KPMG Nigeria has identified what’s described as “errors, inconsistencies, gaps and omissions” in Nigeria’s tax laws that came into force at the beginning of this year.

The professional services company warns that these issues could undermine the attainment of the tax reforms’ stated objectives if left unaddressed.

The reforms, anchored on the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), alongside the Nigeria Revenue Service (NRS)  Establishment Act and the Joint Revenue Board (JRB) Establishment Act, are aimed at improving revenue generation, simplifying tax administration, and enhancing competitiveness.

Authorities have repeatedly described the overhaul as critical to strengthening Nigeria’s weak tax-to-GDP ratio and adapting the tax system to changing economic realities.

Capital gains, inflation, and market behaviour

One of the most far-reaching concerns relates to the computation of chargeable gains under Sections 39 and 40 of the Nigeria Tax Act, which require capital gains to be calculated as the difference between sale proceeds and the tax-written-down value of assets, without any adjustment for inflation, analysis by KPMG revealed.

This approach has attracted attention largely because of Nigeria’s inflation environment. Headline inflation has remained in double digits for eight consecutive years, averaging above 18 percent between 2022 and 2025, according to data from the National Bureau of Statistics. Over the same period, asset price movements have been heavily influenced by currency depreciation and general price increases.

Actual market behaviour shows a mixed reaction to tax policy expectations, despite a strong full‑year rally, with the NGX All‑Share Index up more than 50  percent and market capitalisation near N99.4 trillion, the equities market saw significant sell‑offs in late 2025, including a N6.5 trillion drop in market value in November amid uncertainty over the new capital gains tax rules, underscoring investor sensitivity to tax policy shifts.

In its review of the law, KPMG Nigeria noted that taxing nominal gains in a high-inflation environment could result in taxpayers being assessed on inflationary gains rather than real economic value. The firm recommended the introduction of a cost indexation allowance to adjust asset values for inflation when computing chargeable gains.

According to the analysis, such an adjustment would reduce distortions in effective tax rates while still allowing the government to generate additional revenue from genuine capital appreciation.

Indirect transfer rules and foreign investment risks

Another provision drawing scrutiny is Section 47 of the Nigeria Tax Act, which subjects gains from indirect transfers of shares or assets by non-residents to Nigerian tax where such transfers result in changes in ownership of Nigerian companies or assets located in Nigeria.

The provision is being introduced amid weak foreign investment inflows. Data from the United Nations Conference on Trade and Development shows that foreign direct investment into Nigeria remains below pre-2019 levels, reflecting broader investor caution.

While similar indirect transfer rules exist in other jurisdictions, analysts note that such regimes are typically supported by detailed guidance and clear thresholds to reduce uncertainty.

KPMG’s analysis recommended that Nigerian tax authorities issue clear administrative guidance defining the scope, thresholds, and reporting obligations associated with indirect transfers. The firm noted that clarity would reduce the risk of disputes, improve compliance, and mitigate potential negative effects on foreign investment flows.

FX deductions clash with economic realities

Section 24 of the Nigeria Tax Act limits businesses from deducting foreign-currency expenses beyond their naira equivalent at the official CBN rate.

In practice, this means a company importing goods, paying foreign software subscriptions, or settling overseas vendor invoices cannot claim as tax-deductible any amount they spent above the official exchange rate.

For many companies, this is a real problem. Access to official foreign exchange is limited, forcing businesses to pay higher rates on the parallel market. Under the law, the extra cost becomes non-deductible, effectively increasing taxable profits and raising their tax bills.

KPMG warns that while the rule aims to curb speculative foreign exchange activity, it fails to account for supply shortages. The firm recommends that deductibility should reflect the actual cost incurred, provided proper documentation, so businesses aren’t penalized for circumstances beyond their control.

VAT-linked expense disallowances

Section 21(p) of the Nigeria Tax Act disallows deductions for expenses on which value-added tax has not been charged, even where such expenses were incurred wholly for business purposes.

This intersects with Nigeria’s VAT compliance challenges. The informal sector accounts for a significant share of economic activity, and VAT compliance gaps remain wide, according to assessments by tax authorities and development institutions.

Analysts note that the provision effectively transfers part of the VAT enforcement burden to compliant taxpayers, who may be penalised for supplier non-compliance.

KPMG recommended that Section 21(p) be deleted or substantially modified, arguing that deductibility should depend solely on whether an expense was wholly, exclusively, and necessarily incurred for business purposes. The firm noted that VAT compliance should instead be enforced directly through audits and penalties on defaulting suppliers.

Non-resident taxation and compliance ambiguity

Uncertainty also surrounds the compliance obligations of non-resident companies. While Section 17 of the Nigeria Tax Act provides that withholding tax constitutes final tax for certain non-resident payments where there is no permanent establishment or significant economic presence, the Nigeria Tax Administration Act does not clearly exempt such entities from registration or filing requirements.

Nigeria has signed over a dozen double taxation treaties (DTTs), including the UK, South Africa, Canada, and France, which align with the principle that final WHT extinguishes further tax obligations in the absence of a taxable presence. Experts say harmonizing the NTA and NTAA with these treaties is critical to avoid conflicts and deter foreign investors.

KPMG recommended that the relevant provisions of the Nigeria Tax Act and the Nigeria Tax Administration Act be harmonised, with explicit exemptions for non-resident companies whose Nigerian tax obligations have been fully discharged through withholding tax. According to the firm, such alignment would reduce compliance friction and improve Nigeria’s attractiveness for cross-border transactions.

As Nigeria enacts its most comprehensive tax overhaul in decades, the path to success will depend on clarity, alignment with international best practices, and swift adoption of recommended amendments. Without these measures, businesses may face higher costs, non-residents could be discouraged from investing, and capital markets may remain volatile. For policymakers, the challenge is not just raising revenue but ensuring that the reforms strengthen competitiveness and sustainable economic growth.

Nineteen Nigerian banks have fulfilled the Central Bank of Nigeria’s (CBN) recapitalization requirements as of January 6, 2026, six weeks before the March 31 deadline, according to data from The Cable Index.

CBN

Access Bank, Fidelity Bank, First Bank, GTBank (GTCO), UBA, and Zenith Bank—holders of international licenses—lead compliance among six major players.

National and regional licensees Citibank Nigeria, Ecobank Nigeria, Globus Bank, Stanbic IBTC, Sterling Bank, Wema Bank, PremiumTrust Bank, and Providus Bank have also hit the benchmarks.

Two non-interest banks, Jaiz and Lotus, alongside merchant banks FSDH, Greenwich, and Nova, round out the compliant group, meeting thresholds of N10-N20 billion for non-interest, N50 billion for merchants, N200 billion for nationals, and N500 billion for international banks as set in March 2024.

Approximately 14 banks remain non-compliant, underscoring urgency ahead of the deadline despite broad progress.

Fidelity Bank Plc said it has raised the required minimum share capital for lenders with international authorisation, boosting its capital base as Nigerian lenders race to comply with tougher regulatory requirements scheduled to end by March 2026.

Nneka Onyeali-Ikpe, GMD, Fidelity Bank

The push-up in its eligible capital, raised through a private placement, effectively placed Fidelity Bank among lenders that have successfully scaled through the regulatory mandate.

The Lagos-based bank, in a disclosure on the Nigerian Exchange on Tuesday, said the offer, which opened and closed on December 31, 2025, was approved by the Central Bank of Nigeria and the Securities and Exchange Commission. Proceeds from the transaction lift Fidelity’s eligible capital to about N564.5 billion from N305.5 billion, subject to final regulatory approvals.

The private placement was carried out under a mandate granted by shareholders at an extraordinary general meeting on February 6, 2025, authorising the bank to issue up to 20 billion ordinary shares.

Fidelity did not disclose the pricing or investor mix for the transaction.

The fundraising caps an aggressive capital-raising drive by Fidelity over the past two years. In 2024, the lender raised N175.85 billion through a public offer and rights issue, which brought its eligible capital to N305.5 billion. That left a shortfall of about N194.5 billion relative to the new minimum capital threshold.

Nigeria’s central bank in 2024 announced a sweeping recapitalisation programme aimed at strengthening the banking system, raising the minimum capital for commercial banks with international authorisation to N500 billion.

The apex bank mandated an increment in capital for national banks, pushing it to N200 billion and N50 billion for regional banks. The 24‑month compliance window ends on March 31, 2026, a regulation that’s triggering a wave of equity issuances, merger talks, and balance-sheet restructuring across the sector.

Fidelity’s latest capital raise places it above the regulatory floor, potentially easing pressure on the bank as peers continue to tap markets. The additional capital is also expected to support balance-sheet expansion, larger ticket lending, and resilience against macroeconomic shocks in Africa’s fourth-largest economy, which has been grappling with currency volatility, double-digit inflation, and elevated interest rates.

Analysts stated the scale and speed of this transaction validate Fidelity Bank’s standing among tier‑one lenders. Recently, Fitch Ratings affirmed the bank’s Long‑Term Issuer Default Rating at ‘B’ and upgraded its National Long‑Term Rating to ‘A+(nga)’, citing stronger capital buffers and improved profitability.

Fitch also recognised the bank’s expanding franchise, sound fundamentals, and healthy foreign‑currency liquidity, noting it was Nigeria’s sixth‑largest lender by assets at the end of 2024.