Stransact Blog

Blog

  • Tax Transformation in Nigeria: What Businesses Need to Know

    Tax Transformation in Nigeria: What Businesses Need to Know

    On 26 June 2025, Nigeria entered a new era of taxation. With the signing of the Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Establishment Act (NRSEA), and the Joint Revenue Board Establishment Act (JRBEA), the Federal Government has initiated a structural overhaul that redefines tax compliance, administration, and taxpayers’ obligations across board.

    Unlike previous reforms, these Acts are far-reaching in both scope and substance targeting digital transformation, widening the tax net, creating a more business friendly environment and rebalancing fiscal responsibilities across federal, state, and local authorities.

    Note: While the effective date will be confirmed in the official gazette, it is unlikely that implementation will begin prior to 1 January 2026

    The Nigeria Tax Act consolidates four major legislative instruments:

    • Nigeria Tax Act 2025

    The new Nigeria Tax Act 2025 introduces significant reforms to the country’s tax system, aiming to simplify tax administration, enhance compliance, and promote economic growth. The Act unifies the legal tax framework in Nigeria by creating a single statute for the taxation of all income, transactions and instruments. Once effective, the NTA shall repeal existing tax legislations such as the Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax, Value Added Tax, Petroleum Profits Tax Act, Stamp Duties Act, Industrial Development (Income Tax Relief) Act, among others.

    • Nigeria Tax Administration Act 2025

    The Nigeria Tax Administration Act as defined in its own Act is “an act to provide for the assessment, collection of, and accounting for revenue accruing to the federation, federal, states and local governments; prescribe the powers and functions of tax authorities, and for related matters”. The Act provides the operational backbone for the new tax regime by focusing on how taxes are to be administered and enforced. It sets out the rules, processes and powers for tax enforcement while also providing the clarity and structure for implementing the Nigeria Tax Act.

    • Nigeria Revenue Service (Establishment) Act 2025

    The Act repeals the Federal Inland Revenue Service (Establishment) Act of 2007 and enacts the Nigeria Revenue Service (Establishment) Act 2025 to establish the Nigeria Revenue Service (NRS) as the central tax authority tasked with the assessment, collection and accounting for tax revenue accruable to the Federal government.  In simpler terms, the FIRS has now been replaced with the NRS with expanded mandates.

    • Joint Revenue Board of Nigeria (Establishment) Act 2025

    The newly passed Act establishes the Joint Revenue Board (JRB), replacing the Joint Tax Board as a more autonomous and inclusive body designed to harmonize tax administration across the country. It also creates the Office of the Tax Ombud and a restructured Tax Appeal Tribunal with increased scope to coordinate and settle disputes among tax stakeholders in matters of tax administration as well as promote the rights of taxpayers.

    Download the PDF version of this article

    Key highlights of the Nigeria Tax Act are as follows:

    Maintained VAT Rate and Expanded the scope of Input VAT Recovery
    • The VAT rate remains unchanged at 7.5%
    • VAT paid on all purchases including services and fixed assets will now be recoverable as input tax (within a period of 5 years) only to the extent it was incurred for the purpose of consumption, use or supply in the course of making taxable supplies.
    • The NTA 2025 expands the scope of zero-rated goods and services, allowing suppliers to charge VAT at 0% while still claiming input VAT credits.

    The following are now treated as zero-rated supplies:

    • Basic food items
    • Medical and pharmaceutical products, including medicinal herbal products
    • Educational books and materials
    • Fertilizers and locally produced agricultural chemicals
    • Locally produced veterinary medicines and animal feeds
    • Live cattle, goats, sheep, and poultry
    • Agricultural seeds and seedlings
    • Electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET);
    • Electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs);
    • Medical services and medical equipment
    • Tuition for nursery, primary, secondary, and tertiary education
    • Exported goods (excluding oil and gas), exported services, and exported incorporeal property
    • Electric vehicles, and parts or semi-knocked-down units used for their assembly

    Rate of Tax for Companies to remain at 30%

    • Rate of tax for small companies is now 0%, while all other companies’ rate of tax shall be 30%.
    • A small company has now been defined as a company that earns a gross turnover of N100,000,000.00 or less per annum with total fixed assets not exceeding N250,000,000.00 and excludes any business providing professional services.
    • The rate of tax for large companies can be reduced to 25% effective from a date as may be determined in an Order issued by the President on the advice of the National Economic Council
    • The classification of medium sized companies has been expunged.
    • The rate of tax on chargeable gains from disposal of chargeable assets has been increased from 10% to 30% for corporate entities, except for small companies, which will be taxed at 0%. For individuals, such gains will now be subject to tax under the graduated tax rate for individuals rather than a flat rate. It is important to note that chargeable gains will now be included in computing the total profits of a company and the total income of an individual.

    Taxation of Nonresidents

    The definition of a Nigerian company has been expanded to include any company that:

      • is formed, registered, or incorporated under any law in Nigeria.
      • has its central place of management or control in Nigeria; or
      • has its effective place of management or control in Nigeria.

    The NTA 2025 expands the tax net for non-resident persons by clearly providing that profits from any trade, business, or profession are taxable in Nigeria where:

      1. the non-resident has a Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria;
      2. payments are made by a Nigerian resident or a Nigerian PE for offshore services, except where the payment is:
        • to an employee under a contract of employment,
        • by an individual for teaching by or to an educational institution, or
        • by a foreign PE of a Nigerian entity and the cost is borne by that PE;
    • Insurance premiums are paid to the non-resident for risks situated in Nigeria.
    • The NTA 2025 provides that where a non-resident person has a PE in Nigeria, profits attributable to that PE will include not only income earned through the PE, but also income from goods or services of the same or similar kind supplied directly to Nigeria by the non-resident or its connected persons even if not routed through the PE.
    • Payments made to non-residents for cross-border services, or insurance premiums related to risks located in Nigeria, are subject to withholding tax, which shall be treated as the final tax on such income. However, where the non-resident has a Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria to which the income is attributable, the income may be subject to further taxation.
    • Where a non-resident has a PE or SEP in Nigeria, and the profit attributable to it cannot be reliably determined, the following rules apply:
    • The tax authority may apply the non-resident’s global profit margin to its Nigerian-sourced income to estimate taxable profits.
    • If the declared profit is lower than this benchmark, the higher amount will be deemed as taxable profit in Nigeria.

    Regardless of the profit determination method, where WHT has been deducted at source, it will constitute the minimum tax payable on the income. However, if no WHT applies, the non-resident will be required to pay a minimum tax of 4% on the total Nigerian-sourced income.

    Global Minimum Tax Implementation

    • The Minimum tax rate of 0.5% of gross turnover would no longer apply to companies with no taxable profit in Nigeria.
    • Members of an MNE group and companies with gross turnover of EUR750,000,000 and above or N50,000,000,000 and above will have to pay a minimum tax if their effective tax rate is less than 15%. The Act requires such companies to recompute and pay an additional tax that brings its effective tax rate equal to 15%. This aligns with the OECD BEPS Pillar Two global minimum tax framework.
    • The effective tax rate has been defined to mean the rate produced by dividing the aggregate covered tax paid by a company for a year of assessment by the profits of the company. For this purpose, profit is defined as the net profit before tax as reported in the audited financial statements, reduced by 5% of depreciation and personnel costs for the year.

    4% Development Levy Replaces Multiple Levies

    • A 4% Development Levy on assessable profits of all companies except small companies and non-resident companies replaces the Tertiary Education Tax (TETFUND) and other levies.
    • The revenue accruing from the levy will be distributed as follows:
      • 50% to the Tertiary Education Trust Fund,
      • 15% to the Nigerian Education Loan,
      • 8% to the National Information Technology Development Fund,
      • 8% to the National Agency for Science and Engineering Infrastructure,
      • 4% to the National Board for Technological Incubation
      • 10% to the Defense and Security Infrastructure Fund and
      • 5% to the National Cybersecurity Fund.

    Revised Revenue and VAT Sharing Framework

    The Value Added Tax (VAT) revenue formula has been revised to be shared as follows among the Federal, State, and Local Government:

      • 10% to the Federal Government.
      • 55% to the State Governments and the Federal Capital Territory; and
      • 35% to the Local Governments.

    The revenue sharing formula among the State and Local Governments has also been adjusted as follows:

      • For States: 50% based on equality, 30% based on consumption, 20% based on population.
      • For Local Governments: 70% based on equality, 30% based on population.

    These formulae are designed to promote equitable revenue distribution and incentivize consumption-based development.

    Removal of Reasonability and Necessity Tests on Deductions

    • The longstanding subjective “reasonably” and “necessarily” tests for deducting business expenses have been abolished.
    • Deductibility will now rely solely on objective compliance with tax laws and actual business use, removing ambiguity and reducing disputes.

    Income Tax for Individuals

    • The NTA 2025 sets out that an individual’s chargeable income is calculated as their total income, as defined in Section 28 of the Act, less allowable deductions (referred to as eligible deductions). These deductions represent personal reliefs intended to reduce the individual’s tax burden and reflect essential expenses.

    Eligible deductions include:

    • Contributions to the National Housing Fund (NHF)
    • Contributions to the National Health Insurance Scheme (NHIS)
    • Contributions under the Pension Reform Act
    • Interest on loans used to develop an owner-occupied residential house
    • Life insurance premiums or annuities paid for the individual or their spouse
    • Rent relief equal to 20% of the annual rent paid, capped at ₦500,000 whichever is lower, and subject to full disclosure of rent and other prescribed details.

    The Act also introduces new tax rates for individuals ranging from 0% to 25% as follows:

    • First N800,000 at 0%;
    • Next N2,200,000 at 15%.
    • Next N9,000,000 at 18%.
    • Next N13,000,000 at 21%.
    • Next N25,000,000 at 23%; and
    • Above N50,000,000 at 25%.

    Individuals earning minimum wage in line with the Minimum Wage Act are exempted from income tax.

    Compensation or damages up to ₦50,000,000 for personal injury, professional injury, loss of office, libel, slander, or enticement are not taxable as chargeable gains. Only amounts exceeding ₦50,000,000 would be treated as a chargeable gain and subject to tax.

    Economic Development Incentive

    • The NTA repeals the Industrial Development Act and replaces the Pioneer Status Incentive (PSI) with the Economic Development Incentive (EDI). The EDI aims to stimulate capital investments in defined priority sectors, focusing on actual performance rather than blanket tax holidays.

    The EDI introduces key features such as

      • The implementation of 5% Economic Development Tax Credit (EDTC) on QCE per annum for 5 years (priority period), offsetting CIT payable
      • Unused EDIC can be carried forward for up to 5 years.
      • Possibility of a one-time 5-year extension if 100% of profits are reinvested, though clarity is needed on whether the 5% EDTC applies during the extension.

    Capital Allowance

    • Capital allowance on qualifying capital expenditure is no longer split into initial and annual Instead, a straight- line allowance is now applicable on assets categorized into either of the three classes: Class 1, 2 & 3 of Table 1 of the First Schedule of the NTA.
    • Intangible assets expenditure and software expenditure can now claim capital allowance under rates specified for Class 1 & 3 of Table 1 of the NTA respectively.

    Digital Compliance & E-invoicing

    • The Acts mandate VAT focalization, requiring taxpayers to adopt e-invoicing systems linked to the NRS for real-time transaction monitoring.
    • Profits or gains arising from transactions in digital or virtual assets are now classified as chargeable gains and will be subject to tax under the rules applicable to chargeable assets.
    • A National Single Window platform will integrate tax filings and payments, facilitating ease of doing business and reducing tax gaps.

    Tax Dispute Resolution Enhancements

    • The Office of the Tax Ombud will serve as an independent and impartial arbiter for review and resolution of disputes between taxpayers and tax authorities, improving fairness and reduced protracted litigation.
    • The Tax Appeal Tribunal is reconstituted with jurisdiction over all federal and state tax disputes, promising faster and more effective resolution.

    New Compliance Obligations for Virtual Asset Service Providers (VASPs)

    • Businesses involved in virtual asset exchanges, custody, or management are required file detailed returns on virtual asset transactions, even without formal notification from tax authorities.

    Additional Assessments

    • The NTA provides that the relevant tax authority may continue a tax audit and raise additional assessments beyond the six-year limitation period, provided that the audit commenced before the expiration of that period. This ensures that ongoing audits can be concluded properly, and any further tax liabilities discovered during the process can still be assessed.
    • The NTA also provides that the relevant tax authority is now required to respond to a tax payer’s objection notice within 90 days. Where no response is provided within this period, the objection shall be deemed upheld in favor of the taxpayer.

    Mandatory Disclosure of Tax Planning Arrangements

    • The new framework introduces a proactive disclosure requirement for taxpayers engaging in tax planning arrangements aimed at securing a tax advantage. Any person who enters or intends to enter into a transaction or agreement primarily designed to confer a tax benefit must, without notice or request, disclose relevant details to the appropriate tax authority.

    The tax authority is empowered to issue regulations detailing:

    • The type of information to be disclosed,
    • The format and method of submission,
    • The timeline for disclosure, and
    • Applicable penalties for non-disclosure, false disclosure, or late/incomplete submissions.

    “Tax advantage” is broadly defined to include the reduction, deferral, or avoidance of tax liabilities or obligations, and applies to any transaction, scheme, or arrangement undertaken to achieve such benefits.

    Filing of Tax Incentives Return

    Taxpayers (both individuals and corporate) are now required to file Annual Tax Incentive Returns including those under the Economic Development Incentive (EDI) regime and other sector-specific reliefs. This filing is in addition to the regular annual tax returns and must cover all income tax and incentives not generally available to all taxpayers.

    Stricter Penalties and Offenses

    The reform enhances the penalty regime for tax non-compliance with higher fines and clearer offenses.

    Penalties applicable to companies (excluding those engaged in petroleum operations):
    S/N Offence Penalty
    1 Failure to register for tax ₦50,000 for first month + ₦25,000 for each subsequent month
    2 Awarding contract to unregistered person ₦5,000,000
    3 Failure to file returns / incomplete or inaccurate returns ₦100,000 for first month + ₦50,000 for each subsequent month
    4 Failure to keep books and records ₦10,000 (individual); ₦50,000 (company)
    5 Failure to grant access for deployment of technology ₦1,000,000 first day + ₦10,000 each subsequent day
    6 Failure to use focalization system ₦200,000 + 100% of tax due + interest at CBN MPR
    7 Failure to deduct tax 40% of amount not deducted
    8 Failure to make attribution / notify ₦1,000,000
    9 Failure to remit tax deducted or self-account Amount not remitted + 10% per annum penalty + interest at CBN MPR: also imprisonment up to 3 years or fine up to 50% of sum
    10 Failure to respond to notices / demands ₦100,000 first day + ₦10,000 each subsequent day
    11 Failure to supply info / records ₦200,000 first day + ₦10,000 each subsequent day
    12 Failure to comply with info obligations (legal arrangements) ₦1,000,000 first day + ₦10,000 each subsequent day
    13 VASP non-compliance ₦10,000,000 first month + ₦1,000,000 each subsequent month or license suspension/revocation
    14 Failure to stamp dutiable instruments 10% of unpaid duty + interest at CBN MPR
    15 Failure to disclose facts in dutiable instrument ₦100,000 admin penalty or ₦50,000 fine + 3 years jail or both
    16 Failure to notify change of address ₦100,000 first month + ₦5,000 each subsequent month
    17 Fraud in relation to stamps ₦2,000,000 fine or up to 3 years jail or both
    18 Offence by authorized/unauthorized persons (e.g. fraud, embezzlement) 200% of sum or up to 3 years jail or both
    19 Inducement of authorized officer ₦500,000 (individual); ₦2,000,000 (body corporate) + up to 3 years jail or both
    20 Use of weapon in offence Up to 5 years jail; injury: up to 10 years jail
    21 Impersonation of authorized officer ₦1,000,000 fine or up to 3 years jail or both
    22 Aiding and abetting ₦1,000,000 fine or up to 3 years jail or both
    23 Obstruction ₦1,000,000 admin penalty + ₦1,000,000 fine or up to 3 years jail or both
    24 Unauthorized disclosures of taxpayer info ₦1,000,000 fine or up to 3 years jail or both
    25 False claims of tax refund 50% of refund + interest + recovery of refund
    26 False/fictitious VAT refund claim 100% of refund + interest + recovery of refund
    27 Default in payment of mineral royalties 10% penalty + interest (SOFR + 10% for FX, CBN MPR for Naira)
    28 False declaration ₦1,000,000 admin penalty + tax undercharged or ₦1,000,000 fine + up to 3 years jail
    29 Counterfeiting documents ₦1,000,000 admin penalty + ₦1,000,000 fine or up to 3 years jail
    30 Offence by body corporate (responsible officers) Same penalty as individual unless no knowledge/consent
    31 General contravention without specific penalty ₦1,000,000 admin penalty or up to 3 years jail or both
    Penalties applicable to companies engaged in petroleum operations include:
    S/N Offence Penalty
    1 Failure to file estimated or actual returns on due 10,000,000 on first day + either 2,000,000 for each subsequent day of failure or another sum prescribed by Minister

    Interest at SOFR + 10% on differential of revised tax over estimated tax (if further return is not made)
    2 Late payments of tax, royalty or remittance 10% of unpaid sum + interest (SOFR +10% for FX or CBN MPR+ 2% for Naira

    10,000,000 or USD equivalent first day + either 2,000,000

    Possible distraint, cancellation, seizure, disposal or revocation of licenses or assets of the holder
    3 Failure to comply with notice / appear in response to notice or summons/ submit returns 10,000,000 on first day +2,000,000 for each day default continues

    10,000,000 fines on conviction for an offence + either 2,000,000 each day default continues or 6 months
    4 Incorrect accounts, schedules, statements or false information 15,000,000 + 1% of either of the correct or incorrect account undercharged tax (whichever is higher) + appropriate tax payable

    On conviction of an offence: Same penalty + possible imprisonment
    5 False statements / forged documents / prepares or aids false returns Either fine of 15,000,000 or 1% of tax amount (whichever is higher) or 6 months imprisonment or both fine & imprisonment
    6 Offence by authorized or unauthorized person (e.g. embezzlement, fraud Either 200% of sum in question or 3 years imprisonment or both
    7 Default in petroleum royalty payment (after 30 days) Same penalties as late tax payment: 10% of unpaid sum +

    interest +10,000,000 first day +2,000,000 per day thereafter
    8 General non-compliance where no specific penalty provided 10,000,000 +2,000,000 for each day of continued default
    9 Where no penalty is specifically provided Either 20,000,000 fine or another sum prescribed by Minister or 6 months imprisonment or both fine and imprisonment

    Conclusion

    The Nigerian Tax Reform Acts are more than an administrative update; they are a blueprint for a modernized tax ecosystem. While the scale of the instituted changes may appear daunting, it presents forward-thinking businesses with a timely opportunity to streamline operations, reinforce transparency, and rethink tax governance in a way that adds long-term value.

    Delaying tax readiness could expose your organization to compliance risks, revenue leakage, and reputational concerns especially with the rise of fiscal digitalization, mandatory disclosures, and enhanced regulatory scrutiny.

    At Stransact Chartered Accountants, we are committed to helping clients transition confidently into the post-reform environment. Whether through impact assessments, compliance restructuring, or executive workshops, we offer the insight and support necessary to align your tax strategy with evolving national and global expectations.

    To better understand how these reforms impact your specific industry, structure, or compliance obligations, reach out to our experts at [email protected] to schedule a tailored tax impact assessment or executive strategy session.

    Disclaimer

    This article is based on the version of the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Establishment Act, and Joint Revenue Board Establishment Act currently in circulation. As of the time of publication, these Acts have not been officially gazetted. Consequently, interpretations provided herein may be subject to change upon official gazetting or further regulatory guidance. Businesses are advised to seek professional advice tailored to their specific circumstances.

  • 5 Must-Reads for Forward-Thinking Leaders

    5 Must-Reads for Forward-Thinking Leaders

    At Stransact, we remain aligned to the ever-evolving landscape of business, regulation, and industry developments. Our weekly insights are designed to equip you with the foresight and clarity to make informed decisions and lead with impact.

    1. Avoid These Payroll Penalties: What Every Nigerian Employer Should Know

    Many Nigerian businesses are losing money not to fraud, but to payroll errors. Stransact offers practical strategies to help businesses stay compliant, avoid fines, and focus on sustainable growth.

    Discover what payroll compliance really means and how to stay ahead before it costs your business.
    👉 Read the article

    1. Renewed Hope Nigeria First Policy: A Strategic Shift Towards Local Content and Economic Sovereignty

    Many Nigerian businesses are missing out on growth not because of lack of potential, but because of poorly structured procurement processes.

    Want to find out how this policy could affect your industry and what to do next.
    👉 Read the article

    1. Third-Party Risk Management: Are Your Vendors Your Weakest Link?

    Vendors remain central to Nigeria’s economic growth, but without adequate governance, they can introduce significant operational, financial, and reputational risks.

    Discover why businesses are under growing pressure to strengthen their third-party risk management (TPRM) strategies—and how this shift represents a competitive edge for prepared service providers.

    👉 Read the article

    1. Navigating the Future of Tax Compliance: FIRS to Roll Out E-Invoicing in Nigeria

    This initiative is designed to improve VAT collection, reduce tax leakages, and align with Nigeria’s digital economy strategy by enabling real-time invoice validation, standardization, and secure transmission through integrated enterprise systems.

    The implementation of E-invoicing by the FIRS signals a clear direction toward a data-driven, digitally enabled tax system in Nigeria.
    👉 Read the article

    1. Navigating Global Governance in Oil & Gas: Why Board Advisory Matters More Than Ever

    Governance in the energy sector is no longer a compliance checkbox; it’s a business strategy.

    Discover how governance consulting is transforming African oil & gas boardrooms.
    👉 Read the article

     

    Follow Stransact for weekly insights on the future of business, finance, and regulation in Nigeria.

  • Navigating Global Governance in Oil & Gas: Why Board Advisory Matters More Than Ever

    Navigating Global Governance in Oil & Gas: Why Board Advisory Matters More Than Ever

    In the ever-evolving energy sector, oil and gas companies, particularly those operating across Africa face increasing pressure to demonstrate robust corporate governance practices. With global scrutiny intensifying around climate commitments, ESG compliance, and stakeholder accountability, governance in the oil and gas industry is no longer a box-ticking exercise. It is a strategic imperative.

    Governance consulting has thus emerged as a powerful lever to realign boardroom behavior with global expectations fostering trust, enhancing transparency, and preparing firms for a sustainable future. But what does this alignment actually look like, and how can African energy companies position themselves to lead rather than follow?

    The Governance Gap in Oil & Gas

    Globally, investors, regulators, and civil society are demanding more transparent, ethical, and forward-looking governance practices especially in extractive industries with high environmental and social impact. Yet, in many African markets, governance frameworks remain outdated, compliance-focused, and inward-looking. According to the African Energy Chamber’s State of African Energy 2023 report, “less than 30% of African oil and gas companies have integrated climate risk into board-level discussions, despite mounting investor pressure.”

    Similarly, the OECD found in its report on extractive sector governance that “only 35% of extractive industry boards disclose their criteria for director independence, and less than 10% include ESG competencies in board selection.” These numbers highlight a major governance gap that presents both a risk and an opportunity for boards seeking international capital or partnerships.

    Global Best Practices for Board Governance in Oil & Gas

    To meet global expectations, governance consulting for the sector typically focuses on these five pillars:

    1. Board Composition and Independence
          • Recruit directors with diverse expertise including in sustainability, digital transformation, and stakeholder engagement.
          • Establish clear independence standards and rotate board members regularly.

    According to Spencer Stuart’s 2024 Global Board Index, energy firms with >50% independent directors had 25% higher investor confidence scores.

    2. Risk Oversight and Scenario Planning

          • Embed geopolitical, climate, and technology disruption scenarios into board discussions.
          • Set up separate committees for ESG, HSE (Health, Safety & Environment), and risk.

    3. Disclosure and Transparency

          • Align reporting with global frameworks such as TCFD, GRI, and SASB.
          • Go beyond financials, disclose board evaluations, sustainability metrics, and community engagement efforts.

    4. Stakeholder-Centric Strategy

          • Include stakeholder voices in strategy formulation, especially host communities and regulators.
          • Adopt Integrated Reporting to capture value beyond profits.

    5. Board Effectiveness and Evaluation

          • Conduct independent annual board evaluations.
          • Provide continuous training for directors on emerging issues in governance, technology, and ESG.

    Governance Reform Case Studies

    The following table compares several notable governance reform initiatives in oil and gas companies, highlighting the triggers, changes made, and impacts:

    Company (Country)

    Trigger for Reform

    Governance Changes Implemented

    Impact/Outcome

    Petrobras (Brazil)

    2014 “Lava Jato” corruption scandal exposed political meddling.

    New laws mandated internal audit units and statutory audit committees, mandatory codes of conduct, and merit-based board appointments. Petrobras also separated political influence from its governance.

    Investor confidence gradually restored. By 2019 Petrobras’s stock rebounded (from ~USD 3.80 in 2016 to >USD 15 by late 2019). Enhanced transparency and controls reduced future corruption risk.

    NNPC Limited (Nigeria)

    2025 Government resolution dissolved the existing board and management, citing poor governance.

    A new board of seasoned industry professionals was appointed, emphasizing diverse expertise and transparent oversight. The board’s mandate includes optimizing assets, restoring investor confidence, and preparing for possible public listing.

    Industry observers expect “dramatic improvement in corporate governance” and efficiency. The shake-up was widely hailed as a step toward world-class governance, though outcomes depend on continued independence from political interference.

    Sonangol (Angola)

    2017 anti-corruption drive by new government targeted SOEs (including Sonangol).

    Most SOE boards were replaced. Sonangol’s regulatory and concessionaire functions were split off into a new national oil agency. Laws now require publication of audited annual reports for major SOEs. Sonangol has been asked to divest many non-core assets.

    Early signs of greater transparency: audited accounts are publicly filed, and governance structures tightened. However, progress has been gradual; Sonangol remains under scrutiny, and the true impact on corruption and efficiency will take more time.

    What Governance Consulting Offers

    Governance consulting firms play a critical role by helping oil and gas clients:

      • Assess Gaps using maturity models and board diagnostic tools.
      • Design Governance Frameworks tailored to national regulations and global benchmarks.
      • Train Boards and Executives in ESG governance, ethics, digital strategy, and stakeholder management.
      • Support Compliance with international standards and prepare clients for ESG-linked capital raises or partnerships.

    As boardroom conversations shift from quarterly earnings to long-term resilience, governance consultants serve as translators, helping local companies speak the language of global capital, climate action, and inclusive growth.

    Conclusion

    Governance is no longer a shield, it’s a sword. African oil and gas companies that move beyond compliance and embrace modern governance will not only mitigate risk but unlock strategic opportunities. From attracting climate-conscious investors to improving stakeholder trust and international credibility, board reform is fast becoming a business advantage.

    As McKinsey noted in its 2023 report on African Energy Transition, “Governance maturity will determine which firms survive the global energy shift and which ones disappear.”

    The stakes are high, but so are the rewards. The future belongs to companies bold enough to govern differently.

    At Stransact Chartered Accountants, we work with boards and executive teams across the oil and gas sector to strengthen governance practices and meet global expectations. Our tailored consulting approach helps clients align board structures, disclosures, and ESG oversight with international standards, while staying grounded in local realities.

    Reach out to us at [email protected] to explore how we can support your governance transformation journey.

  • Navigating the Future of Tax Compliance: FIRS to Roll Out E-Invoicing in Nigeria

    Navigating the Future of Tax Compliance: FIRS to Roll Out E-Invoicing in Nigeria

    As part of its broader effort to modernize tax administration and close revenue gaps, the Federal Inland Revenue Service (FIRS) has announced the phased implementation of an electronic invoicing (e-Invoicing) system in Nigeria, known as the FIRS Merchant Buyers’ Service Solution (FIRSMBS). The rollout, beginning July 2025, will initially target large taxpayers (i.e., companies with annual turnover of N5 Billion and above), with plan to expand to other taxpayer categories in subsequent phases.

    This regulatory development aligns with Nigeria’s National Digital Economy Policy and Strategy (2020–2030) which aims to enhance tax transparency, improve efficiency in VAT collection and reduce revenue leakages through digital transformation and automation.

    What Is FIRSMBS?

    The FIRSMBS platform is designed to bridge taxpayers’ internal invoicing systems with the FIRS infrastructure. This integration is intended to give the tax authority real-time access to transaction data, reduce tax leakages, and simplify VAT monitoring. The solution offers businesses a secure, real-time mechanism for creating, validating, and transmitting invoices electronically. It also aims to standardize invoice formats, ensuring consistency and reliability in tax submissions.

    Key Highlights of the E-Invoicing Framework

    • The e-Invoicing mandate will apply to Business-to-Business (B2B), Business-to-Government (B2G) and Business-to-Consumer (B2C) transactions, integrating with enterprise systems through Application Programming Interface (APIs) or National Information Technology Development Agency (NITDA) approved Access Point Providers (APPs).
    • The B2B/B2G invoices must be pre-cleared with FIRS and must carry a unique Invoice Reference Number (IRN) and Cryptographic Stamp Identifier (CSID). The B2C invoices must be reported within 24-hours and include a QR code for validation.
    • Taxpayers will access the FIRSMBS platform using their Taxpayer Identification Number (TIN) to create a digital profile. Once onboarded, businesses can generate invoices through the portal. Each invoice will contain standardized information such as supplier and buyer details, item descriptions, quantities, pricing, tax breakdowns, and total amount.
    • Invoices must be transmitted to the FIRS for validation in real time or shortly before being shared with the customer. To be accepted, the e-invoice must include essential fields such as transaction type, parties’ names and VAT registration numbers, tax amounts, and the total value. All validated invoices must be submitted within 21 days of generation.
    • Implementation begins from July 2025 for large taxpayers while that of the medium and small businesses will be in subsequent phases and based on the feedback from the initial roll out.

    Read more: National Repository Portal and Financial Reporting Compliance: A Guide for Nigerian PIEs

    Why E-Invoicing?

    The shift to e-invoicing is not just a technological update; it represents a transformation in how businesses transact, comply with tax laws, and engage in cross-border trade. Key advantages include:

    • Faster Tax Reporting: Accelerates the invoicing process, resulting in timely and accurate VAT filings.
    • Reduced Costs and Errors: Automation eliminates manual processes and minimizes invoicing errors, improving data integrity.
    • Streamlined Operations: Electronic systems reduce paperwork and facilitate easier reconciliation and recordkeeping.
    • Regulatory Compliance: Ensures adherence to uniform invoice standards, aiding in audits and reducing disputes.
    • Sustainable Practice: Reduces paper usage and aligns with environmental best practices.
    • System Interoperability: Enables seamless communication between businesses’ ERP systems and the FIRS platform, fostering digital integration.

    How can we support you?

    We understand that compliance transformations require more than just systems upgrades; they require strategic alignment. Our team is equipped to support your business through:

    • E-invoicing readiness assessments
    • System integration support
    • Policy and process design
    • Staff training and compliance advisory

    The implementation of E-invoicing by the FIRS signals a clear direction toward a data-driven, digitally enabled tax system in Nigeria. While the changes may appear daunting at first, businesses that prepare early will be better positioned to realize operational efficiencies and maintain compliance.

    We encourage you to reach out to us at [email protected] as you begin navigating this transition.

     

  • Process Optimization in Manufacturing: Where Nigerian Firms Are Losing Millions

    Process Optimization in Manufacturing: Where Nigerian Firms Are Losing Millions

    Nigeria’s manufacturing sector, once a cornerstone of the nation’s economy, is currently facing significant challenges. The sector’s contribution to the Gross Domestic Product (GDP) has declined from 16.04% in Q4 2023 to 12.68% in Q2 2024, marking a 20.95% decrease over six months. This downturn underscores the urgent need for process optimization to enhance efficiency and competitiveness.

    The High Cost of Inefficiency

    Operational inefficiencies are costing Nigerian manufacturing firms millions annually. A study focusing on manufacturing firms in Rivers State revealed a significant positive correlation between process optimization models and operational efficiency. Specifically, real-time optimization and maintenance optimization were found to enhance cost minimization and capacity utilization.

    Moreover, the adoption of Artificial Intelligence (AI) technologies has shown promise in optimizing manufacturing processes. Research indicates a substantial positive correlation between AI adoption and manufacturing efficiency, with AI facilitating enhancements in operational analytics.

    Read more: Navigating Global Challenges Affecting Nigeria’s Manufacturing Industry 

    Key Challenges Hindering Optimization

    Several factors contribute to the inefficiencies plaguing Nigeria’s manufacturing sector:

    The Path Forward

    To reverse the declining trend and unlock the sector’s potential, Nigerian manufacturing firms should consider the following strategies:

    • Invest in Technology: Embrace AI and other advanced technologies to enhance operational analytics, predictive maintenance, and overall efficiency.
    • Enhance Workforce Skills: Implement training programs to upskill employees, ensuring they can effectively utilize new technologies and methodologies.
    • Infrastructure Development: Collaborate with government and private sectors to improve infrastructure, particularly in power supply and logistics.
    • Policy Advocacy: Engage with policymakers to create a more conducive regulatory environment that supports manufacturing growth and innovation.

    By addressing these challenges and embracing process optimization, Nigerian manufacturing firms can significantly reduce losses, improve efficiency, and contribute more robustly to the nation’s economic growth.

    Read more: AI Adoption: Redefining Efficiency and Innovation in Your Business

    Conclusion

    Process optimization in Nigeria’s manufacturing sector is no longer a luxury—it’s a necessity. As firms navigate with outdated systems, rising operational costs, and global competition, the cost of inefficiency continues to climb. By embracing digital tools, upgrading infrastructure, and adopting data-driven strategies, manufacturers can unlock new levels of productivity and profitability.

    At Stransact Chartered Accountants, we support manufacturing businesses in identifying inefficiencies, optimizing operations, and achieving sustainable growth. From strategic audits to digital transformation advisory, our team helps you build a smarter, leaner, and more competitive enterprise.

    Need help optimizing your manufacturing processes? Reach out to us at [email protected] for expert guidance.

  • Third-Party Risk Management: Are Your Vendors Your Weakest Link?

    Third-Party Risk Management: Are Your Vendors Your Weakest Link?

    In today’s dynamic Nigerian business environment, third-party vendors are indispensable to operational efficiency and strategic growth. From logistics providers navigating the complexities of urban transportation to technology partners driving digital transformation, vendors enable organizations to scale and compete effectively. However, increased reliance on external service providers introduces significant risks, ranging from cybersecurity threats and regulatory non-compliance to financial instability and reputational harm. In a market as competitive and regulated as Nigeria’s, such vulnerabilities can have far-reaching consequences.

    Effective Third-Party Risk Management (TPRM) is therefore critical to ensuring business continuity, maintaining stakeholder trust, and achieving compliance with both domestic and international standards. This article examines the unique challenges Nigerian businesses face in managing vendor risks and offers actionable strategies to build a resilient, compliant, and value-driven third-party ecosystem. Importantly, this is not a challenge unique to Nigeria.

    Globally, the TPRM market is experiencing rapid growth—projected to expand from US$6.1 billion in 2024 to US$16.97 billion by 2030, reflecting a Compound Annual Growth Rate (CAGR) of 18.6%. This growth underscores a broader recognition of the critical role TPRM plays in modern enterprise risk management.

    Why Is TPRM Becoming a Big Deal in Nigeria?

    Nigeria’s economy remains oil-driven, with emerging sectors like fintech and agriculture increasingly reliant on third-party vendors to deliver efficiency and scale. With $12.2B in development projects underway (World Bank, 2024), vendors are central to infrastructure and service delivery. However, persistent challenges such as corruption (ranked 154/180 globally), insecurity, and infrastructure deficits amplify third-party risk. Recent reforms, such as fuel subsidy removal and naira devaluation, have raised operating costs. In this context, the pressure to reduce costs may incentivize unethical practices, such as bribery or regulatory shortcuts. These dynamics underscore the critical importance of a robust Third-Party Risk Management (TPRM) framework for organizations seeking to operate with integrity and resilience in a complex and evolving environment.

    A 2024 industry survey indicated that approximately 80% of Nigerian businesses rely on third parties for essential operations, yet around 65% lack comprehensive third-party risk management (TPRM) frameworks. The rapid growth of digital banking, e-commerce, and international trade has heightened vendor-related risks, compounded by Nigeria’s challenges with inconsistent regulatory enforcement, inadequate infrastructure, and rising cybersecurity threats.

    For professional services firms in Nigeria specializing in tax, audit, and regulatory compliance, TPRM is both a challenge and an opportunity to help clients navigate this complex landscape. By addressing local nuances, such as Nigeria’s tax regimes and anti-corruption laws, firms can position themselves as strategic partners in building resilient vendor ecosystems.

    Read more: Compliance as a Tool for Risk Management: Safeguarding Your Business in an Evolving Landscape

    Understanding Common Third-Party Risks in Nigeria

    Knowing the risks that come from your vendors in Nigeria is key to good third-party risk management. Here are the main risks you should watch out for:

    1. Cybersecurity and Data Privacy Risks

    Vendors operating in high-risk sectors such as fintech, logistics, and health tech often introduce significant cybersecurity and data privacy exposure. In Q1 2023, over 82,000 cyberattacks were recorded in Nigeria’s financial sector alone, largely attributed to outdated infrastructure and poor vendor security practices (NIBSS, 2023). Despite mandatory compliance with the Nigeria Data Protection Regulation (NDPR), many SMEs lack the technical capability to meet baseline data protection standards. This creates systemic vulnerabilities for businesses dependent on external service providers.

    A SOC 2 audit is essential for assessing vendor controls against international benchmarks across security, availability, and confidentiality. It enables B2B organizations to validate trust, reduce regulatory exposure, and maintain data integrity in a volatile environment.

    2. Regulatory and Compliance Risks

    Nigeria’s regulatory landscape is complex, with agencies like the Federal Inland Revenue Service (FIRS), Corporate Affairs Commission (CAC), and Economic and Financial Crimes Commission (EFCC) enforcing strict compliance. Vendors failing to remit taxes, such as Value Added Tax (VAT) or Company Income Tax (CIT), can expose businesses to penalties. Vendors may engage in bribery to secure contracts, exposing businesses to penalties. Oil sector vendors often face scrutiny for non-compliance with the Nigerian Extractive Industries Transparency Initiative (NEITI).

    3. Financial and Operational Risks

    Nigeria’s macroeconomic instability driven by persistent naira depreciation and projected inflation of 26.5% in 2025 (IMF, 2025) amplifies vendor financial risk. Insolvency or cash flow constraints among vendors can result in service disruptions, contract breaches, or unfulfilled deliveries. Operational challenges such as unreliable power supply, port congestion, and rising fuel and logistics costs further strain vendor performance. According to the Presidential Enabling Business Environment Council (PEBEC, 2024), Nigeria ranks low on key ease-of-doing-business metrics, with infrastructure inefficiencies significantly inflating operational costs.

    To maintain supply chain stability, organizations must assess vendor financial health, monitor operating environments, and embed financial and operational risk metrics into TPRM frameworks.

    4. Reputation and Ethical Risks

    Nigerian consumers and regulators increasingly prioritize environmental, social, and governance (ESG) standards. Vendors with poor labor practices, such as non-compliance with the National Minimum Wage Act, or environmental violations, like illegal waste disposal, can damage your brand. A 2024 social media backlash against a beverage company in Nigeria, linked to a vendor’s unethical labor practices, highlighted this risk.

    5. Security and Supply Chain Risks

    Nigeria’s security landscape continues to pose material risks to third-party operations, particularly in logistics and raw material sourcing. Insurgencies in the North and local disturbances in the Middle Belt, key regions for agricultural and mineral inputs, frequently disrupt supply chains, leading to delays, increased costs, and operational downtime. In the South, pipeline vandalism and piracy in the Niger Delta have also impacted transportation and manufacturing throughput. Coupled with regulatory enforcement under the Petroleum Industry Act (PIA), businesses face heightened exposure to compliance breaches and sanctions via the NMDPRA.

    To mitigate disruptions and ensure continuity, organizations must implement rigorous vendor due diligence, diversify supply bases, and conduct periodic compliance and security audits.

    Read more: How Cybersecurity and Data Privacy Drive ESG Strategies in Nigerian Businesses

    Why Vendors Pose Strategic Risks in Nigeria?

    Vendors in Nigeria face tough conditions like poor infrastructure, ambiguous regulations, and economic challenges. This makes managing them tricky due to:

    • Limited Vendor Due Diligence Capacity: Many businesses lack the tools, data access, or internal capabilities to assess vendor financial health or compliance with legal and regulatory standards
    • High Informality in Vendor Ecosystem: A significant portion of vendors operate without formal registration or licensing, thereby complicating verification, onboarding, and background checks.
    • Weak Contract Enforcement Mechanisms: Prolonged litigation timelines and inconsistent enforcement in Nigerian courts reduce the effectiveness of contracts as a risk mitigation tool.
    • Vendor Concentration Risk: Overdependence on a single or limited vendor pool increases exposure to service disruptions, especially in volatile sectors like logistics and energy.

    To manage these risks, companies need a special approach that fits Nigeria’s business scene.

    Staying Ahead with a Strong TPRM Framework

    A strong third-party risk management (TPRM) plan helps Nigerian businesses avoid problems with vendors, and here’s how to create one:

    1. Conduct Rigorous Due Diligence: Before onboarding any vendor—and at regular intervals thereafter—assess their financial, legal, and operational standing to reduce exposure:
    • Financial Health: Verify Corporate Affairs Commission (CAC) registration and review SOC 1 reports where applicable.
    • Data Security: Confirm NDPR compliance, presence of internal control frameworks, and request SOC 2 assurance where necessary.
    • Tax Status: Ensure vendors are registered with the Federal Inland Revenue Service (FIRS) and hold valid tax clearance certificates.
    • Regulatory & ESG Compliance: Review adherence to NESREA environmental guidelines and national labour laws.
    • Continuous Monitoring: Reassess after major changes—such as FIRS tax filings, NDPR updates, regulatory reforms, or ESG reporting cycles.

    When in doubt, engage a qualified tax, legal, or audit advisor to support due diligence and compliance efforts.

    1. Draft Robust Contracts
    • Tax Compliance: Ensure vendor tax compliance is up to date, request Make sure vendors pay VAT and Withholding Tax on time, with penalties if they don’t.
    • Data Protection: Vendors must follow Nigeria’s data laws (NDPR) and report any data leaks within 72 hours.
    • Sustainability: Add rules to support Nigeria’s green and ethical banking standards.

    Note: Always work with Nigerian legal experts to make contracts valid and enforceable locally.

    1. Foster a Compliance-First Culture: Finance, HR, and procurement must spot vendor risks like tax evasion and data privacy. HR should check vendors during onboarding, while workshops on anti-corruption laws keep teams aware and compliant.
    1. Prepare for Crisis Management: Crisis events, whether regulatory, operational, or reputational can originate from third-party failures. Embedding crisis management within your TPRM framework helps maintain business continuity.
    • Business Continuity & Disaster Recovery: Develop and regularly test response plans for data breaches, vendor failures, and compliance issues.
    • Regulatory Response: Set clear protocols for managing FIRS penalties or NDPR violations.
    • Supply Chain Resilience: Identify high-risk vendors and regions and maintain pre-vetted backup suppliers.
    • Reputation Management: Align with corporate communications and PR teams to manage external messaging during a crisis. Timely, transparent communication helps preserve brand integrity and stakeholder confidence.

    Crisis preparedness is not an afterthought; it is a strategic imperative. By proactively planning for disruptions, businesses can sustain operations, protect reputation, and maintain regulatory standing even under pressure.

    The Role of Tax, Audit, and Regulatory Professionals in Strengthening TPRM in Nigeria

    Tax, audit, and regulatory experts play a pivotal role in building resilient Third-Party Risk Management (TPRM) frameworks in Nigeria:

    • Tax Compliance Oversight: Ensure vendors meet their obligations under the Federal Inland Revenue Service (FIRS), Lagos State Internal Revenue Service (LIRS), and Petroleum Industry Act (PIA).
    • Independent Assurance: Leverage audit expertise to conduct vendor audits, validate tax remittances, assess financial health, and uncover potential risks.
    • Regulatory Alignment: Navigate complex legal frameworks such as the NDPR, NESREA, EFCC, etc. requirements to ensure full vendor compliance.
    • Strategic People Management: Integrate human capital considerations into vendor oversight, aligning labor practices with Nigerian employment laws and ESG objectives.

    Read more: FinTech: Credit Management as a Pathway to Profitability

    Conclusion

    Vendors remain central to Nigeria’s economic growth, but without adequate governance, they can introduce significant operational, financial, and reputational risks. A well-structured TPRM framework anchored on due diligence, enforceable contracts, digital monitoring tools, and continuous evaluation empowers organizations to mitigate third-party risks while unlocking strategic value.

    By leveraging multidisciplinary expertise across tax, audit, and regulatory domains, Nigerian businesses can build secure, compliant, and future-ready vendor ecosystems that align with evolving expectations around FIRS compliance, data protection (NDPR), and ESG performance.

    At Stransact, we partner with organizations to navigate the intricacies of local compliance requirements. Our integrated approach helps clients align vendor operations with regulatory mandates and organizational goals.

    Reach out to us at [email protected] to learn how we can help you build a resilient third-party management strategy.

  • Renewed Hope Nigeria First Policy: A Strategic Shift Towards Local Content and Economic Sovereignty

    Renewed Hope Nigeria First Policy: A Strategic Shift Towards Local Content and Economic Sovereignty

    In a landmark decision aimed at strengthening Nigeria’s domestic economy and promoting local content, the Federal Executive Council (FEC), presided over by President Bola Tinubu, on Monday 5th of May 2025 approved a sweeping new policy framework tagged the “Renewed Hope Nigeria First Policy”. This policy aims at making government investment directly benefit our people and industries by changing how we spend, how we procure, and how we build our economy.

    Understanding the Nigeria First Policy

    The Nigeria First policy is expected to become the cornerstone of the administration’s economic strategy, especially as the government pushes forward with its industrialization agenda and import-substitution goals.

    The policy comes at a critical time as the International Monetary Fund, IMF, forecasts a gradual slowdown in Nigeria’s economic growth from 3.4% in 2024 to 3.0% in 2025 and further declining to 2.7% in 2026. This downward trajectory underscores the urgent need for structural economic reforms to sustain growth momentum. The Nigeria First policy aims to counteract these declining growth projections by stimulating domestic production and reducing import dependency.

    Read More: Why Nigeria Is Not Classified as a Hyperinflationary Economy

    Key Resolutions and Implementation Strategies

    • Revision and Enforcement of Procurement Guidelines: The Bureau of Public Procurement (BPP) is to revise and enforce procurement rules that prioritize Nigerian-made goods and homegrown solutions across all Ministries, Departments, and Agencies (MDAs).
    • Mandatory Waivers for Foreign Procurements: MDAs are prohibited from procuring foreign goods or services that are available locally without obtaining a written waiver from the BPP. This measure is intended to curb unnecessary foreign expenditures and stimulate domestic production.
    • Inclusion of Technology Transfer Provisions: Where foreign contracts are unavoidable, they must include provisions for technology transfer, local production, or capacity development in Nigeria.

    Implications for Stakeholders

    • For Government Agencies: MDAs must audit existing procurement plans and submit revised versions aligned with the new policy directives. This requires a thorough assessment of current procurement practices and a shift towards sourcing from local suppliers.
    • For Local Industries: The policy presents an opportunity for Nigerian manufacturers and service providers to increase their participation in government contracts. By meeting quality and capacity standards, local businesses can position themselves as preferred suppliers.
    • For Foreign Contractors: International firms seeking government contracts in Nigeria must now incorporate strategies for technology transfer and local capacity development into their proposals. This approach ensures that foreign engagements contribute to the growth of Nigeria’s domestic industries.

    Read More: The New Reality for Nigerian Manufacturers—And How to Compete in It

    Conclusion

    The Nigeria First policy comes amid economic reforms being pushed by the Tinubu administration, including subsidy removals, a new foreign exchange regime, and efforts to restore investor confidence. By making local content central to government spending, the administration hopes to drive job creation, industrial growth, and sustainable economic development.

    While the policy will likely face implementation challenges and resistance from entrenched procurement interests, officials say the administration is determined to enforce compliance at all levels.

    At Stransact Chartered Accountants, we specialize in guiding businesses through complex regulatory landscapes. Our team of experts can help you understand the implications of the Nigeria First Policy and develop strategies to align with its requirements.

     

    📩 Contact us at [email protected] for personalized support.

     

  • Avoid These Payroll Penalties: What Every Nigerian Employer Should Know

    Avoid These Payroll Penalties: What Every Nigerian Employer Should Know

    In Nigeria’s increasingly regulated business environment, payroll compliance is far more than an administrative requirement—it is a legal imperative and a cornerstone of sound corporate governance. Beyond the timely payment of salaries, it encompasses adherence to a complex web of tax laws, pension obligations, and statutory contributions.

    Non-compliance can expose organizations to significant financial penalties, reputational risks, and operational disruptions. For forward-thinking businesses, investing in robust payroll compliance systems is not just about meeting regulatory expectations—it is about protecting long-term value and enabling sustainable growth.

    Why Payroll Compliance Matters

    Payroll compliance ensures that organizations align with Nigeria’s labor, tax, and other employee related regulatory laws. Regulatory bodies such as the Federal Inland Revenue Service (FIRS), States Internal Revenue Services (SIRS), National Pension Commission (PenCom), Nigeria Social Insurance Trust Fund (NSITF), Industrial Training Fund (ITF), and National Housing Fund (NHF) all oversee different components of the payroll landscape. 

    A slip in one area can result in sanctions that could have been easily avoided with proper planning and processes.

    Common Payroll Compliance Triggers for Sanctions

    • Late or Non-Remittance of PAYE Tax: Under the Pay-As-You-Earn (PAYE) scheme, employers are required to deduct personal income tax from employees’ salaries and remit it to the relevant State Internal Revenue Service (SIRS) by the 10th day of the following month. Failure to comply attracts penalties and interest charges.

    Penalty: A 10% penalty on the amount due, plus interest at the prevailing Central Bank of Nigeria (CBN) rate (Personal Income Tax Act, 2011)

    • Non-Remittance of Pension Contributions: Employers with fifteen (15) or more employees must contribute at least 10% of their employees’ monthly emoluments to the Retirement Savings Account, while employees are required to contribute a minimum of 8% to the same account. These contributions must be made not later than seven (7) working days from the day of salary payment.

    Penalty: Non-compliance may attract sanctions from PenCom, including fines and restriction of access to public sector contracts.

    • Failure to Register with NSITF: The Employees’ Compensation Act mandates that all employers must register with the NSITF and make monthly contributions. This fund provides compensation for employees who suffer occupational injury, disease or disability.

    Penalty: Defaulting employers may face legal action, fines, and exclusion from government tenders (Employee Compensation Act, 2010).

    • Inaccurate Payroll Records and Underreporting: Deliberately or mistakenly underreporting employee wages, benefits, or headcount can lead to regulatory scrutiny and heavy penalties. Audits may expose discrepancies between actual wages and what was reported to regulatory bodies.

    Penalty: Range from financial penalties to criminal prosecution in cases of tax evasion.

    • Non-Remittance to Industrial Training Fund (ITF): Employers with twenty-five (25) or more employees are required to contribute 1% of total annual payroll to the ITF not later than 1st April of the following year (Business Facilitation Act, 2022).

    Penalty: Failure to comply can result in a fine and ineligibility for grants and reimbursements from the Fund (The ITF (Amendment) Act, 2011)

    • Misclassification of Workers: Improper classification of employees as independent contractors to avoid tax and pension obligations is another red flag.

    Penalty: This can lead to back payments, interest, and penalties when discovered during audits.

    • Non-Remittance of National Housing Fund (NHF): Employees are required to contribute 2.5% of their monthly income:
      • This contribution is mandatory for employees in the public sector in Nigeria.
      • While it is optional for employees in the private s3ector in Nigeria.

    Penalty: Any employer who defaults, neglects or refuses to make contributions to the Fund as specified by the Act shall be liable to fine or imprisonment (National Housing Fund Act)

    How to Avoid Payroll Compliance Pitfalls

    • Stay Informed and Updated: Regulations change frequently. Subscribe to updates from regulatory bodies or work with compliance professionals to stay current.
    • Automate Payroll Processes: Use payroll software that is updated with current tax rates and deadlines. Automation reduces the risk of human error and missed remittances.
    • Conduct Regular Internal Audits: Quarterly or biannual payroll audits can help detect and fix issues before they escalate.
    • Engage Professional Advisors: Working with tax and payroll compliance experts like Stransact ensures that your payroll processes align with local laws and best practices.
    • Properly Document Employee Contracts: Ensure all employment terms are legally documented and that payroll records reflect the accurate compensation and benefits as stipulated.

    Read more: Are You Being Over-Taxed? How to Spot Errors in Your PAYE Deductions

    Conclusion

    Payroll compliance in Nigeria is a non-negotiable responsibility for businesses. While the regulatory landscape may be complex, the consequences of non-compliance ranging from fines to business disruption are far more costly. By understanding the common triggers for sanctions and implementing proactive compliance strategies, businesses can safeguard themselves against unnecessary risks.

    At Stransact Chartered Accountants, we help organizations stay ahead of compliance requirements. Our dedicated professionals provide tailored payroll and tax advisory services, helping businesses avoid penalties, stay compliant, and focus on growth.

    📩 Need help navigating payroll compliance? Reach out to us at [email protected] for expert guidance.

  • 5 Essential Business Reads for the Weekend

    5 Essential Business Reads for the Weekend

    At Stransact, we stay tuned to the pulse of business, policy, and industry trends. Each week, we bring you carefully curated insights to keep you informed, help you think ahead, and lead with confidence.

    1. The New Reality for Nigerian Manufacturers – And How to Compete in It

    Nigeria’s manufacturers are adapting to inflation, FX pressures, and shifting consumer demand. What does it take to survive—and thrive—today?
    Discover actionable strategies for resilience, including supply chain reengineering, tax planning, and financial transparency.
    👉 Read the article

    2. Cybersecurity as a Boardroom Priority

    With cyber threats escalating, boards can no longer treat security as a tech issue alone.
    This piece explains why cybersecurity must be a strategic risk priority—and how boards can play a proactive governance role.
    👉 Read the article

    3. Financial Reporting in Nigeria: The ICFR Imperative

    Robust Internal Controls over Financial Reporting (ICFR) are more than a compliance checklist—they’re essential for trust and transparency.
    Explore the practical benefits of ICFR and why Nigerian companies should embrace them, especially ahead of regulatory reforms.
    👉 Read the article

    4. Ungazetted Regulations: Legal Grey Areas You Shouldn’t Ignore

    Can a policy be enforced if it hasn’t been officially gazetted?
    This legal insight breaks down the implications of implementing laws or directives not yet published in Nigeria’s official gazette.
    👉 Read the article

    5. Nigeria’s Investment & Securities Act of 2025: A Capital Market Milestone

    The newly passed ISA 2025 ushers in major reforms for market operators, investors, and regulators.
    Get a concise breakdown of what’s changed—and what it means for capital market development.
    👉 Read the article

     

    Follow Stransact for weekly insights on the future of business, finance, and regulation in Nigeria.

     

  • The New Reality for Nigerian Manufacturers—And How to Compete in It

    The New Reality for Nigerian Manufacturers—And How to Compete in It

    Nigeria’s headline inflation raced to 34.8% in December 2024—its highest level since 1996—driven largely by food prices and energy shocks. Meanwhile, our once-booming manufacturing sector has seen growth plummet from 38.06% year-on-year in Q4 2023 to a mere 2.92% in Q4 2024. And despite countless reforms, the nation is still behind at 131st out of 190 economies in the World Bank’s Doing Business ranking.

    Erratic power supply continues to force industrial plants to rely on diesel generators, now costing up to US$0.50/kWh—over six times the theoretical grid tariff of US$0.08/kWh. This makes it even more economical to import products like cement rather than produce them locally. CEOs are grappling with balance sheets where escalating input costs erode margins rapidly. Foreign exchange losses are mounting, and each unplanned outage further undermines profitability.

    If you’re a board member or MD reading this, know this: unless you tackle these inefficiencies now, your factory could be the next headline in an exposé—and your bottom line will continue to be exposed to volatility.

    The Hidden Drain: Where Money Disappears

    1. Energy Shortages

    What’s happening: Grid power meets barely 4,000 MW demand; the rest comes from generators. Most firms pay US$0.40–0.46/kWh for diesel backup, compared to US$0.08/kWh on paper. For a mid-sized plant consuming 500,000 kWh monthly, that’s an extra US$160,000 in fuel costs alone—before factoring in maintenance and spares.

    Impact on your P&L: Energy costs can consume up to 30–40% of operating expenses, squeezing working capital and forcing product price hikes that erode competitiveness.

    2. Foreign Exchange Volatility

    What’s happening: The naira’s poor liquidity and steep devaluations erased ₦792 billion from the books of 16 leading manufacturers in 2023–24 alone. Many firms lack robust hedging strategies, so raw-material imports at N1,650/US$ (parallel market) can suddenly cost N2,000/US$ overnight.

    Impact on your P&L: FX losses feed directly into cost of goods sold, creating unpredictable margins and choking investment plans.

    3. Supply-Chain Gaps & Inventory Gluts

    What’s happening: Leading FMCGs saw input costs jump 121% in H1 2024, largely due to FX pass-through and logistical snarls. Meanwhile, unsold inventory rose by 43% in early 2024, tying up ₦1.24 trillion in working capital.

    Impact on your P&L: Excess inventory drives warehousing costs, idle cash, and write-downs, while stock-outs on critical SKUs dent market share.

    4. Policy Inconsistency & Regulatory Delays

    What’s happening: From sudden export bans to abrupt tariff changes, shifting policies force manufacturers into perpetual catch-up mode. Customs clearance can drag 5–10 days, double regional benchmarks, forcing many to pay demurrage and storage fees.

    Impact on your P&L: Unplanned expenses, project delays, and lost customer trust as orders slip.

    Practical Strategies for Reversal

    Targeted, low-risk pilots can arrest these losses and lay the foundation for scalable improvement. Each approach below has been successfully adopted within similar emerging-market contexts and is ready for rapid adaptation to Nigerian conditions:

    Hybrid Energy Micro-Grids with Smart Management

    What to do: Combine solar PV, battery storage, and gas-fired generators to cut diesel consumption by up to 30% and guarantee uptime when the grid fails.
    How we help:

    • Technology Advisory designs and oversees the micro-grid, integrates smart monitoring, and automates controls.
    • Audit & Assurance establishes baseline energy KPIs, tracks actual savings, and verifies performance.
    • Tax Compliance identifies available capital allowance incentives and optimises gas-to-power tax treatment.

    Digital Supply-Chain Enablement

    What to do: Deploy cloud-based inventory platforms with real-time demand forecasting and automated replenishment to unlock working capital.
    How we help:

    • Technology Advisory manages rapid system deployment, ERP integration, and user training.
    • Audit & Assurance audits stock accuracy, tightens procurement and warehouse controls, and builds KPI dashboards.
    • Tax Compliance optimises customs classifications, VAT recovery, and local-sourcing incentives to cut import duties and FX risk.

    Continuous Skills Development & Compliance

    What to do: Institute monthly “best-practice” forums, targeted training in quality-control and maintenance, and simple digital compliance-tracking tools.
    How we help:

    • People & Regulatory Services design curricula, deliver workshops, and liaise with NAFDAC, NERC, and Customs.
    • Audit & Assurance conducts mock audits, hazard assessments, and gap-closure reviews to ensure zero major findings.

    Policy Engagement and Advocacy

    What to do: Convene industry roundtables with government and regulators to secure practical reforms, such as 24-hour customs windows and predictable tariff regimes.
    How we help:

    Financial Strategies

    What to do: Implement layered FX-hedging programmes and tap development-finance or public-private funding for capex projects.
    How we help:

    • Audit & Assurance validates financial models, business cases, and ROI projections.

    Read More: Strengthening Nigeria’s Manufacturing Industry with Independent Internal Audits

    Conclusion: Charting a New Course for Nigerian Manufacturing

    The margin for error in today’s manufacturing landscape is slimmer than ever. Escalating input costs, currency volatility, and shifting regulatory requirements demand more than incremental improvements—they require a strategic, integrated response. By deploying rigorously tested, context-specific interventions and partnering with advisors who bring both global best practices and deep local experience, manufacturers can not only arrest profit erosion but also build the foundations for sustained, scalable growth.

    At Stransact, we’ve partnered with leading multinationals and fast-growing local champions to deliver precisely this kind of transformation. Our Audit & Assurance teams provide clear, data-driven diagnostics to reveal hidden inefficiencies and compliance gaps. Our Tax specialists optimize fiscal incentives and manage liabilities to improve cash flow. Through Technology Advisory, we implement digital platforms that free up working capital and enhance operational resilience. And our People & Regulatory Services ensure your teams are equipped, compliant, and ready to sustain continuous improvement.

    Let us help you turn today’s disruptions into tomorrow’s growth engine. Contact us for a confidential consultation and a custom pilot design. Together, we will lead Nigeria’s manufacturing renaissance—transforming complexity into clarity and delivering measurable, long-term value.