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.
