Nigeria’s Emergency Economic Stimulus Bill 2020: Highlights and Matters Arising from the Proposed Tax Rebate

Highlights and Matters Arising from the Proposed Tax Re

On 11 March 2020, the World Health Organisation (WHO) announced that Covid-19, the disease caused by the novel corona virus – SARS-CoV-2, had become a pandemic. At the writing of this article, the WHO has recorded over 8 million confirmed cases and approximately 461,675 deaths across 210 countries. Nigeria is also experiencing a rising wave of the epidemic across various parts of the country. As of 22 June 2020, the Nigeria Centre for Disease Control announced over 12,000 total active Covid-19 cases.


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The rising effects of the pandemic has jolted governments to roll-out strict containment measures such as border closures, promulgation of partial or full lockdown Orders, etc. Consequently, businesses operating in certain sectors have been knocked down by the headwinds of revenue attrition, soaring overheads, etc. Such organisations have had to lay off employees, reconfigure supply chains, divest, and in some painful cases, wind down operations. Unsurprisingly, the global economy outlook has been dismal; according to the International Monetary Fund, the global economy is expected to contract sharply by 3% in 2020, much worse than during the 2008-2009 financial crisis.

In Nigeria, the issue becomes even more critical as one examines not just the knock-on effects of the pandemic to the Nigerian economy but also the fiscal impact of the oil price slump owing to the oil glut in the global market. There are concerns around the going concern status of companies heavily hit by the pandemic (hospitality, aviation, etc.), the impact of the dwindling oil price on the 2020 fiscal budget, the prospects of ‘covidflation’ driven by soaring cost of importation from countries experiencing lockdowns(Asia and Europe contributes to 65% of Nigeria’s raw material import), the impact on unemployment, etc.

The Federal Government has now revised its 2020 revenue assumptions to an oil production of 1.94m barrels per day (from 2.2m bpd) and an oil price of $25/bbl (from $57/bbl). To cushion the effect of the pandemic on corporates and individuals, the House of Representatives passed the Emergency Economic Stimulus Bill, 2020 (“the Bill”). The Bill, which has now been transmitted to the Senate for concurrence, seeks to, amongst others, provide temporary relief to companies and individuals in order to alleviate the financial consequences of a slowdown in economic activities and to protect the economic status of Nigerians who might otherwise be unemployed as a result of the pandemic.

This article therefore highlights the salient provisions of the Bill and the burning issues arising from the proposed tax rebate, which the lawmakers (particularly the Senate) should consider in order to render the Bill more effective and pragmatic.

Highlights of the Bill

  • Special Tax Rebate for employers

The Bill provides that Nigerian employers (i.e. entities registered under the Companies and Allied Matters Act), except for entities operating in the upstream oil and gas sector, who retain their employees between 1 March and 31 December 2020 shall be entitled to a 50% income tax rebate on the total of the actual amount due or paid as Pay-As-You-Earn (PAYE) under the Personal Income Tax Act (PITA) Cap C8 Laws of the Federation of Nigeria (LFN) 2004 (as amended).

The Bill defines “rebate” to mean 100% refund of employer’s income tax, which shall be 50% of PAYE tax due or paid on behalf of employees of such employer.

The Bill further provides circumstances under which an employer shall not be precluded from enjoying the tax incentive:

  1. Where an employee dies of natural causes;
  2. Where an employee voluntary leaves the employment or has already indicated interest to leave the employment before 1 March 2020;
  3. Where the employee breaches the provisions of the Labour Act Cap L1 LFN 2004.
  • Deferral of Payment of Mortgages under the National Housing Fund (NHF) Scheme

The Bill provides a moratorium for obligations on residential mortgage obtained by individual contributors to the NHF for a period of 180 days starting from 1 March 2020, which may be extended for a further period of 180 days.

  • Import Duty Waiver on Medicines and Medical Goods

The Bill also provides for an import duty exemption on medical equipment, medicines, personal protection equipment and related medical goods necessary for the treatment and management of Covid-19 in Nigeria.

Matters arising from the proposed tax rebate

The fiscal incentives proposed in the Bill are quite laudable and, to some extent, compare to what is obtainable in many parts of the world. However, there are a number of pertinent issues that the Bill needs to address in order to provide clarity to stakeholders and to achieve ease of implementation and effectiveness.

  • The Bill does not provide much clarity on the commencement of the proposed tax rebate. Would the Bill apply to the year of assessment commencing in 2020 fiscal year? Would a company whose financial year-end falls on 31 August 2020 be equally eligible to claim the incentive in January 2021 (considering that the year of assessment of such company would have commenced in 2019 fiscal year)?
  • The nature of the rebate itself needs to be clarified. Based on a plain reading of the definition of “rebate”, it appears that the actual tax incentive to employers is a refund of the lower of the employer’s income tax and 50% of PAYE tax paid by the employer on behalf of its employees. The Bill should, therefore, make clear that the PAYE tax to be refunded to employers is simply a base for calculating the rebate and not a potential extraction from State Government coffers to employers. This is particularly important because PAYE tax is not a tax imposed on employers but on employees in line with the provisions of the PITA.
  • It is also important to note that there are incidental tax costs that would be directly borne by employers for keeping employees on a payroll. Such taxes or levies, which are computed on a gross basis, include: Industrial Training Fund contribution (1% of payroll cost), National Social Insurance Trust Fund contribution (1% of payroll cost), employers’ pension contribution (10% of employees’ Basic salary, Housing and Transport allowances). Hence, in alleviating the tax burdens of employers, the lawmakers might consider proposing a rebate that is tied to staff cost directly (in addition to PAYE tax). Also, the lawmakers could also consider incorporating a temporary suspension of the above employee-related taxes (save pension) in the Bill.
  • The Bill does not provide for the manner in which the tax rebate will be utilised by qualifying employers who would not have an income tax liability in 2021 year of assessment, say. For instance, small businesses (whose turnover do not exceed N25 million), wholly-export companies, pioneer companies, etc. are exempt from Companies Income Tax (CIT). Would there be a direct cash refund to such companies? Will such refunds be subjected to the same process as other tax refunds allowed under the law, which administratively require verification through tax audits, as such resulting in extended periods before actual refund? Would there be room for an indefinite carry forward of the tax rebate to future years of assessment?
  • Furthermore, the Bill does not state the categories of employees who are contemplated in the tax incentive scheme. For instance, does the reference to “employees” apply to all categories of employees (i.e. full-time staff, temporary staff, expatriate staff, etc.)?
  • Finally, the exclusion of the upstream oil & gas companies from enjoying the tax incentive needs to be revisited, considering the huge revenue attrition that these companies are facing in the wake of the global oil crisis and weakening oil demand. There should also be some room to provide special tax incentives to sectors, such as aviation, hospitality, tourism, etc., that have been most susceptible to the pandemic shock.


While the Bill has been drafted to alleviate the pecuniary burdens of companies and individuals in the Covid-19 era, the document still needs significant revision if its objectives are to be fully realized. Thankfully, the Bill is awaiting review by the House of Senate. We hope, therefore, that the lawmakers would, in the revised version of the Bill, consider these issues and also take onboard, recommendations from key stakeholders in the private sector.

The revised version of the Bill will likely exclude the waiver of import duty on medicines and medical goods. This is premised on the fact that the Honourable Minister of Budget and National Planning recently announced an import duty waiver on medical supplies, as part of the new fiscal policy measures aimed at combating the Covid-19 pandemic in Nigeria.

We also expect the lawmakers to give due consideration to the financial implications of the proposed fiscal stimulus contained in the Bill (or in the revised version) with regards to the country’s fiscal revenue projections and expenditure outcomes.

About KPMG Nigeria

KPMG Nigeria is a professional services firm with deep expertise in the provision of Audit, Tax and Advisory services to clients in various industries and sectors of the economy including the public sector. KPMG is well represented in Nigeria and across the African continent. Our objectives are to provide quality services to multinational, regional and local clients and to enhance the product offering in certain previously under-serviced markets.

For more information, please contact:

Egheosa Onaiwu
Associate Director - Clients & Markets

KPMG in Nigeria

Samuel Yisa

Seinor Tax Associate - TRPS - DA

KPMG in Nigeria

Olusola Gbangbola

Seinor Tax Associate - TRPS - DA

KPMG in Nigeria

Abisola Kazeem 

Seinor Tax Associate - TRPS - DA

KPMG in Nigeria

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