Nigeria’s 2028 deadline might trigger capital flight risk in Free Trade Zones

The Nigeria Tax Act (NTA) 2025 is introducing changes to the nation’s Export Processing Zones (EPZs) and Free Trade Zones (FTZs). For decades, these zones enjoyed blanket exemption from all federal, state, and local taxes; now, that promise has been replaced by a rigid expiration date, threatening billions in foreign investment.

“Effective from January 1, 2028, the profits of an export processing zone entity will be fully subject to tax on its sales to the Nigerian customs territory, regardless of the percentage of such sales,” Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms

The policy shift forces companies in this jurisdiction to either restructure their entire operating model to handle standard Nigerian corporate taxes or initiate capital flight to competing zones in neighboring African nations.

The NTA 2025 effectively changes the core competitive advantage of the FTZ system, the promise of an indefinite tax holiday, by replacing the blanket exemptions with a conditional and targeted incentive regime.

Oyedele defended the move, stressing the need for fairness
“If a free zone entity can sell to the Custom Territory, competing with people who are paying taxes and not paying taxes, that’s the best way to create economic distortion, and that is not the intention,” he said.

The new regime imposes two critical limitations on approved entities; full tax exemption is now strictly conditional on sales being wholly derived from export activities, and sales to Nigeria’s domestic customs territory are strictly limited to a maximum of 25 percent of the entity’s total sales. Exceeding this limit results in the attributable profits being taxed.

This shift replaces broad tax relief (including exemptions from CIT, VAT, and WHT) with precise conditions, anchoring the incentive solely to its underlying policy goal of promoting export-led growth.

“Companies in the zone can continue whatever they are doing till 2028…2-3 years is enough time to move things around. The companies have the option of restructuring or registering within the country, ”

“All exports from the free trade zone will be tax-free, but if you sell into the customs territory, we will look into your activity, and if it falls into the priority sector or any sector you’re in, you may be granted a tax-free period of ten years,” Oyedele said.

For existing investors, the most consequential provision is the sunset clause.