Nigeria’s manufacturing sector is entering a critical adjustment phase as industry leaders and fiscal policymakers align on the practical implications of the country’s new tax architecture. At a high-level engagement in Lagos, the Manufacturers Association of Nigeria met with the Presidential Committee on Fiscal Policy and Tax Reforms to interrogate how recently enacted tax laws will translate from legislative intent to factory-floor reality.
The session—framed around the theme “From Legislative Assembly to Factory Floor”—went beyond policy theory. It confronted the cost pressures, compliance frictions and competitiveness concerns that have long constrained Nigerian manufacturers, while outlining how the reforms seek to correct systemic distortions in the fiscal ecosystem.
A Fiscal Architecture Built for Equity and Competitiveness
Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, explained that the reforms are anchored on three core principles: equity, competitiveness and simplicity. According to him, the objective is to reduce the effective tax burden on productive enterprise while widening the net fairly, rather than perpetuating a regime that penalises compliance and formalisation.
He stated that manufacturers now stand to benefit from expanded input VAT claims on qualifying assets and services, revised income bands, clearer exemption thresholds, and enhanced reliefs and allowances designed to improve cash flow and investment planning.
“Taxing poverty and imposing multiple levies have distorted the system. These reforms are structured to correct those imbalances and provide meaningful support for manufacturing,” said Taiwo Oyedele, Chairman, Presidential Committee on Fiscal Policy and Tax Reforms.
VAT Reforms: From Burden to Balance Sheet Relief
One of the most material shifts discussed was the recalibration of Value Added Tax treatment. Input VAT will now be deductible strictly against taxable supplies, with clearer delineation between taxable and non-taxable activities—an adjustment aimed at reducing disputes and compliance ambiguity.
Strategic exemptions and zero-rating provisions were also highlighted. Locally manufactured sanitary towels, assistive devices and disability-related products are now VAT-exempt, reinforcing the policy’s social equity lens. In parallel, zero-rated supplies include fertilisers, agricultural chemicals, veterinary medicines and animal feeds—inputs critical to agro-industrial value chains.
Oyedele further noted that VAT on petroleum products, renewable energy equipment, Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) may be suspended by ministerial order, a move with potentially significant cost-reduction implications for energy-intensive manufacturers.
Incentives Realigned to Productive Sectors
The engagement also unpacked the Economic Development Incentive Scheme, which reprioritises sectors with the highest multiplier effects on jobs, exports and industrial resilience. Priority areas include agriculture and food production, energy, mining, health, textiles and utilities, alongside ICT, creative industries, chemicals, building materials, steel, transportation, machinery and environmental services.
From an industrial policy standpoint, this represents a deliberate pivot from consumption-heavy incentives to production-driven fiscal support—one that could reshape investment flows within Nigeria’s manufacturing landscape.
R&D, Compliance and the End of Fiscal Fragmentation
Research and development expenses are now deductible up to five per cent of annual turnover, a provision that subtly but powerfully nudges manufacturers toward innovation, process efficiency and product upgrading.
Acknowledging long-standing industry complaints, Oyedele addressed issues of multiple taxation, overlapping levies and VAT compliance bottlenecks. He urged manufacturers to maintain robust records and rely on verified guidance to fully unlock the benefits embedded in the reforms, noting that institutional mechanisms such as a tax ombudsman and withholding tax exemptions for manufacturers and small businesses are being introduced to improve trust and dispute resolution.
Industry Response: Cautious Optimism with Engagement
Responding on behalf of the sector, Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria, reaffirmed the association’s commitment to sustained engagement with government to ensure the reforms translate into tangible competitiveness gains.
His position reflects a broader industry consensus: that while policy intent appears directionally sound, execution, clarity and consistency will ultimately determine whether Nigeria’s manufacturing sector experiences relief—or merely another cycle of reform rhetoric.
BRANDECONOMY Insight
For manufacturers, these reforms signal a potential inflection point. If implemented with discipline, they could ease cost pressures, incentivise capital formation and reduce the informal-formal imbalance that has long undermined scale manufacturing in Nigeria. The real test, however, lies in administrative coherence—how seamlessly policy promises move from gazette to production line.
