FIRS says 4% development levy not additional tax

Agency Report

The Federal Inland Revenue Service (FIRS) has stated that Nigeria’s newly enacted tax laws are designed to strengthen economic competitiveness, attract investments and improve long-term fiscal stability.

The agency also clarified that the much-debated 4 per cent Development Levy on imported goods is not a new or additional tax burden, but a streamlined consolidation of several existing levies.

In recent weeks, the new Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA) have sparked widespread debate among citizens and businesses seeking clarity on how the reforms will affect them. But tax authorities say these concerns stem largely from misinterpretations, insisting the laws are aimed at simplifying compliance, protecting incentives and improving Nigeria’s investment environment.

According to FIRS, one of the most misunderstood elements of the new tax framework is the 4% Development Levy. The agency explained that the levy replaces a range of fragmented charges—such as the Tertiary Education Tax, NITDA Levy, NASENI Levy and Police Trust Fund Levy—those businesses previously paid separately.

This consolidation, it said, reduces compliance costs, eliminates unpredictability and ends the era of multiple agency-driven levies. The law also exempts small businesses and non-resident companies, offering protection to firms most vulnerable to economic shocks.

Analysts say the new levy structure sends an important message to investors: Nigeria is moving toward a more coordinated, transparent and predictable fiscal environment.

Another major clarification relates to Free Trade Zones (FTZs). Earlier commentary had suggested that the government was rolling back the incentives that have attracted export-oriented investors for decades. However, the reforms maintain the tax-exempt status of FTZ enterprises and introduce clearer guidelines to preserve the purpose of the zones.

Under the new rules, FTZ companies can sell up to 25% of their output into the domestic market without losing tax exemptions. A three-year transition period has also been provided to allow firms to adjust smoothly. Government officials say the reforms aim to curb abuses where companies used FTZ licences to evade domestic taxes while competing within the Nigerian market.

With the new measures, Nigeria aligns with global FTZ models in places like the UAE and Malaysia, where the zones function primarily as export hubs for logistics, manufacturing and technology.