax Administration Act (NTAA), 2025. It applies to all companies chargeable to tax, excluding small companies and non-resident firms, and mandates that revenue be paid into a dedicated government account.

Section 59 also provides a detailed framework for revenue allocation, reinforcing the government’s intent to direct funds toward priority sectors while maintaining fiscal transparency.

Precious Adenekan, a tax advisor at KPMG, said the reform has implications beyond compliance. In a LinkedIn post, he highlighted that for sectors such as manufacturing, telecoms, and oil & gas, the levy introduces a structural shift in accounting that affects deferred tax.

“This isn’t just a rate change. It’s a structural shift that affects how and when levies are recognised in financial statements,” he said, stating that companies may need to reassess deferred tax balances, review timing differences, or, in some cases, restate prior financials to remain compliant with accounting standards.

Previously, companies navigated multiple levies totalling about 4.25 percent, including the 3 percent Tertiary Education Tax, the 1 percent NITDA levy, the 0.25 percent NASENI levy, and the Police Trust Fund levy at 0.005 percent of net profit. The combination of different bases and rates created challenges, with companies spending significant time reconciling multiple reports.

NEITI data shows that the Tertiary Education Trust Fund (TETFund) alone received N1.024 trillion from education tax contributions between 2019 and 2023, with a record N571.01 billion in 2023, underscoring the critical role of corporate taxes in funding education.

Under Section 59(3) of the NTAA, revenue from the levy will be distributed as follows: 50 percent to TETFund, 15 percent to the Nigerian Education Loan Fund, 10 percent to the Defence and Security Infrastructure Fund, 8 percent each to the National Information Technology Development Fund (NITDA) and the National Agency for Science and Engineering Infrastructure (NASENI), 5 percent to the National Cybersecurity Fund, and 4 percent to the National Board for Technological Incubation.

The Act also requires all beneficiary agencies to prepare and submit detailed income and expenditure reports to the National Assembly, a provision that strengthens oversight and ensures funds are strategically allocated to national priorities.

At the TETFund Town-Hall Meeting held on Monday, November 24, 2025, Board Chairman, Aminu Bello Masari and Executive Secretary Sonny Echono said sustained investment is critical to building a knowledge-driven economy and equipping Nigeria’s growing youth population to compete globally.

“Education is the backbone of our future competitiveness. We must ensure that these funds translate into research, innovation, and highly skilled graduates who can solve real-world problems,” Masari said.

As implementation begins, the coming months will test whether the unified levy delivers on its promises. Companies will need to adjust accounting systems, re-examine deferred tax positions, and model potential impacts on cash flows. For the government, the measure will demonstrate whether simplification can be achieved without reducing the overall funding available for critical national sectors.