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By Merit Ibe
As the African Continental Free Trade Area (AfCFTA) initiative gains traction, experts say it is time for Nigeria to be well positioned to milk every benefit therein.
To achieve this, critical decisions must be made, especially with regards to in-country fiscal policies that will guide Nigeria into the regional arena to compete favourably.
However, analysts note that for the country to compete gainfully, create jobs and attract investment, it must fix its tax system many stakeholders describe as broken.
That warning formed part of a recent engagement between the Presidential Committee on Fiscal Policy and Tax Reforms and the Manufacturers Association of Nigeria (MAN).
At the forum, the committee’s chairman, Mr. Taiwo Oyedele, emphasised what lies ahead if the tax reforms stall.
Without decisive tax reforms, Oyedele warned that Nigeria risks losing jobs, factories and investments to neighbouring countries with more competitive fiscal regimes.
For manufacturers already grappling with high costs, the stakes could not be higher, Oyedele noted, explaining that the era when African businesses sought only global visibility has given way to a tougher reality-regional competition.
Under AfCFTA, he said, Nigerian firms must first win at home before they can succeed across borders.
Yet today, many local manufacturers struggle even in their domestic market.
According to Oyedele, imported goods often land in Nigeria cheaper than locally produced alternatives, despite shipping costs, insurance and customs duties.
This imbalance, he noted, is a clear sign that Nigeria’s tax and cost structure is undermining local production.
At the heart of the problem is a tax regime that has grown complex, fragmented and punitive over time.
Manufacturers, Oyedele said, face a web of legal and illegal levies imposed by federal, state, local and even non-state actors.
The result is an effective tax burden that leaves Nigerian factories uncompetitive, even before they attempt regional expansion.
The new tax reforms, he explained, are designed to reverse this trend by restoring fairness, simplicity and competitiveness.
One major change allows manufacturers to claim input VAT on assets and services, reducing the cost of investment.
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The reforms also introduce revised income bands, higher exemption thresholds and broader reliefs and allowances.
Beyond industry-wide measures, the reforms target social equity as well.
Oyedele noted that VAT exemptions now cover locally manufactured sanitary towels, assistive devices and disability-related products.
Essential inputs such as fertilisers, agricultural chemicals, veterinary medicines and animal feeds have been zero-rated.
In addition, the Minister of Finance may suspend VAT on petroleum products, renewable energy equipment, compressed natural gas and liquefied petroleum gas.
To encourage innovation, research and development expenses are now deductible, though capped at five per cent of annual turnover.
Oyedele acknowledged that manufacturers remain concerned about VAT compliance, multiple taxation and inconsistent sub-national practices.
He admitted that past policies had distorted incentives by taxing poverty, capital and investment.
The reforms, he stressed, shift the focus from punitive taxation to economic growth.
“If businesses grow, even at lower tax rates, government revenue will rise,” Oyedele said, pointing to global development models.
The reforms also address long-standing abuses in free trade zones, which were meant for exports but often sell into the domestic market tax-free.
To create a level playing field, the new laws aim to reduce total taxes and levies across all tiers of government to single digits.
Some nuisance taxes embedded in the Constitution, Oyedele revealed, are already the subject of proposed amendments before the National Assembly.
Importantly, the reforms respect Nigeria’s federal structure by encouraging states to voluntarily domesticate harmonised tax laws.
President of MAN, Francis Meshioye said this alignment is in the best economic interest of states.
According to him, a supportive tax environment would unlock jobs, boost output and strengthen value chains.
MAN Director-General Segun Ajayi-Kadir added that the reforms would fail without sub-national buy-in, noting that at least 10 states have already aligned their laws.
As manufacturers adjust to the new tax landscape, Nigeria’s AfCFTA ambition now hinges on one question: whether reform momentum can be sustained long enough to turn policy into prosperity.
