Corporate - Deductions

Last reviewed - 09 February 2024

Expenses are deductible for CIT purposes if they are wholly, reasonably, exclusively, and necessarily incurred for the business or trade.


Capital allowances are calculated on a straight-line basis. Capital allowances claimable in any year are restricted to two-thirds of assessable profits for all companies, except companies in the manufacturing and agricultural sectors, which are excluded from this restriction.

The following are the capital allowance rates on fixed assets (qualifying expenditures):

Qualifying expenditure Initial allowance (%) Annual allowance (%)
Building (industrial and non-industrial) 15 10
Furniture and fittings 25 20
Plant expenditure (1) 50/95 0/25
Mining expenditure 95 0
Plantation equipment 95 0
Motor vehicle (2) 50/95 0/25
Ranching and plantation expenditure 30 50
Housing estate expenditure 50 25
Research and development (R&D) 95 0


  1. 95% initial allowance for plant used in agricultural production; others 50%.
  2. 95% initial allowance is granted for motor vehicles used for public transportation if the company has a fleet of at least three buses; all other motor vehicles 50%.

The initial allowance is first deducted, and the balance is written off on a straight-line basis over a fixed period, depending on the rates of annual allowance. There is a requirement that assets not yet disposed of cannot be fully written off in the books. A nominal amount of NGN 10 per asset must be retained in the books till the assets are disposed of. However, where 95% has been claimed as an initial allowance, the 5% balance is the value that must be maintained in the books until the final disposal of the asset.

When assets are sold, the proceeds over the tax written-down value are taxed at 30% to the extent of the allowances already claimed.

Capital expenditure incurred on the development or acquisition of software or other electronic applications are now qualifying expenditures eligible for capital allowance claim. However, the applicable capital allowance rate was not included. In practice, the capital allowance rate for plant expenditure is adopted.

The law restricts the claim of capital allowances to the portion of qualifying assets used for generating taxable income. Capital allowance on assets that are partially used for generating taxable income will be prorated except where the proportion of non-taxable income is less than 20% of the company’s total income. For small and medium companies, the law provides that capital allowances for each year, together with any unabsorbed capital allowances brought forward, will be deemed to be utilised. However, such companies can carry forward the tax residue (tax written down values) of qualifying assets to subsequent periods when it may become taxable.

Pioneer companies are exempt from these amendments during their pioneer period.


There is no tax deduction for goodwill.

Start-up expenses

Start-up expenses are not specifically stated as non-deductible in the tax law, but, in practice, they are usually not allowed by the tax authority. This is based on the assumption that start-up expenses are not directly attributable to any taxable income of the company, which is a fundamental condition for tax deductibility of expenses.

Interest expense

Interest on money borrowed and employed in producing taxable income is a deductible expense. There is currently no thin capitalisation regulation in Nigeria, but general anti-avoidance rules are usually applied to limit deductible interest on related-party loans.

The Finance Act (through the introduction of a new seventh schedule) provides a limitation (30% of EBITDA) on interest expense on foreign connected party debt (which includes debt guaranteed either implicitly or explicitly). Excess interest can be carried forward for up to five years.  

Bad debt

Bad debt incurred in the course of trade is deductible.

Charitable contributions

Donations are deductible, subject to the provisions of the law.

Fines and penalties

Any punitive payments for default or violation of law are expressly not deductible for CIT purposes. 


Any tax on income or profit is not deductible except where such tax was paid on profit earned outside Nigeria. In this case, if the source country has no DTT with Nigeria, the foreign tax paid is allowed as a deduction for CIT purposes. State and local taxes (business rates) and levies may be deducted from taxable income.

The Finance Act provides that taxes borne on behalf of another person are not tax deductible.

Other significant items

Other deductible expenses include the following:

  • Sum payable by way of interest on capital borrowed and used to generate taxable profits.
  • Rent for the period.
  • Expenses incurred in respect of salary and wages.
  • Expenses incurred for repair of assets.
  • Liability incurred for purpose of trade.
  • R&D costs.

Net operating losses

Losses can be carried forward indefinitely. Losses made from one line of business cannot be relieved against another line of business. Losses cannot be carried back.

Payments to foreign affiliates

Payments considered to be artificial are not deductible for CIT purposes. Royalties, management fees, and technical fees required between connected parties are to conform with the Transfer Pricing Regulation.