Dele Kelvin Oye, Chairman of the Alliance for Economic Research and Ethics (AERE), has raised significant concerns that structural flaws in the Nigeria Tax Act 2025 could undermine its successful implementation once it takes effect (January 1, 2026). His critique highlights the following key issues:
Rent Relief Limitations
The Act introduces a rent relief deduction capped at ₦500,000 per year or 20% of actual rent paid (whichever is lower), replacing the old Consolidated Relief Allowance. Oye argues this cap is far too low, especially in major cities like Lagos, Abuja and Port Harcourt, making the benefit insignificant compared to real-world housing costs.
He calls it the “Rent Relief Paradox,” noting that the documentation effort to claim the relief might outweigh any tax savings for many people.
Forex Deduction Restrictions
Under Section 20(4) of the Act, businesses cannot deduct foreign exchange losses and expenses at the actual rate incurred in Nigeria’s unstable forex market. Instead, only the official Central Bank rate is allowed. Oye says this creates a “double jeopardy” situation for firms that must source foreign currency at premium rates in unofficial markets, but cannot claim the full cost for tax purposes.
Other Structural Concerns
Oye mentioned additional issues, such as VAT compliance complexities and internal inconsistencies, which he believes point to a disconnect between the law’s design and Nigeria’s economic realities.
He concluded that while the reforms are ambitious and necessary, these embedded issues could make the “landing” of the reforms bumpy unless there are periodic reviews and adjustments.
Government & Official Responses
Presidential Committee Pushes Back
The Presidential Committee on Fiscal Policy and Tax Reforms has responded to criticisms of the new tax laws, including analysis from professional firms like KPMG, saying some criticisms misinterpret policy intent. The committee stressed that many concerns stem from different preference rather than actual errors.
What the New Tax Act Changes
For clearer context on what Oye is critiquing, here are accurate technical points from the Tax Act:
Rent Relief & Deductions
Rent relief: deductible at the lower of ₦500,000 or 20% of annual rent paid (proof of payment required).
Old Consolidated Relief Allowance (CRA) abolished; now replaced by targeted reliefs like rent deduction.
Forex Expense Rules
Foreign currency expenses are deductible only at official exchange rate, not actual market rates, which may be significantly higher.
Other Key Changes
Broader scope of taxable income including foreign-earned fees and commissions.
Expenses must be “wholly and exclusively” incurred to qualify as deductible, narrowing previous standards.
Why This Matters
These issues are central because:
Businesses operating in Nigeria rely heavily on forex for imports, servicing foreign contracts and sourcing capital. Restricting deduction could increase tax burdens.
The rent relief cap may not reflect inflation or regional cost differences, especially in urban centers.
Nigeria’s economy is already grappling with inflation and currency volatility, meaning tax policy needs realistic calibration to avoid unintended burdens.
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