Many multinationals use transfer pricing techniques to avoid tax compliance and shift profits from high-tax to low-tax countries. The new tax reform ensures a stricter transfer pricing policy so that companies don’t underpay the government.
“Multinationals will operate under a more structured and closely supervised TP regime,” Onyinye Afolabi, a transfer pricing expert from a consulting firm in Abuja, said.
Nigeria has already incorporated several BEPS (Base Erosion and Profit Shifting) rules into its local tax framework.
“Developing economies are hit hardest by profit-shifting because they rely heavily on corporate income tax, especially from multinational enterprises,” The OECD explains the urgency.
OECD, in its BEPS report, stated that BEPS practices cost countries between $100 billion and $240 billion annually, the equivalent of 4 percent to 10 percent of global corporate income tax revenue.
Boluwatife Agbato, a Tax and transfer pricing consultant from a multinational firm notes that “the direction of this reform is to widen the tax base and expose MNEs,” aligning Nigeria more closely with global tax transparency standards.
The future of TP in Nigeria will be defined by increased enforcement, greater alignment with global standards (such as the OECD’s Base Erosion and Profit Shifting (BEPS) initiative), and technology-enabled systems.
“FIRS will rely more on real-time data, e-invoicing information, cross-border reporting frameworks, and risk-based audit tools”, Afolabi noted.
Until now, Nigeria’s TP landscape has relied largely on the Transfer Pricing Regulations 2018, along with the FIRS’ internal Decision Review Panel. The system focused primarily on ensuring compliance with existing obligations, which include. maintaining TP documentation, registering significant related-party transactions, and filing annual TP declaration and disclosure forms. These rules applied to both resident companies and non-resident companies with taxable presence in Nigeria.
However, the newly introduced Nigeria Tax Act (NTA) 2025 retains these requirements while making the process significantly stricter. It expands Significant Economic Presence (SEP) thresholds, introduces provisions for a global minimum corporate tax rate, and extends the tax net to cover a wider range of digital and multinational business models. This represents a shift from traditional TP enforcement toward a more comprehensive framework that reduces room for profit shifting.
The key requirements under Nigeria’s updated transfer pricing framework still revolve around the arm’s length principle and robust documentation. The arm’s length principle mandates that all transactions between related companies, whether local or cross-border, must be priced as though the parties were independent entities negotiating on open market terms.
To support this, companies are required to maintain comprehensive transfer pricing documentation, including: Annual TP returns, transfer pricing disclosures, and TP declarations outlining the nature, value, and justification for controlled transactions.
Nigeria has also incorporated aspects of global CFC (Controlled Foreign Company) rules, which aim to curb profit shifting to low-tax jurisdictions by requiring companies to disclose and justify income earned through foreign subsidiaries
A lot of Companies across Nigeria have already begun preparing for the change, attending industry seminars hosted by tax advisory firms and reassessing their tax positions. “Many have started building tax-planning strategies around the reform, seeking clarity on how the new rules will affect their operations and training their teams on what the new normal will require”, Agbato said.
