Nigeria's free trade zone regime has long offered approved enterprises a favourable operating environment designed to spur export-led manufacturing, attract capital, and deepen industrial capacity. The Nigeria Tax Act, 2025 does not dismantle that policy foundation, but it draws a much sharper boundary between goods and services destined for export and those channelled into the domestic market. Section 60 of the Act, read together with its Second Schedule, establishes a transition pathway that culminates in full taxation of domestic sales from 1 January 2028. For zone operators, manufacturers, investors, and tax professionals, that date now functions as a planning deadline.
A free trade zone in Nigeria is a geographically demarcated area that sits outside the customs territory, where certain national rules are either disapplied or applied only partially. According to the Nigeria Export Processing Zones Authority (NEPZA), the regime exists to foster an enabling climate for export manufacturing and allied commercial activity while also promoting employment, foreign exchange earnings, technology transfer, and economic diversification. Historically, the package of incentives has included duty-free imports, tax holidays, and streamlined market access.
Under Section 60, the Second Schedule applies to export processing zone entities. An entity remains fully exempt from tax only if its total sales derive entirely from exports — or from inputs into goods or services produced exclusively for export — and provided that no more than 25 per cent of its sales are made to the customs territory in Nigeria. Where domestic sales exceed that 25 per cent threshold in any year of assessment, tax becomes payable on the profits attributable to those domestic transactions.
The more consequential change takes effect from 1 January 2028. From that point, profits of an export processing zone entity will be fully subject to tax in respect of sales into the Nigerian customs territory, irrespective of what share those sales represent. The President holds the power to extend this date by an order published in the Official Gazette, though the extension cannot run beyond ten years from the commencement of the Act.
This framework rests on a straightforward distinction. Export activity — meaning goods or services that leave Nigeria, or inputs used solely in goods or services that themselves are exported — continues to enjoy the zone incentive. Domestic sales, by contrast, attract a different tax outcome. The underlying policy judgement is that the Nigerian domestic market should not receive the same level of tax shelter as export-oriented activity.
Before the 2028 deadline, zone operators continue to work within the existing threshold structure. If domestic sales stay beneath the statutory limit, the entity retains tax-free treatment for its qualifying export operations. Once domestic sales cross the 25 per cent mark, however, the profits linked to those sales become taxable under the schedule. After 1 January 2028, even a modest share of local revenue will trigger tax on the associated profits.
Consider a packaged-goods manufacturer located in a free trade zone that exports 80 per cent of output while selling 20 per cent within Nigeria. Under the pre-2028 framework, the business could remain within the incentive if its domestic sales did not breach the threshold. From 2028 onward, that 20 per cent local sales portion becomes taxable regardless. The export side stays incentivised; the domestic side does not.
The law also reinforces broader compliance obligations. Zone entities must continue to meet tax administration requirements covering registration, return filing, and deduction of tax at source. Services provided by persons within the customs territory to a zone entity, or services consumed in the customs territory by a zone entity, remain chargeable to applicable taxes.
For affected businesses, the first step is to measure how much revenue originates from the Nigerian domestic market. An enterprise that sells exclusively to export customers may face limited exposure. One that uses the zone as a manufacturing base while simultaneously building a Nigerian sales channel faces a more complex planning exercise. Pricing models will need revisiting, since a product that appeared viable under a tax-free structure may require recalibration once the local sales arm begins to carry a tax cost. Record-keeping must also be robust enough to cleanly separate export and domestic transactions, supporting compliance with registration, filing, and withholding rules.
Investors likewise need to test whether business cases that lean heavily on Nigerian domestic sales remain viable once those sales become taxable from 2028. Zone location retains its value, particularly for genuinely export-oriented production, but fresh cost forecasts are now essential.
Businesses should address several questions without delay: what proportion of revenue comes from domestic sales; whether internal records can reliably distinguish export from local transactions; whether the current operating model remains efficient after 1 January 2028; what additional tax obligations may arise; and whether operations, pricing, or distribution structures require adjustment before the deadline.
Section 60 does not terminate the free trade zone model. It safeguards the incentive for authentic export activity. What it does is tighten the fiscal treatment of domestic market sales and set a definitive countdown to 1 January 2028. For enterprises within the zones, the prudent response is to map exposure early, segregate export and local revenue streams with precision, and develop a tax strategy aligned with the new framework well before the deadline arrives.