The Federal Government is projecting to earn about N1.9tn from the newly introduced development levy in 2026, the first year it will show up in the federal budget after Nigeria’s sweeping 2025 tax reforms.
Figures in the 2026 Budget Call Circular seen by Sunday PUNCH on Friday put expected collections from the development levy at N1.899tn for 2026.
The projection shows collections are to rise to N2.41tn in 2027 and N3.13tn in 2028, making it one of the fastest-growing non-oil revenue lines over the medium term.
The levy is imposed at four per cent of companies’ assessable profits under the Nigeria Tax Act 2025, which was signed alongside three other tax reform laws on June 26, 2025, and is scheduled to take effect from January 1, 2026.
Assessable profit is defined as taxable profit before capital allowances and loss relief are deducted.
Under the law, the levy applies to companies chargeable to tax in Nigeria, excluding small companies and non-resident entities, which are exempted from Companies Income Tax, Capital Gains Tax, and the development levy once they meet the small-company thresholds.
A part of Section 59 of the Nigeria Tax Act 2025 reads, “(1) 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. (2) The Service shall collect the levy and pay it into a special account created for that purpose.”
The development levy replaces the Tertiary Education Tax, the NITDA information technology levy, the NASENI levy, and the Police Trust Fund levy, all of which were previously charged separately on overlapping profit bases.
The National Information Technology Development Agency Act 2007 mandates specified companies to contribute one per cent of their profit before tax to the agency.
Section 4 of the Nigeria Police Trust Fund (Establishment) Act 2019 requires companies operating in Nigeria to contribute 0.005 per cent of their profit before tax to the Trust Fund.
The NASENI Act (Cap N3 LFN 2004) stipulates that commercial companies and firms with income or turnover of N100m and above must contribute 0.25 per cent of their profit before tax to the NASENI fund. Combined, these levies amount to over four per cent.
“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,” PwC noted in a recent analysis.
The document further shows how the levy will be spent.
Under the expenditure tables, N120.75bn is budgeted as recurrent spending funded from the development levy in 2026, alongside N1.80tn earmarked for capital projects financed from the same source.
The capital envelope is projected to rise to N2.29tn in 2027 and N2.98tn in 2028, tracking the growth in projected collections.
The tax law indicates that proceeds of the levy are to be split between specific funds and agencies, including the Tertiary Education Trust Fund, the Nigerian Education Loan Fund, the National Information Technology Development Fund, NASENI, the National Cybersecurity Fund, and the National Board for Technological Incubation, as well as a defence and security infrastructure fund.
The law directs that all revenue from the development levy must be shared among seven beneficiaries: 50 per cent to TETFund, 15 per cent to the Nigerian Education Loan Fund, eight per cent each to NITDA and NASENI, four per cent to the National Board for Technological Incubation, 10 per cent to the Defence and Security Infrastructure Fund and five per cent to the National Cybersecurity Fund.
It also specifies that the levy cannot be charged on profits computed for hydrocarbon tax purposes. Each beneficiary agency or fund is required to prepare and submit its income and expenditure to the National Assembly for appropriation.
Over the three-year period from 2026 to 2028, the government expects to mobilise a total of about N7.07tn from the development levy. The Nigeria Revenue Service, which will take over from the Federal Inland Revenue Service under the 2025 establishment Act, is expected to drive enforcement and administration of the levy using tighter digital systems and coordinated audits.
The Federal Inland Revenue Service earlier said that Nigeria’s newly enacted tax laws are designed to strengthen economic competitiveness, attract investments, and improve long-term fiscal stability.
The agency also clarified that the much-debated four per cent development levy on imported goods is not a new or additional tax burden, but a streamlined consolidation of several existing levies.
In recent weeks, the new Nigeria Tax Act and Nigeria Tax Administration Act have sparked widespread debate among citizens and businesses seeking clarity on how the reforms will affect them.
But tax authorities say these concerns stem largely from misinterpretations, insisting the laws are aimed at simplifying compliance, protecting incentives, and improving Nigeria’s investment environment.
According to FIRS in a statement on Wednesday, one of the most misunderstood elements of the new tax framework is the four per cent development levy. The agency explained that the levy replaces a range of fragmented charges — such as the Tertiary Education Tax, NITDA Levy, NASENI Levy, and Police Trust Fund Levy — that businesses previously paid separately.
This consolidation, it said, reduces compliance costs, eliminates unpredictability, and ends the era of multiple agency-driven levies. The law also exempts small businesses and non-resident companies, offering protection to firms most vulnerable to economic shocks.
