FG eyes N1.9tn from new 2026 development levy
FG Projects N1.9tn Revenue from New Development Levy in 2026 Budget
The Federal Government has projected that it will generate about N1.9tn from the newly introduced development levy in 2026, marking the first year the levy will be reflected in Nigeria’s federal budget following the sweeping 2025 tax reforms, www.cjsoftflix.com reports.
Figures contained in the 2026 Budget Call Circular obtained by www.cjsoftflix.com show that expected collections from the development levy are estimated at N1.899tn for the 2026 fiscal year.
The projection further indicates that revenue from the levy is expected to rise sharply to N2.41tn in 2027 and N3.13tn in 2028, positioning it as one of the fastest-growing non-oil revenue sources over the medium term.
What Is the Development Levy?
The development levy is imposed at four per cent of companies’ assessable profits under the Nigeria Tax Act 2025, which was signed into law alongside three other tax reform bills on June 26, 2025. The levy is scheduled to take effect from January 1, 2026.
Assessable profit, under the Act, refers to taxable profit before capital allowances and loss relief are deducted.
The law applies the levy to companies chargeable to tax in Nigeria, while small companies and non-resident entities are exempted, provided they meet the small-company thresholds stipulated under the law.
Section 59 of the Nigeria Tax Act 2025 states:
“A development levy of four per cent is imposed on the assessable profits of all companies chargeable to tax under Chapters Two and Three of this Act, other than small companies and non-resident companies. The Service shall collect the levy and pay it into a special account created for that purpose.”
Levies Replaced by the Development Levy
The development levy replaces several existing charges that were previously imposed separately on businesses with overlapping profit bases.
- Tertiary Education Tax
- NITDA Information Technology Levy
- NASENI Levy
- Police Trust Fund Levy
Under previous laws, companies were required to pay:
- 1% of profit before tax to NITDA
- 0.005% of profit before tax to the Nigeria Police Trust Fund
- 0.25% of profit before tax to NASENI (for firms with turnover of N100m and above)
According to a recent analysis by PwC, these levies combined amounted to over four per cent, making the new levy a consolidation rather than an additional burden.
How the Revenue Will Be Spent
The expenditure framework shows that N120.75bn from the development levy is budgeted for recurrent spending in 2026, while a massive N1.80tn is earmarked for capital projects financed from the same source.
The capital allocation is projected to increase to N2.29tn in 2027 and N2.98tn in 2028, in line with rising revenue expectations.
Revenue Sharing Formula
The Nigeria Tax Act 2025 specifies that proceeds from the development levy must be shared among seven beneficiary agencies and funds as follows:
- 50% – Tertiary Education Trust Fund (TETFund)
- 15% – Nigerian Education Loan Fund
- 8% – National Information Technology Development Fund (NITDA)
- 8% – National Agency for Science and Engineering Infrastructure (NASENI)
- 4% – National Board for Technological Incubation
- 10% – Defence and Security Infrastructure Fund
- 5% – National Cybersecurity Fund
The law also makes it clear that the levy cannot be charged on profits computed for hydrocarbon tax purposes.
Each beneficiary agency is required to submit its income and expenditure plans to the National Assembly for appropriation, ensuring legislative oversight.
N7.07tn Expected Over Three Years
Over the three-year period from 2026 to 2028, the Federal Government expects to mobilise approximately N7.07tn from the development levy.
Enforcement and administration of the levy will be handled by the newly established Nigeria Revenue Service, which will take over from the Federal Inland Revenue Service under the 2025 Establishment Act, using enhanced digital systems and coordinated audits.
Addressing Public Concerns
Tax authorities have maintained that the new tax laws are aimed at strengthening economic competitiveness, attracting investment, and ensuring long-term fiscal stability.
They also clarified that the widely debated four per cent development levy is not a new tax burden but a streamlined consolidation of multiple existing levies, reducing compliance costs and eliminating unpredictability for businesses.
For more in-depth analysis of Nigeria’s economy, tax reforms, and budget developments, visit www.cjsoftflix.com for timely and credible updates.
