Ade Adefeko

Nigeria’s 2025 Tax Act represents a watershed moment for the country’s agribusiness sector. As one of four comprehensive fiscal reform acts signed in June 2025, this landmark legislation is poised to revolutionise how multinational corporations invest in, operate within, and grow Nigeria’s agricultural value chain. Through strategic incentives, streamlined regulations, and forward-thinking policy frameworks, the government is making a deliberate bet on agricultural transformation as a cornerstone of economic development.

This strategic analysis examines the transformative impact of these reforms through the lens of multinational agribusiness operators—the pivotal players whose investment decisions will determine whether Nigeria realises its agricultural potential.

The Comprehensive Tax Reform Framework

The Nigeria’s 2025 Tax Act operates within a broader ecosystem of four interconnected legislative reforms designed to consolidate Nigeria’s fragmented tax system, broaden the tax net, harmonize administration, and strengthen enforcement mechanisms. Together, these reforms create a coherent policy architecture that addresses decades of fiscal inefficiency.

The Four Pillars of Reform

1. Joint Revenue Board of Nigeria (Establishment) Act, 2025 – Creates institutional coordination for revenue collection across federal, state, and local governments.
2. Nigeria Revenue Service (Establishment) Act, 2025 – Establishes a modernized revenue collection agency with enhanced technological capabilities.
3. Nigeria Tax Administration Act, 2025 – Streamlines administrative procedures and reduces bureaucratic complexity.
4. Nigeria Tax Act, 2025 – Provides substantive tax policy reforms, incentives, and a framework for economic sectors.

Strategic Incentives for Agricultural Businesses

The Tax Act introduces a suite of targeted incentives specifically designed to catalyze agricultural investment:

• Five-Year Tax Exemption: Complete income tax exemption for new agricultural enterprises (for crop production, livestock, forestry, dairy, and cocoa processing) during their critical establishment phase. This exemption applies from the date operations begin.
• Economic Development Tax Incentive (EDTI) replaces Pioneer Status: A modernised replacement for the outdated Pioneer Status Incentive, offering more flexible and impactful support. EDTI provides a 5% annual tax credit for up to 5 years on qualifying capital expenditure.
• Capital Gains Tax (CGT) Relief: Special provisions for angel investors and venture capital supporting agribusiness startups. The exemption applies to angel investors who hold startup investments for more than 24 months. It is noteworthy that the CGT rate increased from 10% to 30% under the new Act.
• VAT Exemptions: Zero-rated on basic food items, agricultural inputs, and essential medical products under the new Act.
• 4% Development Levy: to replace multiple taxes, including Tertiary Education Tax, Police Trust Fund, NASENI, and IT levies
• Sustainability Provisions: 5% fossil fuel surcharge coupled with tax credits for renewable energy investments in agricultural operations

These reforms collectively aim to elevate Nigeria’s tax-to-GDP ratio from its current level to 18% by 2026/27, while simultaneously driving economic diversification and agricultural sector growth.

From Complexity to Clarity

The Burden of Fiscal Uncertainty

Prior to these reforms, Nigeria’s business environment was characterized by profound fiscal unpredictability and labyrinthine bureaucracy. For multinational agribusiness operators, this uncertainty manifested as a strategic impediment—making long-term capital allocation decisions difficult, hindering expansion planning, and ultimately suppressing the sector’s growth potential.

Companies operating in capital-intensive agricultural value chains—from large-scale crop production to feed manufacturing and food processing—found themselves navigating an environment where the rules of engagement shifted unpredictably, compliance costs escalated without warning, and investment returns remained perpetually uncertain.

The Cascading Tax Complexity

Perhaps no challenge was more acute than the bewildering complexity of the pre-existing tax regime. Businesses confronted what industry insiders described as a ‘cascading effect of multiple taxes’ – a proliferation of overlapping levies that transformed tax compliance from a routine administrative function into a resource-draining ordeal.

The litany of obligations included:

• Tertiary Education Tax
• Police Trust Fund Levy
• Various Information Technology levies
• Multiple state and local government taxes
• Sector-specific assessments and charges

The cumulative effect was profound: companies dedicated disproportionate resources to tax compliance rather than core business activities—production optimisation, innovation, market expansion, and value chain development. Capital that should have been allocated to farm mechanisation, processing capacity, or distribution networks was instead absorbed by compliance costs and administrative overhead.

How Reforms Transform Agribusiness Operations

Streamlined Tax Framework

The 2025 Tax Act directly addresses the complexity challenge through fundamental simplification. By consolidating multiple levies, standardising procedures, and creating clear, predictable guidelines, the Act transforms tax compliance from an obstacle into a manageable administrative function.

For multinational agribusiness operators, this streamlining yields tangible operational benefits: reduced compliance costs, faster processing times, greater certainty in financial planning, and, most importantly, the ability to reallocate management attention and capital toward strategic growth initiatives.

Sector-Specific Incentives: Targeting Agribusiness Growth

Beyond general simplification, the Act provides two particularly impactful provisions for agribusiness multinationals:

1. The Five-Year Agribusiness Tax Holiday

New companies engaged in crop production, livestock operations, and feed manufacturing receive a full income tax exemption for their first five years of operation. This provision recognises a fundamental characteristic of agricultural investment: long gestation periods before profitability.

Agricultural projects typically require years of capital deployment – land preparation, infrastructure development, breeding stock acquisition, and equipment installation, before generating positive cash flows. The five-year exemption provides the financial breathing room necessary for these investments to mature, effectively de-risking early-stage agricultural ventures and making Nigeria more attractive for greenfield agribusiness investments.

2. Expanded Input VAT Recovery

Perhaps even more significant for established operators, the Act allows agribusinesses to recover Value Added Tax (VAT) on capital expenditures, including agricultural machinery, processing equipment, storage facilities, and infrastructure investments.

This provision generates immediate cash-flow benefits, thereby reducing the net cost of capital investments by the VAT component. For companies making substantial investments in farm mechanisation, modern processing facilities, or cold chain infrastructure, these savings can amount to billions of naira annually—capital that can be redeployed to further expansion, technology upgrades, or productivity enhancements.

Building from the Bottom Up: Ecosystem Empowerment

The Act’s genius lies not merely in direct benefits to large operators but in its recognition that sustainable agribusiness growth requires a thriving ecosystem. By strengthening SMEs and empowering consumers, the reforms create a multiplier effect that amplifies benefits across the entire agricultural value chain.

SME Supercharge: Strengthening the Supply Chain

The Act redefines ‘small companies‘ to include businesses with turnover up to ₦100 million (VAT registration thresholds for small businesses), exempting them from Companies Income Tax (CIT) and Development Levy. The threshold for the Companies Income Tax (CIT) exemption is a turnover of ₦50 million plus ₦250 million in fixed assets.

This provision directly benefits the thousands of smallholder farmers, input suppliers, aggregators, and logistics providers that form the backbone of multinational agribusinesses’ supply chains.

For multinational operators, a more financially viable SME supply base translates into:

• More reliable raw material sourcing
• Enhanced quality consistency as suppliers invest in improvements
• Greater supply chain resilience and flexibility
• Reduced need for direct operational intervention in supplier development

Consumer Purchasing Power: Driving Domestic Demand

The Act raises the personal income tax exemption threshold to N800,000 taxable income after standard deductions, equivalent to a gross salary of approximately N1.2 million. This increase puts more disposable income in consumers’ hands, directly stimulating demand for food and essential goods.

For agribusiness multinationals focused on domestic markets, whether producing staple foods, processed goods, or consumer products, this enhanced purchasing power translates into organic market expansion. Rather than relying solely on population growth or market-share gains, companies can benefit from increased per-capita consumption as household budgets expand.

Sustainability and Infrastructure: Long-Term Foundations

The Act incorporates forward-thinking sustainability provisions that create long-term competitive advantages for agribusinesses:

• Tax credits for renewable energy investments encourage solar-powered irrigation, biogas facilities, and renewable energy-powered processing plants
• 5% fossil fuel surcharge for transport infrastructure generates dedicated funding for road networks critical to agricultural logistics and market access. NB: This “5% fossil-fuel surcharge” is specifically for transport infrastructure.

These provisions align private sector incentives with national development priorities, ensuring that today’s tax policies support tomorrow’s infrastructure and sustainability needs.

Aligning Fiscal and Monetary Policy

Perhaps the most sophisticated aspect of the 2025 reforms is their recognition that tax policy cannot operate in isolation. The establishment of the Joint Revenue Board facilitates institutional coordination between fiscal policy and monetary management, thereby generating cascading benefits for the investment climate.

VAT Distribution Changes

To accurately assess the macroeconomic impact of the reforms, a significant VAT distribution reform was undertaken, allocating VAT revenues as follows: Federal (10%), States (55%), Local Governments (35%).

Minimum Effective Tax Rate (ETR)

For large multinational agribusinesses, there is a 15% minimum ETR for multinationals with €750 million global revenue or ₦50 billion Nigerian revenue.

Transparency Through Technology

The Electronic Fiscal System (EFS) provides real-time revenue insights to both fiscal authorities and the Central Bank. This transparency enables more accurate liquidity forecasting, better-calibrated monetary policy interventions, and reduced uncertainty in macroeconomic management.

For agribusiness investors, this means fewer monetary policy surprises, more predictable interest rate trajectories, and greater confidence in long-term planning assumptions.

The Virtuous Cycle: Revenue, Borrowing, and Interest Rates

Improved tax collection efficiency creates a powerful virtuous cycle:

• Predictable Revenue: Reduced government need for domestic borrowing
• Lower Government Borrowing: More capital available for private sector lending
• Increased Credit Availability: Downward pressure on interest rates
• Lower Interest Rates: More attractive financing for agricultural investments

This cycle directly benefits capital-intensive agribusiness operations that rely on debt financing for expansion, equipment purchases, and working capital management.

Currency Stability: The Exchange Rate Dividend

The Act mandates the use of official exchange rates for foreign-currency tax deductions, thereby creating what practitioners describe as a ‘single window of truth’ for currency valuation. This provision:

• Reduces opportunities for exchange rate arbitrage
• Improves foreign exchange market transparency
• Signals policy commitment to exchange rate stability
• Attracts foreign investment by reducing currency risk perceptions

For multinational agribusinesses managing cross-border supply chains, importing equipment and inputs, or repatriating dividends, exchange rate stability is one of the most significant risk-reducing effects of the reforms.

Forging a New Social Contract: Government

The 2025 tax reforms represent more than technical fiscal policy; they signal a fundamental recalibration of the relationship between the Nigerian state and the private sector. By simplifying obligations, strategically targeting incentives, and fostering macroeconomic stability, the reforms articulate a new compact: the government will create enabling conditions; business will deliver growth, employment, and development.

This social contract has resonance in agriculture – a sector where government policy, private capital, and smallholder livelihoods intersect most directly. The reforms acknowledge that agricultural transformation cannot be achieved through state diktat or private initiative alone; it requires aligned incentives, coordinated action, and shared commitment to long-term value creation.

From Extraction to Partnership

The pre-2025 tax regime often felt extractive to businesses – a series of demands disconnected from corresponding improvements in the business environment or public services. The new framework shifts this dynamic toward partnership: tax relief is explicitly linked to investment commitments; incentives are calibrated to drive specific development outcomes; and government revenue gains are predicated on private-sector growth.

For multinational agribusinesses, this partnership model creates space for long-term strategic planning. Companies can commit to significant capital investments, processing facilities, outgrower schemes, and research facilities with reasonable confidence that the policy framework supporting these decisions will remain stable.

Building Trust Through Consistency

Perhaps most importantly, the reforms begin building something Nigeria’s business environment has long lacked: policy credibility. By consolidating multiple acts, creating institutional coordination mechanisms, and establishing clear frameworks, the government demonstrates commitment to systematic reform rather than ad hoc interventions.

This credibility compounds over time. As businesses observe consistent policy implementation, risk premiums decline, investment horizons extend, and capital commitments deepen. The result is a positive feedback loop in which initial reforms create conditions that enable subsequent growth, which in turn validates further reform.

Turning Policy into Practice

Even the most elegantly designed policy framework means little without effective implementation. The 2025 reforms face several critical challenges that will determine whether their promise translates into reality:

Administrative Capacity

The Nigeria Revenue Service requires substantial institutional strengthening to administer the new framework effectively. This includes recruiting skilled personnel, deploying modern IT systems, and building capacity for specialised sectors like agribusiness. Without this capacity, even well-designed incentives may fail to reach intended beneficiaries due to administrative bottlenecks.

Stakeholder Awareness

Many potential beneficiaries, particularly SMEs and smaller agricultural operators, remain unaware of available incentives or lack the knowledge to access them effectively. Comprehensive stakeholder engagement, simplified guidelines, and proactive outreach are essential to ensure reforms benefit their intended constituencies.

Monitoring and Evaluation

Robust monitoring systems must track policy implementation, measure outcomes, and enable adaptive management. Regular assessment should evaluate whether incentives achieve intended goals, identify implementation challenges, and inform necessary adjustments.

Coordination Across Government

The reforms require coordination across multiple agencies, including revenue services, agricultural ministries, investment promotion agencies, and subnational governments. Institutional silos and jurisdictional conflicts could undermine implementation if not actively managed through the Joint Revenue Board and related coordination mechanisms.

Looking Forward: Nigeria’s Agribusiness Future

If successfully implemented, the 2025 tax reforms can catalyse transformative change in Nigeria’s agribusiness sector. The potential impact extends across multiple dimensions:

Investment Catalysis

Reduced tax burden and improved business environment lower hurdle rates for agricultural investments. Projects previously marginal become viable. Capital flows increase. Both domestic and foreign investors commit to larger, longer-term investments in agricultural value chains.

Technology and Innovation

VAT recovery on capital expenditure incentivizes mechanization and technology adoption. Companies invest in modern processing equipment, precision agriculture technologies, and cold chain infrastructure. Productivity increases, post-harvest losses decline, and value addition improves.

Value Chain Integration

Strengthened SMEs and improved logistics infrastructure enable deeper value chain integration. Multinational anchor companies can more effectively link with smallholder producers, creating inclusive growth patterns that combine commercial viability with broad-based development impact.

Food Security and Economic Diversification

Increased agricultural production, improved processing capacity, and enhanced value-chain efficiency contribute directly to food-security and food sustainability objectives while reducing import dependence. It is expected that Agriculture’s share of GDP stabilizes or grows, supporting economic diversification away from oil dependency.

Employment and Rural Development

Agricultural investment creates employment opportunities across skill levels, from farm labour to processing plant operations to logistics and distribution. Rural areas benefit from infrastructure improvements, income growth, and expanded market access, helping address rural-urban migration pressures.

Conclusion

Nigeria’s 2025 Tax Act represents a pivotal moment—a deliberate, comprehensive attempt to reset the relationship between policy and agricultural development. By addressing long-standing grievances, creating targeted incentives, and establishing enabling macroeconomic conditions, the reforms provide a foundation for agricultural transformation.

For multinational agribusiness operators, the message is clear: Nigeria is open for business, committed to policy stability, and willing to align incentives with investment. The government has signalled that agriculture is not merely a priority on paper but a sector warranting concrete policy support and fiscal commitment.

Yet policy alone, however well-designed, cannot guarantee success. Realising the reforms’ potential requires disciplined implementation, consistent policy follow-through, and continued dialogue between the government and the private sector. It requires companies to respond to improved conditions with genuine investment commitments. It requires all stakeholders to recognise that agricultural transformation is a long-term endeavour that requires sustained effort and patience.

The 2025 tax reforms provide the tools. As Nigeria rolls out these reforms from January 1, 2026, whether Nigeria successfully uses them to unlock its agricultural potential will depend on the implementation choices made in the coming months and years. Early indications suggest a serious commitment to implementing these reforms. If that commitment holds, Nigeria’s agribusiness sector stands on the threshold of a genuinely transformative period.

The opportunity is real. The framework is in place. Now comes the hard work of turning policy promise into development reality,cementing the “New Fiscal Compact” and unlocking Nigeria’s vast potential.

.Ade ADEFEKO is a policy analyst specialising in agricultural value chains and fiscal policy in emerging markets. His work focuses on the intersection of public policy, private sector development, and agrarian transformation in Sub-Saharan Africa.