Impact Analysis Of The Nigerian Tax Reforms On The Mining Sector

Introduction

The President of the Federal Republic of Nigeria (FRN), His Excellency Bola Ahmed Tinubu in August 2023, inaugurated the "Presidential Fiscal Policy and Tax Reforms Committee" to, amongst others, review the existing fiscal legislation in the country in a bid to simplifying the tax system, repealing suboptimal ones, harmonising others and mitigating against multiplicity of taxes. The planned reforms also sought to modernise the Nigerian tax system whilst accelerating revenue generation to achieve a tax revenue to Gross Domestic Product (GDP) ratio of at least 18% by 2026 (2023: 9.4%¹).

In November 2024, the Committee communicated four (4) executive bills ("the Bills") to the National Assembly for debate and, ultimately, for passage into law. Following extensive debate and stakeholder engagements, the President accented to the Bills on 26 June 2025. The laws enacted are:

• The Nigeria Tax Act, 2025 (NTA)
• The Nigeria Tax Administration Act, 2025 (NTAA)
• The Nigeria Revenue Service (Establishment) Act, 2025 (NRSEA),
• The Joint Revenue Board (Establishment) Act, 2025 (JRBEA)

The NTA and the NTAA are effective 1 January 2026, while the NRSEA and the JRBEA became effective from the date of accent.

The Acts contain several changes that would significantly impact taxpayers, with an overarching revision of the existing tax administration framework. However, this article provides a streamlined analysis of how the Acts will impact operators in the Nigerian Mining Sector ("the Sector").

Review of the Primary Tax Provisions relevant to the Sector

• Cessation of Automatic Tax Holiday in the Companies Income Tax Act

The NTA repeals the Companies Income Tax Act (CITA) in its entirety, and all mining companies (who do not currently enjoy pioneer status incentive (PSI)) are to be subjected to tax in accordance with the former's provisions. The implication is that Section 36 of CITA which automatically exempts new mining companies from tax for the first three years of their operation is technically extinguished. The NTA in Section 197(9) also repeals the provisions of Section 28 of the Nigeria Minerals and Mining Act (NMMA) that provides similar tax holiday of 3-5 years to mining companies from their first year of operation. In essence, the automatic tax holidays provided to new mining companies by virtue of these provisions have become invalid, post-NTA.

The cessation of automatic tax holidays is no doubt a disincentive to mining companies, given the capital-intensive nature of the business during the exploration and development phases of mines' life. The Economic Development Tax Incentive (EDTI) framework, which is provided in the NTA as a replacement for PSI, is not automatic, and it comes with the satisfaction of some stringent qualification criteria and application processes. This may prolong project start up and elongate FID process.

• Royalty Payments

The NTA imposes royalty on minerals obtained during exploration or mining operations, at rates set out in the Eighth Schedule to the NTA. Royalty payments are tax-deductible. The fiscal provision pertaining to royalty payments under Section 33 of the NMMA has been deleted by Section 197(7) of the NTA. However, there are two key differences between the previous and current provisions relating to royalties, as discussed below:

• Increased Royalty Rates

The Eight Schedule to the NTA ("the Schedule") provides the ad valorem royalty rates for minerals mined in Nigeria, varying between 7.5% to 15%, depending on the mineral type. This is a marked increase compared to the current royalty regime in the Sector, as stipulated by the erstwhile Ministry of Mines and Steel Development (MMSD), effective 1 May 2022, where royalty rates range from 3% to 5%. Majority of the minerals that are currently charged to royalty at 3% have been increased to 7.5% (representing a 150% increment), while those charged at 5% have been increased to 10% (representing a 100% increment)!

Surprisingly, "Gold Concentrate" witnessed the most significant leap in royalty rate from 3% to 15%, representing a whopping 400% increase! This outlier increase in royalty rate on gold concentrate raises much concern, especially as other gold mining jurisdictions like Ghana, South Africa and Mali have royalty rates for Gold set at 5%; 0.5%-5%; 3%; respectively². Thus, the current traction in significant investment seen in the Nigerian gold mining industry may slow down if this astronomical increase in the "resource tax", that has no correlation to profitability of the venture, is not reversed or revisited.

Further, two new mineral categories have been introduced in the Schedule to the NTA i.e., Moganite and Chalcopyrite; each having royalty rate of 10%. Another broad category named "any other mineral" has also been included with a royalty rate of 10%. While the FG may hope to realize revenues from this additional class of minerals when explored, it is however debateable if the 10% royalty rate stipulated is fair for yet-to-be-identified minerals, which may not be as valuable as those already listed.

• Administration of Royalty Remittances

The NTA prescribes that the Nigeria Revenue Service³ ("the NRS") will be the appropriate authority to administer the royalty imposed under the law, subject to the relevant provisions of the NTAA. This is a total departure from the current regime, where mining companies remit royalty to the relevant mining ministries. Section 20 of the NTAA requires mining companies to file monthly self-assessment return of minerals royalty with the NRS, by the 21st day of the following month in which the mineral production occurred, in the prescribed form and alongside the prescribed documentation.

Further, the NTA directs that the value of each solid mineral resource extracted is to be determined using the official selling price specified by the Ministry of Solid Minerals Development (MSMD), or the ruling prices on an international trading platform or market for solid minerals. Thus, while the MSMD is expected to publish the approved or official selling price of the minerals for royalty computation, the NRS is the appropriate authority for royalty administration and collection.

In addition, the supervising Ministers no longer have the discretionary powers to either waive, reduce or defer / suspend royalty payments, given the deletion of Section 33 of the NMMA. Removing the discretionary powers of the Ministers may seek to achieve "certainty" around the royalty regime for operators, which will create a level-playing field for all operators.

• Removal of Accelerated Capital Allowances regime on Mining Expenditure

Under the CITA, mining companies can claim accelerated capital allowance (CA) of up 95% in the first year a qualifying mining expenditure (QME) is incurred and put to use. However, under the NTA, accelerated CA will no longer be available to mining companies. Rather, an annual allowance of 20% is to be granted on QME, claimable over a period of 5 years. A residual value of 1% is to be retained in the books at the end of the fifth year, which is notional and for statistical purpose, as it will not affect the claim of the full 20% of the cost of the QME in the fifth year.

The cessation of accelerated CA claims will delay the tax benefits on QME for mining companies, as was available to them under the CITA. However, since the companies will only experience a delay in the claim of the CA (but not a denial), it is doubtful whether this will disincentivise investors from executing their FIDs on mining projects.

Other Secondary Provisions that May Impact the Mining Operators

• Non-Oil Exports to Become Zero-Rated for Value Added Tax (VAT) Purpose

Under the extant VAT law, non-oil exports are categorised as VAT-exempt. However, the NTA has now classified "exported goods excluding oil and gas" as "zero-rated". In Nigeria, majority of the solid minerals mined are exported. Thus, exporters of solid minerals would now have the ability to recover any input VAT incurred on their mining inputs (taxable supplies), including on services and fixed assets, from the output VAT charged (at 0%) on their exports, by way of seeking refund from the NRS, rather than expensing same through the profit or loss account, as it is currently done.

Based on the provision of Section 56(3) of the NTAA, where a valid VAT refund request is received from a taxable person, the NRS shall not later than 30 days of the receipt of that request, refund the tax to the taxable person, or the amount shall be eligible for set-off against any tax liability of the taxpayer. Consequently, VAT refund may not require a refund tax "audit" before the NRS effects the refund through either of the mechanisms stated above.

This amendment will no doubt offer great relief to solid minerals' exporters, as the law does not provide any complex mechanism for processing the refund, other than making the claim to the NRS in the prescribed form, and being refunded by the latter. Hopefully, the NRS would not create any administrative bottlenecks to impede this provision of the tax law and discourage tax-payers with valid VAT refund, to apply for the claim.

• Introduction of the Economic Development Tax Incentive (EDTI)

The repeal of the Industrial Development (Income Tax Relief) Act, 2004 (IDITRA) by the NTA is a rude shock to operators in the mining space who have enjoyed or are enjoying PSI under that law. However, in its stead, the EDTI has been introduced for certain industries classified as "priority sectors", subject to fulfilling the prescribed conditions.

It is instructive to note that the NTA retains "Mining and Quarrying" as a priority sector for EDTI purpose. Further, the incentive has now been extended to cover "mining of lithium and rare earth minerals", in addition to all the minerals currently covered under the PSI regime⁴. Extending the incentive to other key minerals is noteworthy and demonstrates the FG's readiness to develop the mining sector as part of its economic diversification agenda.

While EDTI is similar to the PSI as both offer some tax relief for specified periods, some notable differences exist. For instance, under the NTA, the EDTI period for eligible companies starts from the company's production day and lasts for five (5) years in the first instance, and could be extended for an additional period of 5 years, provided that 100% of profits are reinvested in product expansion. In contrast, PSI is only granted for three (3) years in the first instance, with an option of extension for additional two (2) years without the "reinvestment of profits in product expansion" condition attached to it.

Under the EDTI scheme, economic development tax credits (EDTC) equivalent to 5% per annum of the value of the qualifying capital expenditure is granted to qualifying companies, which can be used to offset the income tax payable on the profits of a priority product or service, for a period of five (5) years. The EDTC cannot be used to offset the minimum effective tax⁵ introduced under the NTA. Any unused tax credits may be carried forward for up to five years beyond the priority period, after which they will expire. The NTA also prescribes that "any company granted EDTC, will not benefit from a similar tax incentive under the NTA or under any other law".

The NTA provides clear eligibility criteria as well as application guidelines which must be followed strictly to qualify for the EDTI.

• Profits/ Income Exempted

The NTA deletes the exemption granted to companies who derive export proceeds, as outlined in Section 23(1)(q) of the soon to be erstwhile CITA. Specifically, this section exempts "the profits of any Nigerian company (other than companies engaged in the Upstream, Midstream and Downstream petroleum operations) in respect of goods exported from Nigeria, if the proceeds of such exports are used for the purchase of raw materials, plant equipment and spare parts". As noted earlier, most mining companies export their minerals for further processing and or beneficiation. Thus, the deletion of the above provision in the NTA limits the value that miners can enjoy from the exportation of solid minerals.

Nevertheless, section 163(1)(v) of the NTA stipulates a similar provision which exempts export proceeds from income tax on the condition that the proceeds have been repatriated through official channels. While it can be argued that this section offers a similar (or even better) incentive as that of the former, it may have a different impact on mining business given that most mining plant and equipment are imported. Thus, under the NTA regime, export proceeds must first be repatriated into the country before being used for any other offshore purposes like importing equipment. This additional requirement of repatriation of proceeds before utilization may create an unnecessary administrative burden, especially as the Nigerian foreign exchange rules are sometimes fluid and may involve strict guidelines on repatriation timelines and restricted use of such proceeds.

Apart from the above, the exemptions granted in the Third Schedule to the CITA on reduced Withholding Tax (WHT) on interest payable on foreign loans based on specific terms and graduated scale, i.e., repayment and grace periods of the loan agreement and graduated duration for repayment, have been expunged in the NTA. Under the Third Schedule to the CITA, WHT on interest payable on foreign loans is exempted up to a maximum of 70% (subject to meeting certain conditions).

Mining business is capital intensive. Hence, operators typically depend on such foreign loans with attractive fiscal terms to finance their mining operations. Consequently, the non-inclusion of the limited tax break on interest payable to foreign lenders may potentially reduce the attractiveness of Nigeria as a tax-efficient destination for debt capital in the mining space.

• Effective Tax Rate / Minimum Tax

The NTA deletes the minimum tax provisions stipulated under the CITA but introduces an Effective Tax Rate (ETR) regime of 15% of the net income of a company, where the company is either part of a multinational enterprise (MNE) group with aggregate group turnover of €750million and above, or where the company has an aggregate turnover of N50 billion and above in the relevant financial year. The ETR is payable in any YOA where the ETR of an eligible company is less than 15%. Such company will be required to recompute and pay a top up tax to equate 15%.

The NTA defines net income as the profits before tax as reported in the audited financial statements (AFS), less franked investment income and unrealised gains and losses for the year. MNE group is defined as any group that includes two or more enterprises, the tax residence for which is in different jurisdictions or includes an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction.

This new requirement in the Nigeria tax space is long expected, given that other jurisdictions (particularly, countries who are members of the OECD) have since incorporated ETR provisions in their tax legislation. It is simply adapting the OECD BEPS Pillar 2 requirement in the country's tax legislation, to ensure that companies pay a fair and reasonable tax on the income that they generate from their economic activities in the country. Clearly, some, if not most mining companies, may be impacted by this amendment, given that they are either members of an MNE or they would exceed the turnover threshold of ₦50billion. It is therefore important for companies who satisfy these criteria to consider this provision while drawing up their investment models to avoid unpleasant surprises.

Conclusion

The tax reforms present both challenges and opportunities for the Sector. While some of the changes may encourage sustainable practices and support local industries, the overall impact of the changes will depend on how effectively they are implemented and enforced. Nevertheless, several areas (especially the increased royalty rates) may warrant further consideration by the FG to ensure that the reforms achieve their intended outcomes without stifling growth in the Sector. It is crucial for the FG to address these key concerns and work closely with stakeholders in the mining sector to create a balanced and effective framework that fosters growth, sustainability and investment.

The FG also needs to revisit the entire fiscal framework for the taxation of mining companies in Nigeria. While there has been a significant harmonization of the fiscal legislations and regulations, the revision of the NMMA is also overdue, as some of its provisions may no longer align with current realities and global best practices.

The authors have only considered the key changes that may impact the Sector in this article. Thus, mining companies, operators and / or investors are enjoined to, as a matter of urgency, review their entire business models vis-à-vis the provisions of the tax reform Acts, with their tax consultants, to better quantify the overall tax implications for their business.

Footnotes

1 IMF: At 9.4% in 2023, Nigeria's tax revenue to GDP ratio among lowest in the world | TheCable

2 2025 Gold Export Regulations in Africa: All you need to know

3 The NRS will replace the Federal Inland Revenue Service (FIRS) when the NRSEA becomes effective.

4 Coal, Gold, Limestone, Lead-Zinc, Bitumen, Iron Ore, barite, bitumen and bentonite

5 The concept of "Effective Tax" is discussed in (iv) below.

The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.