On 31 December 2021, President Muhammadu Buhari signed the Finance Bill, 2021 (now the Finance Act, 2021) into law. The Finance Act, 2021, which took effect from 1 January 2022, amended various provisions in 13 Acts of the National Assembly¹. We highlight below 7 key changes introduced by the Finance Act, 2021:

1. Introduction of Capital Gains Tax (CGT) on Share Deals: CGT at the rate of 10% is now payable on gains accruing from the disposal of shares in any Nigerian company, except where the proceeds are utilized to acquire shares in the same entity or other Nigerian companies within the same assessment year or the proceeds are less than N100 million in any 12 consecutive months. With the introduction of CGT on share deals, it is important for transaction parties to analyze the impact of the CGT payable (if any) on the pricing terms and the tax provisions in the sale and purchase agreement. Alternative transaction structures may have to be explored by the parties.
2. Exclusion of Companies Engaged in Petroleum Operations from the Exemption on Profits in respect of Goods Exported from Nigeria: Under the Finance Act, 2019, the profits of any Nigerian company derived from goods exported from Nigeria are exempted from companies’ income tax (CIT) if the export proceeds are utilized to acquire raw materials, plant, equipment and spare parts. Portions of the export proceeds that are not utilized to acquire raw materials, plant, equipment or spare parts will however be subject to CIT. The Finance Act, 2021 has now excluded companies engaged in downstream petroleum operations from this tax incentive. Companies engaged in upstream or midstream petroleum operations are also excluded. 
3. Introduction of Sweetened Beverage Tax in Nigeria: Excise duty at the rate of NGN10 per litre is now payable on non-alcoholic, carbonated and sweetened beverages. More countries are introducing sweetened beverage tax as a way of encouraging healthy eating habits. According to the World Health Organisation (WHO)², from 2011 to 2030, worldwide losses (both direct and indirect costs) in gross domestic product due to diabetes are expected to total US$1.7 trillion (US$900 billion in high-income countries and US$800 billion in low and middle income countries). Taxation of sugary drinks was therefore suggested by the WHO as a way of reducing the consumption of sugars on the basis that evidence shows that a tax on sugary drinks that rises prices by 20% can lead to around 20% of reduced consumption. Other benefits include savings on healthcare costs and utilization of the realized revenues and savings for health-related projects and activities.
4. Data Protection: The Finance Act, 2021 amended the Federal Inland Revenue Service (FIRS) (Establishment) Act, 2007 to impose a general obligation on every person acting in an official duty or employed for the administration of the Act that has access to taxpayer information to regard and deal with such information as secret and confidential. Previously, the obligation imposed was in respect of information relating to the profits or items of profits of any company. The Finance Act, 2021 expanded the data protection obligation placed on officials of the FIRS in line with the global movement to ensure data protection, not only due to its primacy as a right but the economic necessity of the same.
5. Increase in Tertiary Education Tax (TET) Rate and Reduction of the Payment Timeline: TET which was previously levied at the rate of 2% will now be levied at the rate of 2.5% on the assessable profit of companies registered in Nigeria, excluding small companies. The resulting effect is that companies in Nigeria, with the exclusion of small companies, now have an increased tax liability. In addition, any company liable to TET is required to make payment within 30 days of receiving a notice of assessment from the FIRS as opposed to the 60 days’ timeline that was previously the case.
6. The National Agency for Science and Engineering Infrastructure (NASENI) Levy: A levy at the rate of 0.25% on profit before tax is now payable by commercial companies and firms with turnover of N100m and above operating in the banking, mobile telecommunications, information communication and technology, aviation, maritime, and oil and gas sectors. Although the NASENI levy is not new (having been introduced in 1992 by the NASENI Act to, inter alia, fund research, development and production activities), the Finance Act, 2021 streamlines the applicability of the levy to specific sectors based on an increased turnover threshold in order to increase enforcement efficiency and generally reduce the business costs of small and medium companies.
7. Expansion of the Government’s Borrowing Power: The Finance Act, 2021 amended the provisions of the Fiscal Responsibility Act, 2007 (the FRA) in respect of debt management by the government. Prior to the Finance Act, 2021, the debt management rules in the FRA were to the effect that government at all tiers are only allowed to borrow for “capital expenditure” and “human development”, and “on concessional terms with low interest rate and with a reasonably long amortization period”. Under the FRA, “concessional terms” means that the loan must be at an interest rate not exceeding 3%. The interest rate cap provided under the FRA was a key issue in government related financings. The Finance Act, 2021 has now amended the language in the FRA. Under the Finance Act, 2021, government at all tiers are now able to borrow to embark on “critical reforms of significant national impact” in addition to borrowing for capital expenditure and human development. Further, borrowing by the government may be on “concessional terms or at relatively low interest rates,” thus creating a distinction between borrowings that are on "concessional terms" and borrowing that, although not on concessional terms, have a "relatively low interest rate." The amendments introduced by the Finance Act 2021 effectively expands the borrowing powers of the government

Given that the key objective of the Finance Act, 2021 is to ensure that there is an alignment between the amended laws and the Federal Government’s macroeconomics policy reforms, it is expected that other laws that need urgent attention to stimulate the growth of the Nigerian economy will similarly be considered and addressed in the near future.

1. The Acts amended are as follows: (1) The Capital Gains Tax Act Cap C1 Laws of the Federation of Nigeria (LFN) 2004; (2) the Companies Income Tax Act Cap C21 LFN 2004; (3) the Customs and Excise Tariffs Etc. (Consolidated) Act Cap C49 LFN 2004; (4) the Personal Income Tax Act Cap P8 LFN 2004; (5) the Stamp Duties Act Cap S8 LFN 2004; (6) the Value Added Tax Act Cap V1 LFN 2004; (7) the Insurance Act Cap I17 LFN 2004; (8) the National Agency of Science and Engineering Infrastructure Act Cap N3 LFN 2004; (9) the Finance (Control and Management) Act Cap F26 LFN 2004; (10) the Federal Inland Revenue Service (Establishment) Act, 2007; (11) the Fiscal Responsibility Act, 2007; (12) the Tertiary Education Trust Fund (Establishment) Act 2011; and (13) the Nigerian Police Trust Fund (Establishment) Act, 2019. ↩
2. https://apps.who.int/iris/bitstream/handle/10665/260253/WHO-NMH-PND-16.5Rev.1-eng.pdf;sequence=1 ↩