By Chinedu Okafor, African Business Correspondent
The Federal Government of Nigeria is projecting to raise approximately N1.9 trillion from the newly introduced development levy in 2026, marking its debut in the national budget following the sweeping tax reforms of 2025.
According to figures contained in the 2026 Budget Call Circular, expected collections from the levy stand at N1.899 trillion for 2026, with projections rising to N2.41 trillion in 2027 and N3.13 trillion in 2028. This positions the levy as one of the fastest-growing non-oil revenue streams over the medium term.
What the Levy Entails
The levy, set at four per cent of companies’ assessable profits, was established under the Nigeria Tax Act 2025, signed into law on June 26, 2025. It takes effect from January 1, 2026. Assessable profit refers to taxable profit before deductions for capital allowances and loss relief.
Small companies and non-resident entities remain exempt, in line with existing thresholds under the Companies Income Tax and Capital Gains Tax framework.
Consolidation of Multiple Levies
The development levy replaces several overlapping charges, including:
- The Tertiary Education Tax
- The NITDA Information Technology Levy
- The NASENI Levy
- The Police Trust Fund Levy
Previously, these levies collectively exceeded four per cent of company profits. Analysts at PwC note that the consolidation simplifies compliance, reduces unpredictability, and eliminates the burden of multiple agency-driven charges.
Spending Plans
Budget documents show that in 2026, N120.75 billion will be allocated to recurrent expenditure from the levy, while N1.80 trillion will fund capital projects. The capital allocation is projected to grow to N2.29 trillion in 2027 and N2.98 trillion in 2028, mirroring the expected rise in collections.
Revenue from the levy will be distributed among seven key beneficiaries:
- 50% – Tertiary Education Trust Fund (TETFund)
- 15% – Nigerian Education Loan Fund
- 8% each – NITDA and NASENI
- 10% – Defence and Security Infrastructure Fund
- 5% – National Cybersecurity Fund
- 4% – National Board for Technological Incubation
Each agency must submit its income and expenditure plans to the National Assembly for appropriation.
Enforcement and Administration
The newly established Nigeria Revenue Service (NRS) will oversee enforcement, replacing the Federal Inland Revenue Service (FIRS) under the 2025 reforms. Authorities say tighter digital systems and coordinated audits will ensure compliance.
Addressing Concerns
Tax authorities have clarified that the levy is not an additional burden but a streamlined consolidation of existing charges. They argue that the reform strengthens Nigeria’s competitiveness, attracts investment, and enhances fiscal stability.
Despite initial concerns from businesses and citizens, officials maintain that the levy exempts small firms and non-resident companies, offering protection to those most vulnerable to economic shocks.
Over the three-year period from 2026 to 2028, the government expects to mobilise N7.07 trillion from the levy, underscoring its importance in Nigeria’s evolving fiscal landscape.