Investor Relations View On Nigeria’s Tax Reforms And Growth

By Enam Obiosio

I find the seeming debate between Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Tax Reforms, and Dr. Paul Alaje, Chief Economist of SPM Professionals, on tax reforms particularly relevant to the investment climate in Nigeria.

While tax reforms present an opportunity for economic transformation, they also raise critical concerns that investors cannot afford to overlook.

At the heart of Mr. Oyedele’s argument is the belief that broadening the tax base and enhancing compliance will improve government revenue, leading to better infrastructure, enhanced credit ratings, and a lower cost of debt. This is an investor-friendly position: a stable macroeconomic environment with predictable fiscal policies creates a more attractive destination for capital inflows. If Nigeria can effectively implement these reforms, the country could see increased foreign direct investment (FDI), as investors tend to favor economies with transparent and efficient tax structures.

On the other hand, Dr. Alaje’s concerns highlight potential roadblocks that investors—both domestic and foreign—should not ignore. The proposed increase in VAT from 10 percent to 12.5 percent by 2026, for instance, could impact consumer purchasing power, particularly in an economy where inflation and currency instability already pose challenges. If businesses face higher tax burdens without a corresponding improvement in ease of doing business, the private sector may struggle to remain competitive. For investors, this raises questions about return on investment (ROI) and the overall viability of long-term projects in Nigeria.

From an investor relations standpoint, the tax reforms must strike a balance between revenue generation and business sustainability. Nigeria’s SMEs—often the backbone of economic activity—will benefit from the exemption of small businesses from company income tax, as Mr. Oyedele proposed. This move aligns with global best practices in fostering entrepreneurship and job creation. However, clarity and consistency in tax policy implementation will be crucial. Investors require policy predictability to make informed decisions, and frequent shifts in tax policy without adequate stakeholder engagement can create uncertainty.

Additionally, Dr. Alaje’s call for phased implementation strategies and broader stakeholder consultations should not be dismissed. Investors will be watching closely to see how the government manages this transition. If reforms are introduced in a manner that allows businesses time to adapt, the risk of capital flight or reduced investment appetite can be mitigated.

For Nigeria’s investment community, the ultimate question remains: Will these tax reforms create a more enabling environment for business expansion, or will they stifle growth through increased financial burdens? The answer depends on execution. If done right, Nigeria could emerge with a tax system that not only enhances revenue but also strengthens investor confidence. However, a hasty or rigid approach could deter investment and slow down economic progress.

As Astudity Limited continues to guide businesses and investors in navigating Nigeria’s economic landscape, our focus remains on advocating for policies that support sustainable growth, protect investment interests, and foster an environment where businesses can thrive. The government must listen, engage, and refine its approach—because a tax system that works for businesses ultimately works for the nation.

Enam Obiosio is the Managing Director of Astudity Limited, a strategic public relations and investor relations consultancy in Nigeria.