Incentives and further tax changes introduced in Nigeria and Tanzania

Welcome back to the Vault.

This week, we present highlights of policy developments in Nigeria and Tanzania:

• Nigeria: New withholding tax regulations bring succor to manufacturers and small businesses
• Nigeria: Zero Tax incentive for pharmaceutical production
• Tanzania: Introduction of tax on digital content creators and digital platform owners in Tanzania
• Tanzania’s Budget 2024/25 Highlights (Data Vault)

In other news: Nigeria’s National Construction and Household Support Program kicks off, as National Gold Purchase programme marks progress. Incumbent President Ghazouani wins re-election in Mauritania, while ECOWAS security force attracts $2.6 billion annual bill.

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Nigeria

Government eases tax burden on manufacturers and small businesses

This week, as part of the current administration’s fiscal reform drive, the Nigerian government introduced business-friendly changes to the nation’s withholding tax regime via approval of new Deduction of Tax at Source (Withholding) Regulations, 2024.

The regulations aim to address the challenges previously faced by businesses in relation to compliance, eligible transactions, applicable rates, and remittance timeframe. Changes introduced by the Regulations include:

• Exemption of small businesses from withholding tax compliance
• Reduced rates for businesses with low margins
• Exemptions for manufacturers and producers (including farmers)
• Measures to curb tax evasion and minimize tax avoidance
• Ease of obtaining credit and utilization of tax deducted at source
• Changes to reflect emerging issues and adopt global best practices
• Clarity on the timing of deduction and definition of key terms

The policy is expected to lower costs for small businesses, boost agricultural and manufacturing operations, enhance tax compliance, and foster a more equitable and business-friendly tax environment in Nigeria.

Head of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has confirmed that further tax changes are expected to take effect at the start of 2025 and that about ten tax reform bills have been delivered to the country’s legislators for consideration.

Zero Tax Incentive for Pharmaceutical Production in Nigeria

President Bola Tinubu has signed an executive order aimed at increasing local production of healthcare products, reducing production costs and enhancing the competitiveness of local manufacturers. This move intends to further his efforts in unlocking Nigeria’s healthcare value chain – an initiative launched in October 2023.

Announced by Prof Ali Muhammad Pate, the coordinating minister of health and social welfare, the executive order introduces zero tariffs, excise duty, and VAT on specified machinery, equipment, and raw materials. Items exempted from taxes under the Order include:

• Active Pharmaceutical Ingredients (APIs) and Excipients
• Other essential raw materials for manufacturing crucial health products like drugs, syringes, needles, Long-lasting Insecticidal Nets (LLINs), and Rapid Diagnostic Kits.

Provisions are also made for market-shaping mechanisms like framework contracts and volume guarantees aimed at supporting local manufacturers. The government also opened the door to strategic plans for market-based incentives to promote medical industrialization and gradually lower medical product costs through import substitution.

Tanzania

Tanzania’s Finance Act 2024 introduces tax on digital content creators and digital platform owners

Like Kenya, Tanzania intends to increase its tax base in the fiscal year 2024/25 by introducing new taxes, levies and duties, as well as amending existing laws governing the collection and management of public revenue through the Finance Act 2024, which was signed by the President on 30th June.

The Act makes significant amendments to various tax and non-tax laws aimed at boosting economic growth in strategic sectors such as industries, agriculture, livestock, fisheries, energy, transport infrastructure, education, and health. Key provisions include:

• Introduction of a new 5% withholding tax on payments made to resident digital content creators.
• Introduction of a 3% withholding tax on digital platform owners on transactions related to transfer of digital assets.
• Expansion of the scope of registration tax to cover electric motor vehicles.
• 2% final withholding tax on payments for the purchase of agricultural, livestock, forestry, or fishery products on supplies made by distributors/agents and not producers.
• Permission for Contingency Fund to be used for emergency road repairs and the introduction of new sources of funds, including an infrastructure levy.
• Introduction of a 10% excise duty on betting, gaming, and National Lottery stakes, which will be remitted to the Universal Health Insurance Fund to cover health insurance for indigents and special groups.
• Introduction of a 10% levy on crude sunflower oil, cake, and seeds exports to ensure an affordable local supply and protect local producers.

On the flip side, excise duty on bottled water has been reduced from TZS 63.80 per liter to TZS 56 per liter, royalty rate on the supply of gold to the Bank of Tanzania (BoT) reduced from 6% to 4%, while the supply of aircraft, aircraft engines, aircraft parts, and aircraft maintenance by local manufacturers or assemblers of aircraft, are now exempted from VAT. Banking laws were also amended to facilitate interest-free lending services and enhance financial opportunities for banks that do not charge interest.

Data Vault: Tanzania Budget 2024/25 Highlights

The Tanzanian national budget for the fiscal year 2024/25 amounts to TZS 49.35 trillion (approximately USD 18.94 billion), marking an 11.2% increase from the previous year of TZS 44.4 trillion (USD 18.4 billion). The budget prioritizes inclusive economic growth through strategic investments in completing flagship projects, strengthening production sectors, enhancing human capital development, increasing ICT utilization, and improving the business and investment climate.

Key expenditures include wages, debt servicing, local government elections, preparations for the 2025 general elections, and hosting the 2027 AFCON. The government plans to raise TZS 34.61 trillion (70.1% of the total budget and 15.7% of GDP) through domestic revenues including revenue from local government authorities, expects TZS 5.13 trillion from foreign loans or grants and general government support, and intends to borrow TZS 6.62 trillion domestically and TZS 2.99 trillion non-concessional borrowings.

Other News

We’re also tracking some events in the news.

Nigeria | Tinubu approves rollout of National Construction and Household Support Program

President Bola Tinubu has approved the rollout of the National Construction and Household Support Program across Nigeria’s six geo-political zones to enhance agricultural productivity, strengthen economic growth in agriculture, manufacturing, and construction sectors, and deliver immediate economic relief to Nigerians, with priority on infrastructure like the Sokoto-Badagry Highway and other key road and railway projects.

Nigeria | Nigeria makes progress with the National Gold Purchase programme

Nigeria’s Minister of Solid Minerals Development, Dele Alake, announced the country’s first commercial gold transaction under the National Gold Purchase Programme (NGPP). This centralized scheme, complemented by a decentralized network of artisanal miners and cooperatives, aims to boost Nigeria’s gold reserves and strengthen the economy. According to the Minister, the first commercial transaction led to an increase in foreign reserves by over US$5 million. The refined gold, meeting London Bullion Market standards, will be sold to the Central Bank with locally mined gold expected to inject approximately NGN 6 billion into the rural economy.

Mauritania | Mauritania’s President Ghazouani wins re-election

President Mohamed Ould Ghazouani of Mauritania has won re-election for a second term after securing 56.1% of the votes in the first round of the presidential poll. His main opponent, anti-slavery activist Biram Dah Abeid, received 22.1% of the votes and has contested the results, alleging electoral fraud. The country’s independent electoral commission confirmed the results with a voter turnout of 55%. Despite accusations of electoral fraud from Abeid and some opposition candidates, Ghazouani, a former army chief, maintains popularity among Mauritanians who see him as a stabilizing figure.

West Africa | ECOWAS needs up to $2.6 billion a year for security force

The West African region, plagued by political crises and military coups since 2020, is reassessing defence agreements and considering new security strategies amid rising threats from Islamist militants. Last week, the defence and finance ministers of ECOWAS countries met in Abuja to determine the force’s size and funding. The bloc is considering establishing a 5,000-strong security force to combat terrorism, requiring up to $2.6 billion annually.

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