Nigeria

Nigeria’s 2026 Budget and Fiscal Strategy Insights

Nigeria’s 2026 federal budget reflects a clear shift from spending-led stimulus to reform-driven growth. Set at ₦58.18 trillion, the budget is framed against lessons from 2025, where non-oil revenues outperformed expectations but capital expenditure was consistently under-implemented and debt servicing absorbed a large share of government revenue. These pressures have reinforced the need for tighter fiscal discipline and more effective capital deployment.

The 2026 budget is built on conservative oil-price assumptions, moderate production targets and an ambitious growth outlook. While these assumptions carry execution risks, they are supported by an explicit focus on macroeconomic stability and coordination between fiscal and monetary policy. The Medium-Term Expenditure Framework prioritises revenue mobilisation, expenditure efficiency and debt sustainability, while creating room for private capital to play a larger role in infrastructure delivery.

Sectorally, the budget signals opportunities aligned with policy reform rather than public spending alone. Infrastructure, power, defence, agriculture, digital economy, health, education, solid minerals and creative industries are positioned for increased private-sector participation through PPPs, concessions and blended finance models.

Complementing the fiscal strategy are wide-ranging tax reforms aimed at simplifying administration, reducing distortions and improving compliance. Expanded input VAT claims, consolidated levies and revised income and capital gains tax thresholds are expected to lower the cost of doing business while reshaping government revenue dynamics.

The 2026 budget and tax reforms point to an economy where execution, reform credibility and private investment will define growth outcomes.

Federal High Court (FHC) upholds Tax Appeal Tribunal (TAT) decision on validity of the Country-by-Country Reporting (CbCR) Regulations - Check Point v FIRS

The FHC has held that the Income Tax (Country-by-Country Reporting) Regulations 2018 (CbCR Regulations) were not validly issued and are therefore null and void. This was in light of the appeal made by the FIRS on the initial ruling issued by the TAT on 17 August 2023. The TAT had ruled that the CbCR Regulations were unconstitutional and void in a case between Check Point Software Technologies B.V. Nigeria Limited (Check Point) and the FIRS. 

The FHC confirmed that the CbCR Regulations could not have been validly made as the FIRS did not have a Board in place at the time the CbCR Regulations were issued. The FHC also confirmed that the CbC Multilateral Competent Authority Agreement (MCAA) is a treaty based on the definition in Section 12 of the Constitution and must be enacted into law by the National Assembly before it can have force in Nigeria. Therefore, by virtue of section 3(1)(c) and 3(2) of the Treaties (Making Procedure) Act, there was no need to domesticate the CbC MCAA. Also, the FHC held that Section 12 of the Constitution applies to all treaties, regardless of intent or purpose, and the Treaties (Making Procedure) Act cannot override the Constitution. On this basis, the CbC MCAA must be enacted into law in Nigeria before it can take effect.

Additionally, the FHC held that the penalties in the CbCR Regulations were in excess of the powers of the FIRS as prescribed in the Federal Inland Revenue Service (Establishment) Act (FIRSEA). While the range of penalties for failure to file returns under the FIRSEA is between NGN 10,000 and NGN 25,000, the CbCR Regulations significantly expanded this to NGN 10 million.

FIRS issues Circular to guide implementation of the WHT Regulations 2024​

On 24 February 2025, the FIRS issued a Circular detailing some guidelines for the implementation of the WHT Regulations, 2024, which became effective on transactions from 1 January 2025, as follows: 

• Scope and applicability:It applies to a wide range of entities, including companies, partnerships, statutory and non-statutory bodies, unincorporated persons, and non-resident persons involved in transactions requiring tax deduction at source.
• Exemptions for small companies: Small companies are exempt from deducting tax at source if the transaction value is NGN 2 million or less and the supplier has a valid tax identification number (TIN). The Circular provides illustrations to guide small companies on when to deduct tax.
• Fake receipts: The Circular reiterates the penalties for failure to deduct or remit WHT, including sanctions under the law for the submission of fake or counterfeit receipts.
• Exemptions: The FIRS clarifies its position on the exemptions of interest or fees paid to a bank by direct debit and commission withheld by brokers in accordance with industry norms.

Windfall tax on Nigerian banks

The Nigerian government is proposing a 70% tax (‘windfall tax‘) on realised profits made by Nigerian banks from exchange transactions in the 2023 - 2025 financial years (FYs). This proposal has sparked some debate considering the many practical concerns that it raises. One of such issues is that it retrospectively applies the tax on profits from FY 2023, which the banks already filed and paid by June 2024.

FHC nullifies the requirement to pay security deposits before appeal at the TAT and the courts

The FHC of Nigeria recently struck down provisions that required taxpayers to pay security deposits before filing appeals at the TAT and the courts. These provisions, found in various rules and Practice Directions, were deemed to infringe upon taxpayers' constitutional right to fair hearing and were consequently declared null and void.

The FHC's decision highlighted the importance of the right to appeal as a constitutional right and criticised the deposit requirements for imposing an undue burden on taxpayers. The offending provisions were struck down, allowing taxpayers to file appeals without payment of any deposit.

While the ruling is lauded for upholding taxpayers' rights, questions remain regarding the interpretation of relevant laws and the standardisation of deposit requirements that still exist in the FIRS Establishment Act. The constitutionality of rules of court and practice directions also remains contentious, indicating potential further legal challenges.

Overall, the ruling provides clarity on taxpayers' rights in Nigeria's tax dispute resolution process and underscores the need for transparent and fair procedures in tax administration.

Federal Government waives VAT and customs duties on gas and gas equipment

In December 2023, the Ministry of Finance (MoF) released a Circular on fiscal incentives for the gas sector that waives VAT and customs duties on gas and gas equipment. This Circular is in line with the Presidential Gas for Growth Initiative, which aims to improve the investment climate in Nigeria and to increase the utilisation and supply of gas in the domestic market. The Circular contains incentives and directives to the Nigerian Customs Service (NCS) and the FIRS.

The FIRS postpones commencement of the automated collection of VAT on imported goods purchased through digital platforms

The FIRS has postponed its intended commencement of the automated collection of VAT on imported goods purchased through digital platforms.

The 2020 Finance Act amended the VAT Act to require non-residents that make taxable supplies of goods and services to Nigerian customers to register and account for VAT on supplies to Nigeria. Following this amendment, the FIRS issued Guidelines on Simplified Compliance Regime for VAT for Non-Resident Suppliers on 11 October 2021, with an effective date of 1 January 2022 with respect to supply of services and intangibles and 1 January 2024 for goods.  

The FIRS had initially planned to roll out the regime with respect to supply of goods by non-resident suppliers by 1 January 2024; however, the FIRS has decided to postpone it to afford more time to develop a seamless process and collaborate more effectively with key stakeholders (e.g. the NCS). Pending any next steps, the FIRS has stated that the existing guidelines for services and intangibles provided by non-resident suppliers continue to remain in effect. 

The FIRS and Lagos State Internal Revenue Service (LIRS) agree to establish joint audit and investigation framework

The FIRS and LIRS signed a Memorandum of Understanding (MoU) to establish a Joint FIRS and LIRS Audit and Investigation Team (JAIT or ’the Team‘) on 6 February 2023. The JAIT implementation committee organised a sensitisation meeting on 10 August 2023 to educate stakeholders on the guidelines for successful implementation of the collaborative framework. The objective of the MoU is to harmonise the tax procedures between the FIRS and LIRS, foster collaboration, promote exchange of information, and reduce time and cost for relevant stakeholders. There are perceived concerns about the likelihood of success of the JAIT initiative, considering the short-lived nature of a similar policy introduced in 2017 that aimed to harmonise audits among the FIRS and all the SIRSs. However, carrying out a pilot with only the FIRS and LIRS under the JAIT is more practical. 

The FIRS issues assessments to international petroleum tankers and transport vessels

In a recent turn of events, the FIRS has begun to issue assessments to companies operating ocean-going petroleum tankers, based on intelligence obtained from regulators. The letters have been addressed to International Petroleum Vessel Companies (IPVCs) deemed to have ’conducted business‘ in Nigeria. In the assessment letters, the FIRS either apply a 6% tax plus a 10% penalty and 19% interest on perceived freight income earned by the IPVCs from periods as early as 2011 or assume a treaty rate, which is lower in most cases. In some of those assessments, the FIRS includes a tax on demurrage and detention charges earned on vessels chattered. There are no public details of how the income earned by the IPVCs was determined.

The FIRS stated that if the IPVCs assessed fail to submit their tax returns or make payments, it will be considered as tax evasion. The FIRS also mentioned that they are prepared to activate international cooperation mechanisms with foreign jurisdictions to enforce the tax payments.

International shipping companies need to evaluate whether they are required to register and pay taxes in Nigeria and determine the extent of their revenue subject to Nigerian tax. This is now more critical, considering new tax law amendments that require international shipping companies with Nigerian operations to submit their Tax Clearance Certificates (TCCs) upon request by the regulators.