Nigeria’s 2025 Tax Reform And Its Impact On MSMEs

By Enam Obiosio

In 2025 Nigeria enacted a comprehensive overhaul of its tax laws – consolidating multiple statutes into the Nigeria Tax Act (NTA) 2025 and associated administration reforms intended to modernize tax administration, broaden the tax base and simplify compliance. This reform package is designed to harmonize tax administration, remove duplicative “nuisance” levies, and align Nigeria with global tax developments (including rules targeting multinationals). (KPMG Assets)

One notable practical feature repeatedly cited across advisory notes is the government’s intention to ease the compliance burden for genuinely small enterprises – including raising thresholds for “small company” classification and exemptions on company income tax for enterprises under a specified annual turnover (widely reported around the N50 million turnover threshold in the market commentary). These measures are deliberately pro-MSME on the surface, intended to incentivize formalization and reduce the regressive burden of compliance on micro and informal firms. (Baker Tilly Nigeria)

At the same time the reforms introduce stricter tax administration and transparency measures – including improved reporting, expanded definitions of taxable activities, and mechanisms to capture revenue from previously informal or opaque channels. Implementation timing and political calibration (including temporary delays or staged implementation of certain elements) have been part of the policy debate. (Reuters)

Why this matters: this legislative package changes the fiscal operating environment MSMEs must navigate. It simultaneously creates opportunities (clearer thresholds, possible CIT exemption for very small firms, simplified rules) and new risks (heightened documentation expectations, stronger administration and potential new compliance costs for those that transition into the formal tax net).

What MSMEs should expect – practical effects on growth, cashflow and formalization

1. A push toward formalization
   Raising the “small company” thresholds and clarifying tax rules reduces the immediate tax bite for many small operators – making formal registration more attractive. Expect a wave of registrations and compliance activity from firms that previously stayed informal to avoid taxes. This is good for long-term access to finance, but it raises short-term administrative pain points (books, bank accounts, corporate governance). (Baker Tilly Nigeria)
2. Cashflow and timing pressures
   Even where a tax is reduced or an exemption exists, compliance carries costs: bookkeeping, filing systems, and possible tax advisory fees. For MSMEs with tight margins, these costs can be material. Moreover, some measures (e.g., broader VAT administration or reallocated VAT sharing formulas) could affect working capital dynamics for businesses that trade across states. (com)
3. New transparency and reporting expectations
   A modernized tax code often demands better records and more frequent reporting. Firms that cannot produce reliable management accounts will find capital markets and regulated financing harder to access.
4. Sector sensitivity
   The reforms are not neutral across sectors. Export-oriented MSMEs, tech firms, creative industries and agriculture will experience the changes differently – both in compliance specifics and in how attractive they look to investors (tax incentives, duty rules, export allowances etc. vary by sector). (NESG)

The place of Investor Relations (IR) – why IR is now central, not optional

Investor Relations is commonly thought of as the preserve of listed companies and institutional capital. The 2025 tax reforms change that calculus. IR now plays a strategic role across three linked functions:

1. Risk communication and reassurance

Investors care about after-tax returns and predictability. When tax rules change, investor sentiment can swing on perceived policy risk. IR professionals must translate technical fiscal changes into clear impacts on cashflows, margins and growth scenarios. Good IR reduces uncertainty by providing modeled, scenario-based guidance showing pre- and post-tax outcomes and sensitivity to implementation timing.

2. Compliance signalling as an investment advantage

Compliance will be a positive signal in the post-reform market. SMEs that demonstrate clean tax compliance, robust bookkeeping and transparent governance will trade at a credibility premium with investors, crowdfunders and lenders. IR helps issuers convert compliance into a market story – “we are low-tax risk, audited-ready and scalable” – which matters for valuations and access to patient capital.

3. Stakeholder navigation and advocacy

IR acts as the bridge between management, investors and regulators. For MSMEs unfamiliar with tax policy, IR specialists provide the translation layer and help structure stakeholder communications (tax disclosures, materiality statements, cash tax reconciliations). IR can also represent collective MSME interests to policymakers – advocating for implementation grace periods, capacity support and tax administrative simplifications.

Concrete IR actions MSMEs and IR advisers must prioritise now

1. Immediate tax-scenario financial modelling – produce at least three scenarios (baseline, conservative, adverse) showing after-tax margins and cashflow impact for 12–36 months. Use these in investor decks and due diligence packs.
2. Upgrade accounting hygiene – move from ad-hoc books to at least monthly management accounts and bank reconciliations. This builds credibility with tax authorities and investors alike.
3. Embed tax disclosure into investor communication – add a tax policy section to investor decks explaining effective tax rate assumptions, known exposures, and mitigation plans.
4. Develop a short-form ‘tax FAQ’ for investors – explain reclassification thresholds, exemptions, timing and potential state-level impacts in plain language.
5. Design governance checkpoints – appoint a compliance owner, schedule quarterly internal tax reviews, and commit to publish an annual tax compliance statement for larger MSMEs seeking institutional funding.
6. Proactive investor outreach on implementation risk – if a significant portion of revenue may be affected by VAT redistribution or new rules, speak to key investors early to manage expectations and prevent market surprises.

Strategic implications for policy and private sector collaboration

IR practitioners should not be passive translators. We should advocate for:

• Grace periods for small businesses to adopt new reporting standards.
• Capacity building (SMEDAN, states, tax authorities) focusing on bookkeeping and IR fundamentals.
• Transparency tools – e.g., a public registry of MSME tax incentives and a simple online guide for investors comparing pre- and post-reform tax treatment by sector.

Such measures will speed formalization while protecting investor confidence.

IR as a growth-enabler in a reformed tax environment

Nigeria’s 2025 tax reforms are a structural moment. They present a clear path toward formalization, a rebalanced revenue architecture, and a more credible environment for institutional capital – but only if MSMEs meet the new fiscal reality with credible, investor-grade communication. As investor relations practitioners, our job is to make tax reform legible and investable.

We must move beyond compliance as a checklist – to compliance as a strategic messaging tool that improves valuations, reduces perceived risk and attracts long-term capital. StakeBridge IRPR Consulting stands ready to help MSMEs and their investors translate tax changes into credible investment propositions: modeling after-tax scenarios, building disclosure templates, and designing stakeholder engagement programs that make the reforms work for business growth and investor confidence.