Tax Glossary

A tax deduction granted in lieu of accounting depreciation for the cost of qualifying capital assets (e.g. machinery, vehicles, buildings) used for business purposes. It reduces taxable profits for CIT.

Government spending on the acquisition, construction, or improvement of fixed assets such as roads, schools, hospitals, and infrastructure that deliver long-term economic value.

Nigeria's apex monetary authority, responsible for regulating the banking sector, managing the naira, formulating monetary policy, and maintaining price stability.

A tax charged on the profit (capital gain) realised from the sale or disposal of a chargeable asset such as real estate, shares, or business assets.

A tax on the profits of incorporated companies. Under the Nigeria Tax Act 2025, the rate is tiered based on annual turnover — 0% for small companies, 15% for medium companies, and 27.5% for large companies.

A statutory relief granted to individuals to reduce their taxable income. It is computed as the higher of ₦200,000 or 1% of gross income, plus 20% of gross income.

A fiscal sustainability metric comparing a government's total debt stock to its revenue. A high ratio signals that a significant portion of revenue is consumed by debt servicing, limiting fiscal flexibility.

The government agency responsible for managing Nigeria's public debt — including domestic and external borrowing, debt servicing, and maintaining a sustainable debt profile.

A levy on the assessable profits of registered companies in Nigeria, collected for the Tertiary Education Trust Fund (TETFund). Under the 2025 reforms, it is set at 2% of assessable profit.

The body responsible for sharing revenue accruing to the federation account among the federal, state, and local governments in accordance with the constitutionally prescribed formula.

The federal tax authority responsible for administering and collecting federal taxes, including CIT, VAT, PIT for non-residents, and other national taxes.

The government's use of taxation and public spending to influence the economy — managing aggregate demand, economic growth, employment, and inflation.

The total monetary value of all finished goods and services produced within a country's borders in a given period. It is the primary indicator of an economy's size and health.

Nigeria is divided into six geopolitical zones — North Central, North East, North West, South East, South South, and South West — used for political, economic, and statistical analysis.

Revenue generated by a government (federal, state, or local) from its own internal sources, excluding statutory allocations from the federation account. It includes taxes, fees, fines, and earnings from government assets.

The rate at which the general level of prices for goods and services rises over a period, eroding purchasing power. It is commonly measured by the Consumer Price Index (CPI).

A body established to promote uniformity in the application of tax laws across Nigeria's federal and state tax authorities and to resolve disputes between tax authorities.

Actions taken by the Central Bank to manage money supply, interest rates, and credit conditions in order to achieve macroeconomic objectives such as price stability and sustainable growth.

The principal statistical agency of the Federal Government of Nigeria, responsible for collecting, compiling, analysing, and publishing official statistics on the economy and society.

A contributory scheme established by the Federal Government to mobilise funds for the provision of affordable housing. Contributions are deducted from employees' income and are a allowable relief for PIT purposes.

The proposed unified revenue service under the 2025 tax reforms, intended to consolidate federal tax collection functions into a single streamlined agency.

The 2025 legislation that consolidates and modernises Nigeria's tax framework — merging multiple tax laws into a single statute, introducing tiered CIT rates, and reforming VAT and PIT provisions.

A method of collecting personal income tax from employees at source. Employers deduct tax from employees' salaries and remit it to the relevant tax authority on their behalf.

Mandatory contributions under the Pension Reform Act, deducted from an employee's salary (minimum 8% by employee, 10% by employer). These contributions are deductible when computing taxable income for PIT.

A tax holiday granted to qualifying companies in pioneer (priority) industries, exempting them from CIT for an initial period of three years, which may be extended by one or two years.

A tax levied on the income of individuals, including employment income, business profits, rent, dividends, and other sources of personal earnings.

Government spending on recurring operational costs such as salaries, overheads, debt servicing, and maintenance, as distinct from capital investment in infrastructure and assets.

Funds distributed to federal, state, and local governments from the federation account, derived from oil revenue, company income tax, VAT, and other federally collected revenues.

Refers to the tier of government below the federal level — Nigeria's 36 state governments and the Federal Capital Territory (FCT), as well as the 774 local government areas.

The total pool of income, assets, transactions, or economic activity upon which a tax is levied. Broadening the tax base means bringing more entities or activities into the tax system.

The degree to which a taxpayer meets their tax obligations — including registration, filing of returns, payment of taxes due, and adherence to all applicable tax laws and regulations.

A metric that compares a country's tax revenue to its GDP, expressed as a percentage. It indicates the government's ability to mobilise revenue relative to the size of the economy.

A unique identification number assigned to every registered taxpayer by the relevant tax authority. It is required for all tax transactions, filings, and correspondence.

A consumption tax levied on the value added to goods and services at each stage of production and distribution. It is ultimately borne by the final consumer.

An advance payment of tax deducted at source from payments such as rent, dividends, interest, royalties, and contract payments. It serves as a credit against the taxpayer's final tax liability.