Chairman of the Alliance for Economic Research and Ethics (AERE), Dele Oye, has warned that key provisions of the Nigeria Tax Act 2025 may pose serious challenges to its effective implementation, citing the rent relief cap and restrictions on foreign exchange deductions as major concerns.
Oye said the Act’s provision limiting deductible rental expenses to N500,000 annually and disallowing the deduction of actual foreign exchange losses could undermine the policy’s objectives, especially for businesses operating in Nigeria’s volatile currency environment.
The forex restriction, he noted, prevents companies from deducting real losses incurred when sourcing foreign exchange locally, a move he described as disconnected from the realities of Nigeria’s business climate.
Speaking in a paper titled “The Nigeria Tax Act 2025: A Critical Examination of Consolidation, Implementation Challenges, and Institutional Identity Crisis,” Oye acknowledged that the reform represents the most significant legislative shift in Nigeria’s income tax framework in the Fourth Republic. However, he said it contains structural flaws that reflect a poor alignment with economic realities.
According to the former chairman of the Organised Private Sector of Nigeria (OPSN), the rent relief provision has attracted widespread criticism.
“Perhaps the most criticised clause in the new Act is the limit on relief for individual taxpayers. The Act decrees that taxpayers will be allowed to deduct rental expenses capped at N500,000 per year. Considering Nigeria’s primary economic hubs, including Lagos, Abuja and Port Harcourt, this figure is embarrassingly low,” Oye said.
He added that rising inflation and currency devaluation have pushed property values far beyond the relief threshold, making the provision ineffective for average urban professionals and small business owners.
Describing the situation as a “rent relief paradox,” Oye argued that fixed and low thresholds erode the value of tax reliefs, turning them into what he called a “decorative doormat” rather than a meaningful safety net.
“For many taxpayers, the time and effort required to gather documentation and file for relief may outweigh the actual tax savings,” he said.
Oye also raised concerns about the institutional changes introduced by the Act, particularly the establishment of the Nigeria Revenue Service (NRS) as the successor to the Federal Inland Revenue Service (FIRS).
While the move appears to be a rebranding exercise, he warned that the legislation expands the authority’s mandate beyond revenue collection into areas bordering on investment policy.
“This growth of power suggests an institutional identity crisis, where the primary goal of revenue extraction may overshadow the more delicate task of attracting investment,” Oye said.
He urged policymakers to draw lessons from challenges faced in other sectors, including the pharmaceutical industry, where inadequate financial incentives have hindered growth and innovation.
According to him, for the Nigeria Tax Act 2025 to achieve its objectives, it must go beyond legal reforms to include strategic financial incentives that support technology adoption, improve compliance, and encourage sustainable economic development.
