FOR nearly 30 years, Nigeria’s company income tax (CIT) was among the highest in the world at 30 percent. In Africa, where the CIT varied from 20 percent to 30 percent, it was also counted among the highest.
This became a major hindrance to investments into Nigeria, with other tax-friendlier nations attracting higher foreign investments. Singapore was a typical example. With CIT at 17 percent flat rate, Singapore attracted billions of dollars in foreign investments.
Foreign direct investment (FDI) inflows into Singapore stood at $192 billion in 2024, marking an increase of 5.6 percent over the previous year. This was driven by increases in equity capital and retained earnings, which constituted the bulk of total FDI inflows in 2024, according to the Singapore Department of Statistics.
Without doubt, low CIT wasn’t the only reason investors preferred Singapore. The Southeast Asian nation had strong infrastructure and laws targeted at luring investors.
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However, investors always consider the tax rates before betting on any economy, economists say. Understanding this point, India reduced corporate tax rates to 22 percent in September 2019 from 30 percent earlier. As of the time this decision was taken, India’s FDIs stood at $51 billion. By 2024, FDIs in world’s most populous nation had risen to $81.04 billion.
Just recently, the Presidential Committee on Fiscal Policy and Tax Reforms in Nigeria proposed the reduction of the CIT from 30 percent to 25 percent. Analysis now shows that Nigeria’s CIT will no longer rank among the world’s highest globally, putting the nation on the global map.
Where Nigeria squares in Africa
An investigation into the CITs of 20 frontier markets in Africa places Nigeria in the middle of the park. Egypt’s CIT stands at 22.5 percent, according to PwC. Kenya’s CIT is 30 percent, PwC says, while South Africa’s is 27 percent, according to the South African Revenue Service (SARS).
The CIT stands at 25 percent in Ghana, 28 percent in Rwanda, 30 percent in Ethiopia, and 20 percent in Tunisia, says PwC.
More so, the corporate tax stands at 22 percent in Botswana, 31 percent in Namibia, and 35 percent in Guinea, which is now among the highest globally.
Furthermore, the CIT stands at 30 percent in Senegal, 30 percent in Zambia, 30 percent in Burundi, 20 percent in Madagascar, and 25 percent in Guinea Bissau.
Moreover, the CIT is charged at 25 percent in Seychelles, 25 percent in Sao Tome and Principe, as well as 30 percent in Cameroon, according to KPMG. Mali’s CIT is 30 percent, while Angola’s is 25 percent.
Hence at 25 percent, Nigeria’s CIT is no longer among the highest on the continent.
“For us as a business in Nigeria, this is a good development,” said Chief Executive Officer of Kenfrancis Farms, Mr Ifeanyi Okeleke. “People always talk about the negative side of the tax reforms, but this is one of the brightest spots. It is relatively high, but it’s a good development,” he said.
On the future inpact of the 5 percent reduction, he said, “The 5 percent reduction will enable us to have more money to create jobs and expand operations,” Mr Okeleke, who has interests in agroprocessing, education and manufacturing, noted.
Low CIT and high FDIs
Research shows that most nations with low CITs often attract higher FDIs. Unlike foreign portfolio investors who are interested in ‘hot money,’ FDIs set up shops or plants in foreign markets. The CIT is not the only source of attraction for investors, according to analysts, but it remains one of the factors luring FDIs to various markets.
Ireland’s CIT stands at 12.5 percent. FDIs in Ireland have remained high over time. FDI in Ireland stood at €1,089bn in 2024, according to the Central Statistics Office (CSO). In the previous year, FDI inflows into Ireland reached €1.3 trillion, the CSO said.
In the United Arab Emirates (UAE), natural persons (individuals) engaged in business activities are taxable if annual turnover exceeds AED 1 million, with a zero percent rate on taxable income up to AED 375,000 and 9 percent on amounts above. Though it is progressive in nature, several taxes paid by small businesses in the country are single-digit in nature. In 2024, the UAE attracted $45.6 billion in FDI inflows, according to the UAE Ministry of Investment.
In contrast, Nigeria’s FDIs fell sharply by 70.06 percent quarter-on-quarter to mere $126.29 million in the first quarter (Q1) of 2025, down from $421.88 million recorded in the final quarter of 2024, according to the National Bureau of Statistics (NBS). The FDIs fell further to $29.83 million (just 1.15 percent of total capital importation) of total capital importation in the second quarter (Q2) of 2024.
“In Nigeria, the corporate tax rate has been a major factor influencing business investment, particularly in the
agricultural sector, which plays a vital role in economic development, employment generation, and food security,” according to a research by Adeniyi Fadipe, Olufemi Adekoya, Hannah Adeniyi, and other authors, entitled, ‘Corporate Tax Rate and Investment Decision: A Study of the Agricultural Sector in Nigeria.’
According to an emerging markets analyst, Mr IK Ibeabuchi, “When you reduce your corporate taxes, you simply send a positive message to investors that this is where they can be. So, I commend the government for taking the decision.”
He said, however, that the reduction was not enough, recommending that Nigeria should target a CIT of 15 percent to 20 percent to stack up with competitive economies across the world.
“In Hong Kong, the CIT is about 16.5 percent. In Singapore, it is 17 percent; zero percent to 9 percent in the UAE; and 15 percent in Germany. We have to target 15 percent to 20 percent. This will likely make a remarkable impact on FDI inflows, which have been insignificant for many years.”
