Tax experts that participated in the webinar on tax reforms organised by the Impact Investors Foundation (IIF) have tipped the ongoing tax initiatives to enhance inclusive growth and sustainable development in Africa’s most populous nation.

The discussants at the webinar included Etemore Glover, CEO, IIF Nigeria; Prof Taiwo Oyedele, Chairman, the Presidential Committee on Fiscal Policies and Tax Reforms who delivered the keynote address; Martins Arogie, partner at KPMG and head of ESG tax for KPMG in Africa; Alice Dada, Country Technical Lead Nigeria for the RISE Fund; Nana Abu, Senior Manager at KPMG West Africa and the moderator for the panel session, as well as Chinyerugo Ugoji, and Dipo Okuribido, a Senior Vice President and General Counsel at Vero.

Welcoming participants to the webinar, Glover said the reforms in Nigeria’s tax laws would position the country as a hub for impact-driven investments, adding that the reforms would serve as a catalyst for inclusive growth and sustainable development.

While delivering his keynote address, Prof Taiwo Oyedele assured Nigerians, especially the business community, that the recent tax reforms aim to promote business, address long-standing issues in investments such as taxing capital and distortionary incentives. He said efforts are being made to harmonise taxes and levies, reduce corporate tax rates and introduce a net basis for capital gains tax which implies that losses are not taxed.

Oyedele enjoined Nigerians to approach the reforms with open minds adding that Nigeria is ready for business and be willing to provide feedback on how these reforms affect their businesses. He assured the Nigerian businesses that their concerns will be addressed through regulations and guidelines assuring that there will be future amendments if the current laws do not align with the objectives of promoting investments and growth.

Arogie discussed how new tax reforms, particularly the Economic Development Incentive, are designed to stimulate impact-driven investment in high-impact sectors like renewable energy, healthcare, education, and agriculture, noting that this incentive provides tax credits for investments in specific high-growth areas, and tax exemptions are available for MSMEs, which are significant employers of labour.

Of interest to Chinyerugo Ugoji were the legal implications of the new tax laws for structuring impact investment vehicles and funds. She noted that several incentives are not explicitly impact-focused but targeting sectors with high SDG potential. She highlighted that the Economic Development Incentive offers a 5 percent tax credit on qualifying capital expenditure, and significant tax deductions for R&D expenses.

Chinyerugo advised local fund managers to consider establishing local funds that attract pension funds and blend capital with concessionary capital from government, Development Finance Institutions (DFIs), or philanthropic sources to de-risk structures for commercial investors.

Dipo Okuribido provided a contrasting perspective on the new tax regime’s effect on fund structuring, especially for blended finance models. He was of the opinion that concerns regarding significant changes for non-resident companies due to the “place of management and control” concept, could subject entire management fees of offshore fund managers to tax in Nigeria, prompting a re-evaluation of standard operating models.

He expressed concerns about strict rules on interest deductibility for shareholder loans, as blended finance vehicles often rely on a combination of equity and concessional debt, which could make such structures more expensive and limit innovation.

He frowned at the 200 percent increase in capital gains tax, arguing it is problematic for fund managers whose default business involves exits, and highlighted the additional concern of capital gains tax being applied to dollar-denominated investments that show a naira gain but a dollar loss due to exchange rate depreciation.

Discussants urged impact investors to tell their story by showcasing the significant tax revenue contributions of their investments, and to play a more active role in policy dialogue despite potential concerns.