The Dark Side of Non-Disclosure Agreements in the Music Industry: Lessons for Nigeria.

Introduction.
Record labels employ a variety of contractual arrangements to manage artists, each with distinct rights, obligations, and revenue-sharing models. These agreements may include Standard Recording Contracts—which cover master recordings, production, marketing, and distribution costs; Licensing Deals—where labels secure rights to musical works for a defined period; 360 Deals—which encompass revenue from touring, merchandise, endorsements, and music sales; Joint Ventures—detailing profit-sharing between the artist and label; and Single or EP Deals—short-term agreements focused on one or a few tracks rather than a full album. These are generally limited in scope, and artists typically cannot publicly announce they’ve been signed, as the label’s involvement is specific to supporting production and marketing for that particular release.

Most of these contracts typically include confidentiality provisions, often referred to as Non-Disclosure clause or Non-Disclosure Agreement (NDA). A Non-Disclosure Agreement (NDA) is a legally binding contract preventing parties from disclosing specified confidential or proprietary information.

While NDAs are intended to protect sensitive information, recent developments in the global music industry have revealed its darker side: a tool of victimisation weaponized by silence. High-profile cases, such as the ongoing legal battle between Sean “Diddy” Combs and singer Cassie Ventura, have spotlighted how NDAs can be deployed to conceal abuse and silence victims—raising serious ethical concerns with implications for not only the artists worldwide, including Nigeria but the lawyers that draft them.

NDAs: Shielding Misconduct & Unconscionable Industry Practices.

In the case of United States v Sean Combs, allegations have emerged that NDAs were employed to prevent individuals from speaking out about abusive behaviour. Testimonies from Cassie Ventura and former personal assistant (Capricon Clark, scheduled to testify on 27 May 2025) suggest that NDAs were used not just to protect business interests but to silence victims and witnesses of alleged unfair and unconscionable practices of Bad Boy Records. This misuse of NDAs has sparked broader concerns of how the Rich and Powerful force signees into unfair work practices while serving to restrict valuable information of their personal lives, some of which have damaging effects on their employees. A telling example emerged in November 2024, when TMZ published details of a typical NDA used by Sean Combs’ enterprises, barring signees from taking photos or videos, or publicly discussing any event that took place at parties hosted by Combs, without his express written consent. More alarmingly, the NDA imposed an extraordinary duration— effective for 20 years after Combs’ death or 70 years from the date of signing, whichever is later—effectively silencing parties for a lifetime and beyond.

Another notable and deeply troubling example of the misuse of non-disclosure agreements emerged in the case of former Hollywood producer and convicted rapist Harvey Weinstein, currently serving a 16 year sentence on conviction of rape in 2022. For years, Weinstein allegedly relied on NDAs and secret settlements to silence numerous women who accused him of sexual harassment, assault, and rape. These agreements were often presented under pressure, with victims fearing reputational harm, career sabotage, or legal retaliation if they spoke out. The NDAs functioned as tools of coercion—protecting Weinstein’s power and shielding his actions from public scrutiny.

It was only after investigative reporting by journalists at The New York Times and The New Yorker in 2017 that the extent of the allegations—and the role NDAs played in concealing them—became widely known. Although sentenced to 3 years imprisonment earlier in March 2020 for third degree rape and 20 years for first degree criminal sexual assault. The decision was overturned by the New York’s highest court late April 2024 in a 4-3 decision, the court held that the trial court erred in admitting testimony about uncharged, alleged prior sexual acts involving individuals other than the complainants, as such testimony lacked any relevant or material value in establishing the defendant’s propensity to commit the charged offenses

Implications for the Nigerian Music Industry.

The Nigerian music industry is rapidly growing, with artists gaining international recognition. However, the use of NDAs in Nigeria is not immune to misuse. While NDAs are intended to protect intellectual property and confidential business information, there is a risk that they could be used to legitimize misconduct of record label executives/owners of entertainment companies. The lack of robust legal frameworks and enforcement mechanisms in Nigeria may exacerbate this issue, allowing powerful individuals to exploit NDAs to silence victims.

Legal Considerations and the Need for Reform.

In Nigeria, NDAs are legally binding agreements that establish a confidential relationship between parties. However, there is a need for clearer legal guidelines to prevent the misuse of NDAs in cases involving misconduct or implicating signees such as to sabotage their careers. Legal reforms should be directed at ensuring that NDAs do not shield powerful individuals from accountability for abusive behaviour. Additionally, there should be provisions that allow victims to speak out without fear of legal repercussions when reporting misconduct.

Tips for Navigating Unfair Contract Clause/Agreement.

When faced with repugnant or overly restrictive non-disclosure agreement (NDA) which can be inserted as contract clauses or standalone agreements connected to artist management agreement, Nigerian artists should take proactive and informed steps to protect their rights, dignity, and creative freedom. Here are practical recommendations:

1. Engage a Competent Entertainment Lawyer.

Why: NDAs are legal documents that can have long-term consequences.
Action: Always consult with a lawyer familiar with the entertainment industry before signing any agreement. A lawyer can:

  1. Identify exploitative or overly broad clauses.
  2. Negotiate fairer terms on your behalf.
  3. Explain legal implications in simple terms.

Example: An emerging Afrobeats artist approached a major label. The proposed NDA restricted her from ever discussing her experiences, even in cases of abuse. Her lawyer flagged it as unenforceable and negotiated for its removal.

2. Negotiate Scope and Duration.

Why: NDAs should be limited in scope, not lifelong gags.

Action: Artists should:

  1. Push for time-limited NDAs (e.g., 2–3 years).
  2. Define exactly what counts as “confidential” (e.g., financial terms, trade secrets—not personal conduct or abuse).

Tip: Avoid clauses that prohibit you from discussing anything that occurs in the relationship, especially personal or criminal conduct.

3. Insist on Exceptions for Illegality and Abuse.

Why: Some NDAs try to silence people from reporting illegal activity.
Action: Demand exceptions that allow you to:

  1. Report harassment, abuse, or crimes to authorities.
  2. Speak out about misconduct without facing legal penalties.

Note: Nigerian law may not explicitly bar such clauses yet, but public policy and human rights principles can help challenge them in court.

4. Avoid Blanket or One-Sided NDAs.

Why: Blanket NDAs often favor the more powerful party.
Action: Request mutual NDAs where both parties are bound by the same terms, or reject overly one-sided clauses that:

  1. Only protect the record label.
  2. Impose penalties only on the artist.

5. Document Every Interaction.

Why: Documentation creates a paper trail that can be useful in legal disputes.
Action:

1.Keep copies of all drafts and communications.

2. Make notes about meetings where NDAs were discussed or signed.

3. If possible, request that negotiations be recorded or documented via email.

6. Involve Trusted Representatives.

Why: Emotional or power pressure can cloud judgment.

Action:

  1. Bring your manager, preferably your legal rep,  for contract negotiations bordering on artist management contracts.
  2. Don’t let anyone pressure you into signing “on the spot.”

7. Leverage Artist Collectives or Unions.

Why: There is strength in numbers.

Action: Join or support collectives like the Performing Musicians Employers’ Association of Nigeria (PMAN), Musical Copyright Society of Nigeria (MCSN), Guild of Artistes and Poets (GAP). Also engage in advocacy for industry-wide ethical standards on contract terms which includes unconscionable NDAs.

8. Know When to Walk Away.

Why: Not every opportunity is worth your silence.

Action: If an NDA demands unethical silence or gives away too much of your freedom, consider turning down the deal. Protecting your long-term dignity and legal rights is more valuable than a short-term gain.

Final Thought.

The use of NDAs should never be a tool for exploitation or silencing abuse. As seen in global controversies, repugnant NDA practices can perpetuate harm. Nigerian artists must be vigilant, legally aware, and ready to challenge any clause that infringes on their fundamental rights.

Written by Adeola Osifeko LLB, LLM, ACIS, ABR. Partner Corporate Commercial Group at AEO Law Practice

Sources:

1. Njera Perkins and Taiyler. S. Mitchell, ‘How Cassie’s Lawsuit Against Diddy Galvanised a Movement of Survivors’ Huffpost 24 May 2025  <https://www.huffpost.com/entry/sean-diddy-combs-trial-cassie-lawsuit_n_682fae95e4b0239ca9a6eba3> Accessed 25 May 2025

2. Laura Italiano, ‘At Diddy trial, ex-assistants recall smashed whiskey glasses, bags of drugs, and mopping up after freak offs’ Business Insider Africa 25 May 2025 <https://africa.businessinsider.com/entertainment/at-diddy-trial-ex-assistants-recall-smashed-whiskey-glasses-bags-of-drugs-and-mopping/4s7rjhm> Accessed 25 May 2025

3. Ronan Farrow, ‘Weighing the Cost of speaking Out About Harvey Weinstein’ New Yorker 27 October 2017 <https://www.newyorker.com/news/news-desk/weighing-the-costs-of-speaking-out-about-harvey-weinstein> Accessed 25 May 2025.

4. Daniel Arkin, ‘What you need to know about Harvey Weinstein’s retrial’ NBC News 21 April 2025 <https://www.nbcnews.com/news/us-news/harvey-weinstein-retrial-conviction-health-me-too-what-know-rcna199981> Accessed 25 May 2025

The Legal Practitioners Remuneration Order 2023: Will It Strengthen or Strain the Legal Industry?

The legal industry in Nigeria is undergoing a significant transformation with the introduction of the Legal Practitioners Remuneration (For Business, Legal Service and Representation) Order 2023 (LPRO 2023). This regulatory framework, established under the Legal Practitioners Act (Cap LII, LFN 2004), seeks to standardise fees for legal practitioners across various areas of legal practice. While its objectives include ensuring fair compensation for lawyers and preventing fee undercutting, the broader economic and business implications of this regulation are profound. Against the backdrop of Alternative Legal Service Providers (ALSPs), this Order raises questions about its potential to strengthen or strain the legal profession in Nigeria.

Economic and Business Implications of LPRO 2023 on the Legal Profession

LPRO 2023 introduces minimum fees for various legal services, including consultations, incorporation of companies, litigation, property transactions, and other commercial dealings.1 By establishing prescribed fees, the regulation aims to curb price undercutting, which has historically affected law firms, particularly small and mid-sized firms. This structured pricing model ensures that practitioners receive adequate remuneration commensurate with their experience and the complexity of legal services rendered. However, the regulation also introduces rigid constraints on pricing flexibility, potentially impacting market competitiveness.

For established law firms, particularly those operating in corporate commercial law and litigation, the LPRO 2023 provides a more predictable revenue stream2. Firms that cater to high-net-worth clients or corporate entities may find this beneficial as it aligns with international best practices. However, for younger lawyers, solo practitioners, and small firms that rely on competitive pricing to attract clients, the LPRO 2023 presents a challenge. Many clients, especially startups, SMEs, and individuals seeking legal representation for minor matters, may opt for ALSPs, online legal platforms, or non-traditional legal service providers offering more affordable solutions.

The rigidity in the Order also poses concerns in dispute resolution practices. Given the increasing global shift towards flexible billing arrangements such as contingency fees, fixed retainers, and subscription-based legal services, the LPRO 2023 appears to constrain such innovations.3 While it does allow for percentage-based fee arrangements, it does not permit any arrangement below the prescribed hourly rate, thus limiting lawyers’ ability to tailor their services to market demands.

The Rise of Alternative Legal Service Providers (ALSPs) and the LPRO 2023

The global legal market has witnessed a surge in Alternative Legal Service Providers (ALSPs), which offer legal solutions outside the traditional law firm model.4 These entities, ranging from legal tech companies, document review services, online dispute resolution (ODR) platforms, contract automation providers, and freelance legal consultants, leverage technology and process efficiencies to deliver cost-effective legal services.

In Nigeria, ALSPs are emerging as formidable competitors to traditional law firms, particularly in areas like legal research, contract drafting, compliance, and regulatory advisory services.5 With the advent of artificial intelligence (AI)-driven legal research tools, automated document generation platforms, and online corporate registration services, ALSPs are addressing clients’ needs faster and at lower costs.

The LPRO 2023 inadvertently favours the rise of ALSPs by making traditional law firms less attractive to cost-conscious clients. A small business seeking corporate registration, for instance, may find online incorporation services preferable to engaging a law firm that charges statutory minimum fees as stipulated in the Order.6 Similarly, businesses needing contract review and compliance services may opt for subscription-based ALSPs rather than law firms constrained by hourly rate requirements.

Furthermore, ALSPs often operate in a less regulated environment compared to traditional law firms. While law firms must adhere strictly to professional ethics rules and LPRO 2023’s fee structure, ALSPs may offer customised, on-demand pricing models.7 This regulatory gap could create an uneven playing field, where ALSPs thrive while traditional law firms struggle with compliance costs.

The Role of the NBA and Regulatory Bodies in Shaping ALSPs within the Legal System

The Nigerian Bar Association (NBA) and the Legal Practitioners Remuneration Committee (LPRC) play crucial roles in shaping the legal market, particularly regarding ALSP operations. LPRO 2023, by its design, primarily regulates traditional legal practitioners but does not comprehensively address how ALSPs fit into the legal ecosystem.8

The NBA has an obligation to define the regulatory boundaries for ALSPs, ensuring that while innovation is encouraged, it does not undermine the traditional legal profession. Possible regulatory responses include:

  1. Bridging the Regulatory Gap: The NBA could introduce specific regulations to cover ALSPs, ensuring they operate within a defined legal framework. This could include licensing requirements, ethical codes, and restrictions on certain reserved legal activities.9
  2. Collaboration Between Law Firms and ALSPs: The NBA could encourage synergy between ALSPs and law firms, rather than fostering direct competition. By permitting law firms to integrate ALSP models (such as automated legal research tools and contract lifecycle management solutions), practitioners could enhance efficiency while remaining within the LPRO 2023 framework.10
  3. Reforming Fee Structures for Greater Flexibility: The rigid minimum fees imposed by the Order may require periodic review. The NBA could consider allowing alternative fee structures, such as tiered pricing models for SMEs, startups, and social enterprises, to ensure legal services remain accessible while sustaining law firm profitability.11
  4. Addressing Ethical Concerns and Consumer Protection: Given the rise of unregulated online legal services, the NBA must establish consumer protection policies to prevent unauthorized practice of law (UPL) and data privacy breaches in tech-driven legal services.12
  5. Promoting Technology-Driven Legal Services within the Traditional Bar: The NBA can train and support law firms in adopting legal tech solutions rather than allowing ALSPs to dominate the market. By incorporating document automation, e-discovery tools, and AI-based research, traditional law firms can compete effectively without violating the LPRO 2023 pricing model.13

Conclusion

The Legal Practitioners Remuneration Order 2023 presents both opportunities and challenges for Nigeria’s legal industry. While its intent is to promote fair remuneration and standardise fees, its economic impact could inadvertently drive clients towards ALSPs and alternative legal solutions. Traditional law firms, particularly smaller firms and solo practitioners, may struggle to retain clients in a market where cost efficiency and flexible pricing are increasingly prioritised.

The NBA and regulatory bodies must therefore strike a balance between protecting traditional legal practice and embracing the innovations brought by ALSPs. Through strategic regulatory reforms, collaboration with ALSPs, and modernising fee structures, Nigeria’s legal profession can evolve without losing its competitive edge. The future of legal practice in Nigeria will depend on how well regulators and practitioners navigate this complex intersection between standardisation, innovation, and market competitiveness.

Author: Adeola Osifeko LLB, LLM, BL,ACIS,ABR


Endnotes

  1. Legal Practitioners Remuneration Order 2023, s 1.
  2. ibid.
  3. 2023 LPRO, s 8.
  4. Nkemakonam Umeadi-Onyedika, ‘The Rise of Alternative Legal Service Providers: Threat or Opportunity’. BusinessDay Newspaper, 13 March 2025 Page 21.
  5. ibid.
  6. 2023 LPRO, Schedule 2.
  7. 2023 LPRO, s 10.
  8. 2023 LPRO, s 14.
  9. ibid.
  10. ibid.
  11. ibid.
  12. ibid.
  13. ibid.

Key Provisions of the Nigeria Start-Up Act 2022 Every Tech Founder Should Know.

The Nigeria Start-Up Act 2022 (the ‘Act’) is a transformative legislative instrument designed to stimulate innovation, entrepreneurship, and economic growth within Nigeria’s startup community. Enacted as a collaborative effort between the Nigerian government and the tech community, the Act’s foremost objective is to position Nigeria as a key player in Africa’s innovation and technology industry by addressing critical challenges facing startups, streamlining processes, and establishing support mechanisms to ensure that Nigeria remains competitive in the global digital economy. The Act fundamentally creates the right incentives and ecosystem for startups to innovate and grow.

The key provisions outlined below are legal and regulatory requirements every tech founder should be familiar with, emphasizing their implications for new and existing startups.

1. Definition of a Start-Up

The Act provides a detailed definition of what constitutes a startup. According to the Act, a startup must:

a). Be a company incorporated under Nigerian law and in existence for no more than ten years;

b). Engage in the development of digital technology products, or improvement of innovative processes i.e products or services;

c). Be predominantly Nigerian-owned, with at least 51% of its shares held by Nigerians;

d). Possess the capacity to scale and generate revenue.[1]

This definition ensures that only genuinely innovative businesses qualify for the benefits provided under the Act. Tech founders are advised to align their business structures to meet these criteria where possible.

2. Start-Up Label Certification

One of the most crucial aspects of the Act is the introduction of the startup label, which is granted to eligible companies by the National Information Technology Development Agency (the ‘Secretariat’) through a digital portal. The certification process involves submitting an application via the portal, that meets the criteria outlined in the Act, subject to the standard assessment. Once these requirements are fulfilled, the company receives a start-up label, valid for 10 years.

Certified startups gain access to several benefits, including:

  • Tax exemptions;
  • Incentives for investment;
  • Government grants and loans;
  • Capacity-building opportunities.[2]

Startups should ensure that their applications are comprehensive and adhere strictly to the requirements of the Act.

3. Tax Incentives[3]

The Act prioritizes tax incentives for angel investors and venture capitalists to attract investment into the startup ecosystem for the purpose of reducing the financial burden on startups. These include:

a. Tax Holidays

Startups are entitled to tax holiday of up to four years from the date of certification under the Act.

b. Research and Development (R&D) Deductions

Expenses incurred on R&D activities are deductible from taxable income, encouraging startups to innovate and remain competitive.

4. Access to Funding[4]

The Act prioritizes access to funding, by introducing key mechanisms to ensure that startups can access funding efficiently:

a. Start-Up Investment Seed Fund

A Start-Up Investment Seed Fund is established with a minimum annual allocation of N100,000,000 managed by the Nigerian Sovereign Investment Authority (NSIA), to provide grants, loans, and equity investments to certified startups, inclusive of export-focused supports such as the Export Development Fund, Export Expansion Grant, and Export Adjustment Scheme Fund.

b. Credit Guarantee Scheme

Additionally, labelled startups can benefit from affordable credit through a dedicated Credit Guarantee Scheme to reduce risks borne by lenders when financing startups.      

5. Regulatory Flexibility[5]

Startups often face significant regulatory hurdles, which can stifle growth. The Act addresses this by offering regulatory flexibility through sandbox programs, allowing startups to test innovative products and services under relaxed regulatory conditions.

6. Market Access and Regulatory Support

The Act simplifies regulatory processes and enhances market access for startups, that ensures they focus on business growth rather than navigating complex regulations. Central to this initiative is the Startup Portal, a one-stop platform for registration, prioritizing startup applications, and facilitating interactions among investors, regulators, and startups. Launched in 2023, the portal is accessible at https://startup.gov.ng.[6]

The Act also mandates the Secretariat to facilitate regulatory support for startups by collaborating with relevant regulators to ease compliance processes and foster access to local and international markets.[7]

To qualify as a startup under the Act, a business must satisfy all requirements listed in the definition section of this article.

7. Intellectual Property (IP) Protections[8]

Startups often operate in industries where intellectual property is a core asset. The Act places strategic emphasis on intellectual property (IP) rights, as highlighted in Section 31, recognizing their pivotal role in fostering innovation and entrepreneurship. The Act actively promotes the creation, protection, and commercialization of IP assets by startups, while also facilitating their penetration into global markets. This effort is anchored in partnerships with key institutions such as the Nigerian Copyright Commission and the Trademarks, Patent, and Design Registries.

A significant innovation under the Act is the inclusion of a dedicated IP registration channel within the Startup Portal, exclusively accessible to startups that have obtained the required labelling from the Secretariat. This initiative simplifies the process for registering trademarks and patents internationally, enabling Nigerian startups to compete on the global stage more effectively. The Secretariat’s active role in this process ensures that startups can navigate international IP frameworks with greater ease and efficiency.

This enhanced IP registration and protection framework is a critical step in boosting Nigeria’s startup ecosystem, empowering businesses to secure their innovations while expanding their market reach. Such progress aligns with Nigeria’s ongoing economic diversification efforts, as the Information and Communication Technology (ICT) sector contributed 19.78% to the country’s GDP in the second quarter of 2024, reflecting the nation’s shift away from reliance on oil.

8. Innovation Hubs and Incubators[9]

The Act empowers the National Information Technology Development Agency (NITDA) to collaborate with relevant stakeholders to establish hubs and incubators that will promote collaboration, mentorship, and networking. These hubs are designed to serve as centres for knowledge exchange and support, providing startups with the resources needed to develop and scale innovative ideas.

9. Dispute Resolution

The Act provides a streamlined dispute resolution mechanism to handle conflicts involving startups. It promotes the use of alternative dispute resolution mechanisms and establishes a Start-Up Tribunal to handle disputes related to its provisions[10].

Conclusion

The Nigeria Start-Up Act 2022 is a landmark legislation that substantially supports technological innovation. Its provisions on certification, funding, tax incentives, and regulatory flexibility create a conducive environment for startups to thrive.

However, it is worth noting that the year 2023 witnessed a sharp decline in global investment in startups and innovation, signaling a marked reversal from the funding boom of 2020-2022. According to the 2024 Global Innovation Index Tracker, venture capital funding and scientific output regressed to pre-pandemic levels, with the downturn hitting emerging regions like Latin America and Africa particularly hard. Nigeria’s startup ecosystem was not immune to these challenges, as the total funding received by local startups plummeted.[11]

Several factors contributed to this funding drought. The global economic slowdown has made institutional investors more cautious, particularly in high-risk areas like startup investments, where only a fraction of ventures eventually become profitable. In Nigeria, the challenges are compounded by the volatile foreign exchange (forex) market, which significantly reduces the value of returns when capital and profits are repatriated. This has deterred foreign investors, who are critical to the country’s tech ecosystem.[12]

Another significant factor is the rise of emerging technologies, particularly artificial intelligence (AI). Investors have begun to pivot their strategies, channeling funds toward innovators in AI and other emerging verticals, sometimes at the expense of broader startup ecosystems. This shift reflects a global recalibration of priorities as technological advancements reshape the landscape of innovation.[13]

The broader innovation landscape has also suffered setbacks. Corporate research and development (R&D) spending has slowed, mirroring stagnant revenue growth and recalling the post-2009 financial crisis. Although R&D investment levels remain historically high, their growth has plateaued, and international patenting activity has declined.

Looking ahead, while some central banks have started to cut interest rates, conditions for innovation financing remain tight. This environment may continue to weigh negatively on investments in startups and innovation, particularly in emerging economies like ours (Nigeria). The outlook for 2024 and 2025 remains unusually uncertain, raising concerns about how startups in these regions will navigate these financial headwinds.

For tech founders, while understanding and leveraging the Act is essential for building resilient and scalable businesses. Aligning business operations with the Act’s requirements will become more beneficial in promoting innovation in Nigeria’s digital economy, if Nigerian startups and policymakers prioritize fostering local investment sources, diversifying funding strategies, and aligning with global trends in emerging technologies to stay competitive.

Written by Adeola Osifeko Esq LLB, LLM, ACIS

Partner, Corporate-Commercial Practice Group, AEO Law Practice


[1] Nigeria Start-Up Act 2022, s 2

[2] World Intellectual Property Office, ‘Nigeria’s Startup Act’s Impact on Innovation’ 14 March 2024 <https://www.wipo.int/en/web/global-health/w/news/2024/news_0004> Accessed on 2 December 2024

[3] Nigeria Start-Up Act 2022, s 24

[4] Nigeria Start-Up Act 2022, ss 19 and 21

[5] Nigeria Start-Up Act 2022, s 37

[6] Nigeria Start-Up Act 2022, s 13

[7] Nigeria Start-Up Act 2022, s 18

[8]  WIPO (n2)

[9] Nigeria Start-Up Act 2022, s 28(1)(e)

[10] Nigeria Start-Up Act 2022, s 47-48

[11] WIPO, ‘ Global innovation Inde 2024’ September 2024 https://www.wipo.int/web-publications/global-innovation-index-2024/en/  Accessed on 3 December 2024

[12] Ibid

[13] Ibid

Recent Tax Reforms: The Economic Stabilisation Bill and The Nigeria Revenue Service (Establishment) Bill.

Recent Tax Reforms: The Economic Stabilisation Bill and The Nigeria Revenue Service (Establishment) Bill.

  1. The Economic Stabilisation Bill

On 23 September 2024, the Federal Executive Council approved the Economic Stabilisation Bill (ESB), with focus on amending tax, fiscal, and establishment laws, required for the enhancement of economic stability and growth.

The bill, driven by recommendations from the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Mr. Taiwo Oyedele, is set to deliver the Federal Government’s accelerated stability and advancement plan.

The following amendments were proposed as provisions for the Economic Stabilisation Bill:

  • Amendments to income tax laws to facilitate employment opportunities for Nigerians in the global value chain, including the digital economy. With focus on the Companies Income Tax Act amongst others, Nigerians will be able to provide services to foreign companies without requiring them to be incorporated in Nigeria. It is anticipated that the development will create new employment, income and entrepreneurship opportunities.
  • Amendments to the Foreign Echange Act, to facilitate electronic transactions over cash to increase liquidity and empower the Central Bank of Nigeria to attract international funds through foreign exchange transactions and remittances to Nigeria.
  • Zero-rated VAT and improved incentive regime to promote exports in goods, services, and intellectual property.
  • Amendments to facilitate investment in the gas sector and simplify local content requirements to ensure competitiveness.
  • Tax reliefs for private sector employers in respect of wage awards and transport subsidies provided to their employees.
  • Tax relief to companies that generate incremental employment and retain such employees for a minimum of three years.
  • Fiscal discipline and enhancement of remittances from government agencies and corporations to the Consolidated Revenue Fund of the Federal Government.
  • Collaboration with states to suspend certain taxes on small businesses and vulnerable populations, including road haulage levies and other charges on transportation of goods.
  • Introduction of a “Tax Identification Consolidation and Collaboration (TICC)” initiative to expand the tax base and create level playing field for businesses.
  • Provision of additional funding for the Students Loan Scheme.

These reforms approved by the FEC are set to be transmitted to the National Assembly for passage into law and if enacted, are expected to play a pivotal role in stabilising Nigeria’s economy and fostering long-term sustainable growth.

Additionally, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, revealed that the Fiscal Responsibility Act will be overhauled to guide government owned companies on how to share surpluses and build reserve funds from their revenues.

B. The Nigeria Revenue Service (Establishment) Bill

Furthermore, on 3 October 2024, President Bola Ahmed Tinubu introduced four critical fiscal bills to the National Assembly titled “The Nigeria Revenue Service (Establishment) Bill. The Bill is designed to modernize tax administration, enhance revenue collection efficiency, and create a comprehensive, unified tax legislation for Nigerians as enumerated below:

1. 1 Nigeria Revenue Service Bill

The Nigeria Revenue Service (NRS) Bill replaces the Federal Inland Revenue Service (Establishment) Act, 2007 (“FIRS Act”). Key reforms introduced in this Bill include:

  • Tax Collection Assistance

The NRS can now assist States, Local Governments (LGs), or other government entities in collecting taxes, provided there is mutual agreement. This provision aligns with the federal structure of Nigeria, allowing collaborative revenue generation.

  • Separation of Tax Administration.

The bill establishes tax administration as a distinct legislative framework, previously consolidated under the FIRS Act. This highlights the importance of a dedicated statute for tax governance.

1.2  Joint Revenue Board Bill

The Joint Revenue Board (JRB) Bill succeeds the previous Joint Tax Board (JTB) framework and seeks to streamline tax coordination across all levels of government. Notable provisions include:

  • Integrated Taxpayer Database

The JRB shall be responsible for maintaining a comprehensive and integrated database of all taxable persons in Nigeria, working alongside the NRS, State Internal Revenue Services (SIRS), Local Government Revenue Committees (LGRC), and other government agencies. This is a significant step toward a more centralized and efficient tax system.

  • Tax Tribunal and Ombudsman.

The Tax Appeal Tribunal (TAT), which existed under previous tax legislation, remains in place. Additionally, the Bill introduces a Tax Ombudsman—an independent arbiter to mediate disputes between taxpayers and revenue authorities, promoting transparency and fairness in tax administration.

1.3 Nigeria Tax Administration Bill

The Nigeria Tax Administration Bill outlines detailed procedures for tax registration, reporting, and compliance. Significant elements of this Bill include:

  • Mandatory Tax Identification Number (TIN).

All Ministries, Departments, and Agencies (MDAs), including non-resident entities, are now required to obtain a TIN. This mirrors provisions in the Companies Income Tax Act (CITA) and the Personal Income Tax Act (PITA), reinforcing the importance of a centralized identification system for taxpayers.

  • Upstream Oil & Gas Taxation.

Companies in the upstream oil sector are required to file both estimated and actual tax returns, enhancing transparency and predictability in tax obligations. Furthermore, they are to pay taxes on a monthly installment basis, a shift from the annual payment system previously in place.

  • VAT Fiscalisation System: The Bill introduces a Value-Added Tax (VAT) Fiscalisation System, a new electronic platform for recording and reporting taxable supplies. This is a progressive step towards improving VAT collection efficiency and reducing evasion.

2.    Nigeria Tax Bill

The Nigeria Tax Bill represents the most comprehensive reform, overhauling Nigeria’s tax system by repealing 11 existing tax laws. It consolidates various tax provisions into a unified framework. Key reforms include:

  •  Presumptive Tax Regime.

The Bill introduces a presumptive tax regime for individual taxpayers, a significant reform which shall focus on improving tax compliance from the informal sector, in line with provisions under the PITA.

  • Changes to Corporate Income Tax (CIT).

The CIT rate for small companies will be pegged at 0%, while other companies will face rates of 27.5% in 2025 and 30% from 2026. Large companies, including Multinational Enterprises (MNEs) with turnovers above ₦20 billion, will be subject to an effective tax rate of 15%, regardless of deductions or allowances. This echoes global trends in taxing MNEs based on economic activity within the jurisdiction.

  • Personal Income Tax Reforms

The Bill revises individual income tax bands, with progressive rates that increase with income. The highest marginal rate stands at 25% for income above ₦50 million.

  • Development Levy

A phased Development Levy is introduced, starting at 4% in 2025 and reducing to 2% by 2030. This levy will replace existing levies such as the Tertiary Education Tax Fund (TETFUND), NITDA, and NASENI levies. The Student Loan Fund will be the sole beneficiary of the Development Levy from 2030.

  • Tax Deductions

The Bill expands the range of eligible deductions, including interest on mortgage loans, adding to previously allowable deductions such as contributions to the National Housing Fund (NHF), National Health Insurance Scheme (NHIS), and pension funds.

3.   Tax Refund Timeline

Tax refunds are now to be processed within 90 days, while VAT refunds are to be settled within 30 days. This provision aligns with global best practices and emphasizes the government’s commitment to a fair tax system.

4.    Incentives for Tax Revenue Assistance.

Individuals or entities assisting tax authorities in generating revenue are now entitled to rewards, incentivising participation in revenue generation and compliance enforcement.

5.    Revenue Distribution and Deduction Powers.

The Accountant-General of the Federation (AGF) now has the authority to deduct funds from MDAs at source following a warrant issued to the NRS. Additionally, VAT revenue is to be distributed with 10% to the Federal Government, 55% to the States, and 35% to Local Governments, with the states and LGs sharing based on a 60% derivation formula, benefiting high-revenue states like Lagos and Rivers.

     Conclusion

The Economic Stabilization Bill is crucial for addressing Nigeria’s fiscal challenges, promoting economic resilience, curbing inflation, stabilising currency, and fostering growth by implementing measures to boost revenue, spending efficiency, and job creation while the Nigeria Revenue Service (Establishment) Bill proposed by President Tinubu serves the purpose of streamlining tax administration, enhance revenue collection, and improve fiscal accountability in Nigeria.

Author

Adeola Osifeko Esq LLB, LLM ACIS

Partner AEO Law Practice

Email: adeola@aeolawpractice.com LinkedIn: https://www.linkedin.com/in/adeola-osifeko/