A. Introduction

The 2020 fiscal year started with great hope, as the government had capped oil price at $57 per barrel with an estimated total expenditure of ₦10.59 trillion for the year 1 . The year also witnessed the passage of the annual Budget alongside the Finance Act, 2019, which introduced sweeping changes to seven tax legislation geared towards improving small and medium scale businesses in Nigeria, and generating more tax revenue for government amongst others. 2

However, following the outbreak of the COVID-19 Pandemic in Nigeria and the global fall in oil prices, the government revised the Budget to cater to its increasing expenditure and dwindling revenue. The amended 2020 Budget was based on a benchmark oil price of $28 per barrel while the estimated expenditure was adjusted upwards to ₦10.81 trillion. 3 The government also introduced various measures to cushion the effect of the Pandemic on businesses as well as the economy. Some of these measures include conditional cash transfer across the 36 states, distribution of palliatives to citizens, extension of time for filing Companies Income Tax (CIT), Value Added Tax (VAT) and Withholding Tax (WHT) returns, exclusion of more food items, baby products and other items from VAT, amongst others.

The Government pursued its revised Budget vigorously, as this was evidenced by the issuance of the Significant Economic Presence (SEP) Order and the VAT Modification Order by the Minister of Finance, amendment of the Voluntary Offshore Assets Regularization Scheme (VOARS) Order, and publication of various information circulars aimed at providing implementation guidance to taxpayers and shoring up tax revenue for government.

Despite the challenges associated with the COVID-19 Pandemic, the government plans to set the country on a path of economic recovery in the year 2021. This document seeks to review the key tax and fiscal highlights of 2020, and comment on potential developments in the Nigerian tax and fiscal space in 2021.

B. Key Tax and Revenue Highlights in 2020

1. Tax Administration

For the most part of 2020, the Federal Inland Revenue Service (FIRS or the Service) and state revenue authorities across the country rolled out various measures to cushion the effects of the COVID-19 Pandemic on businesses. For instance, the FIRS extended the timeline for filing CIT, WHT and VAT returns. The FIRS also waived the imposition of interests and penalties for taxpayers that paid their outstanding taxes before 31st December 2020, and introduced a number of initiatives for submitting tax returns electronically. In the same vein, several state tax authorities extended the deadline for filing of Personal Income Tax returns and introduced a number of incentives and similar e-filing procedures for taxpayers.

In addition, the government turned its focus to revenue generating alternatives like agriculture and indirect taxes such as VAT (using the increased VAT rate of 7.5%) as well as stamp duties given the fall in oil prices and the reduction of revenue from income tax.

In the full year 2020, the FIRS generated ₦4.95 trillion, which represented 98% of its revenue target for the year. 4

2. Tax Legislation and Policy

  • Legislation and Policy " One major highlight of 2020 was the Presidential assent to the Finance Act, 2019 (FA 2019 or the Act) on 13th January 2020. The Act made several changes to seven tax legislation including the CIT Act, Personal Income Tax (PIT) Act, VAT Act and Petroleum Profits Tax Act. Notable amendments introduced by the FA 2019 include the increase of VAT rate from 5% to 7.5%, categorisation of companies into small, medium and large companies and the exemption of small companies from paying income tax and charging VAT. In addition, the Act introduced the SEP concept for the taxation of the digital economy. The Act also empowered the Minister of Finance to determine what constitutes SEP.
  • Pursuant to the powers granted under the Finance Act, 2019, the Minister of Finance issued the Companies Income Tax (Significant Economic Presence) Order, 2020 (SEP Order). The SEP Order, which has an effective date of 3rd February, 2020 imposes CIT on non-resident companies that provide digital services and derive at least ₦25 million from Nigeria. The SEP Order also makes provisions for the taxability of non-resident companies that provide professional, technical, consultancy and management services to Nigerian residents.
  • "Companies should begin to analyse the provisions of the Act and its possible impact on their business and tax obligations, going forward. Companies may also want to identify the relevant incentives introduced in the Act, and how they can take advantage of such incentives and reliefs."

  • The Minister of Finance also issued the VAT Modification Order 2020, (the Order). Similar to the SEP Order, the Order has an effective date of 3rd February, 2020. The Order modifies and expands the list of items exempted from VAT, and provides interpretation to a number of items in the Act, which hitherto formed the basis of contention between tax authorities and taxpayers.
  • On 11th November, 2020, the Federal Government approved the ratification of the Agreement Establishing the African Continental Free Trade Area. The Agreement seeks to create a single market for goods and services, and boost intra- African trade by eliminating tariffs and facilitating the free movement of goods, services and investment within the African Continent.
  • In September 2020, President Muhammadu Buhari presented the Petroleum Industry Bill (PIB) 2020 (the Bill) to the 9th National Assembly for consideration and passage. The Bill, which seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host Communities is currently before the two houses of the National Assembly, and needs to be passed by both houses, and assented to by the President before it becomes law.
  • The FIRS issued a number of public notices and information circulars with respect to stamp duties compliance. The FIRS through the circulars and public notices stated that agreements and transactions consummated over online platforms such as email, WhatsApp, Instant Messaging (IM) or any other internet based messaging service, website or cloud based platforms are dutiable instruments and should be disclosed by the contracting parties for the purposes of Stamp Duties.


1. Office of the Honourable Minister of Finance, Budget & National Planning: Public Presentation of 2020 FGN Approved Budget https://www.Budgetoffice.gov.ng/index.php/highlights-breakdown-of-the-2020-approved-Budget?task=document.viewdoc&id=736

2. Andersen Tax Alert: https://andersentax.ng/president-buhari-signs-the-finance-bill-2019-into-law/

3. 2021 Budget Speech: Budget of Economic Recovery and Resilience Delivered by: His Excellency, President Muhammadu Buhari, President, Federal Republic of Nigeria at the Joint Session of the National Assembly, Abuja Thursday, 8th October 2020

4. Business Day, FIRS meets 98% of its revenue target in 2020 https://businessday.ng/news/article/firs-meets-98-revenue-target-in-2020-generates-n4-9trn/ last accessed 28 January 2021

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Originally Published by Andersen Tax LP , February 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.