Nigeria Projects N1.9 Trillion Revenue from New Development Levy in 2026
The Nigerian Federal Government is anticipating a significant revenue stream from a newly introduced development levy, with projections indicating earnings of approximately N1.9 trillion in 2026. This figure marks the levy’s debut in the federal budget following Nigeria’s comprehensive tax reforms enacted in 2025.
The projected collections from this development levy are detailed in the 2026 Budget Call Circular, which outlines an expected N1.899 trillion for the year 2026. This revenue stream is forecast to experience substantial growth, climbing to N2.41 trillion in 2027 and further to N3.13 trillion in 2028. Such an upward trajectory positions the development levy as one of the fastest-growing non-oil revenue sources over the medium term.
Understanding the Development Levy
The development levy is set at a rate of four percent of companies’ assessable profits. This is stipulated under the Nigeria Tax Act 2025, one of four tax reform laws signed into effect on June 26, 2025, and scheduled to become operational from January 1, 2026.
What is Assessable Profit?
Assessable profit is defined within the new legislation as the taxable profit determined before the deduction of capital allowances and loss relief.
Scope of Application:
The levy is applicable to companies that are liable to pay tax in Nigeria. However, specific exemptions are in place for small companies and non-resident entities. These entities are excused from paying Companies Income Tax, Capital Gains Tax, and the development levy, provided they meet the established thresholds for small companies.
A key section of the Nigeria Tax Act 2025 outlines the imposition and collection of the levy:
- “A development levy of four per cent is imposed on the assessable profits of all companies chargeable to tax under Chapters Two and Three of this Act, other than small companies and non-resident companies.”
- “The Service shall collect the levy and pay it into a special account created for that purpose.”
Consolidation of Existing Levies
A significant aspect of the new development levy is its role in consolidating several previously separate charges. It effectively replaces the Tertiary Education Tax, the NITDA information technology levy, the NASENI levy, and the Police Trust Fund levy. These previous levies were often charged independently on overlapping profit bases, leading to potential complexities and increased compliance burdens for businesses.
To illustrate the previous landscape:
- National Information Technology Development Agency (NITDA) Act 2007: Mandated specified companies to contribute one percent of their profit before tax to the agency.
- Nigeria Police Trust Fund (Establishment) Act 2019: Required companies operating in Nigeria to contribute 0.005 percent of their profit before tax to the Trust Fund.
- NASENI Act (Cap N3 LFN 2004): Stipulated that commercial companies and firms with an income or turnover of N100 million and above must contribute 0.25 percent of their profit before tax to the NASENI fund.
Cumulatively, these individual levies could amount to over four percent, making the new consolidated levy a streamlining measure. PwC, in a recent analysis, noted that “The Development Levy consolidates the Tertiary Education Tax, the Information Technology Levy, the National Agency for Science and Engineering Infrastructure Levy, and the Police Trust Fund Levy.”
Allocation of Levy Proceeds
The collected revenue from the development levy is earmarked for specific allocations, as detailed in the expenditure tables.
- 2026 Allocations:
- N120.75 billion is budgeted for recurrent spending.
- N1.80 trillion is allocated for capital projects.
- Projected Capital Spending Growth: The capital expenditure envelope is projected to increase to N2.29 trillion in 2027 and N2.98 trillion in 2028, mirroring the anticipated growth in levy collections.
The tax law specifies how the proceeds will be distributed among various funds and agencies:
- Distribution Framework:
- 50% to the Tertiary Education Trust Fund (TETFund).
- 15% to the Nigerian Education Loan Fund.
- 8% each to NITDA and NASENI.
- 4% to the National Board for Technological Incubation.
- 10% to the Defence and Security Infrastructure Fund.
- 5% to the National Cybersecurity Fund.
It is important to note that the levy is not to be charged on profits computed for hydrocarbon tax purposes. Furthermore, each beneficiary agency or fund is mandated to prepare and submit its income and expenditure reports to the National Assembly for appropriation.
Revenue Mobilisation and Enforcement
Over the three-year period from 2026 to 2028, the government anticipates mobilizing a total of approximately N7.07 trillion from the development levy. The enforcement and administration of this levy will be spearheaded by the Nigeria Revenue Service, which will succeed the Federal Inland Revenue Service under the 2025 establishment Act. This new service is expected to leverage enhanced digital systems and coordinated audit processes to ensure effective collection.
Addressing Concerns and Clarifying Reforms
The recently enacted tax laws, including the Nigeria Tax Act and the Nigeria Tax Administration Act, have generated considerable discussion and some apprehension among citizens and businesses seeking clarity on their implications.
Tax authorities have sought to allay these concerns, asserting that they stem largely from misinterpretations. The core objective of these reforms, they state, is to foster economic competitiveness, attract investment, and bolster long-term fiscal stability. The laws are designed to simplify tax compliance, preserve existing incentives, and ultimately improve Nigeria’s investment climate.
Regarding the much-discussed four percent development levy, tax officials have clarified that it is not an additional tax burden but rather a consolidation of existing levies. This streamlining aims to reduce compliance costs for businesses, eliminate the unpredictability associated with multiple, separate charges, and end the practice of dealing with numerous agency-specific levies. The exemption for small businesses and non-resident companies is highlighted as a protective measure for firms that may be more susceptible to economic fluctuations.
