Economy
What Nigeria’s Signing of OECD’s Multilateral Instrument Means for Taxpayers
By Seun Adu and Olanrewaju Alabi
Consider this puzzle. It takes 5 machines 5 minutes to manufacture 5 widgets. How many minutes will it take 100 machines to manufacture 100 widgets? If you answered this in a hurry, you probably said 100. This is wrong. The correct answer is 5. But what does this have to do with the Multilateral Instrument (MLI)? I will come back to this in a bit.
When the international community agreed there was a need to fix the international tax rules through the BEPS project, one of the problems they had to address was how to ensure that the recommendations from the project could be quickly implemented by everyone that was involved.
Implementing the BEPS recommendations would require countries to make several changes to (a) their local tax legislation; and (b) the avoidance of double taxation agreements (DTA) that they had with other countries. Making changes to DTAs was clearly the more challenging issue because of the time and resources required to do so.
Participants in the BEPS project realized that if the old way of updating DTAs was used to implement the BEPS actions, it would take many years before the BEPS recommendations would become fully effective in most countries. This would defeat the purpose of the project.
The Multilateral Instrument (MLI) was developed to deal with this challenge.
What is the MLI?
In its full form, it is called the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI). The MLI is a single agreement between many countries. It allows a country to make concurrent changes to all or some of the DTAs that it has with other countries.
Quick overview of DTAs
Countries that do a lot of trade with one another usually sign agreements for the avoidance of double taxation to ensure that tax, in particular double taxation, does not become an obstacle to their trade activities. DTAs help to reduce the incidence of double taxation in several ways including: specifying which country has a right to tax a certain type of income, providing for reduced taxes on certain categories of income, etc.
DTAs usually follow a standard template or model. The two most used models are the OECD and UN models developed by the OECD and UN respectively. These models were first developed in the 1920s and are updated from time-to-time to deal with new tax issues.
Whenever a model is updated to address a particular tax issue, countries that follow the model try to make the changes to each of their DTAs to ensure that they can also address the issue.
Updating DTAs is not easy
The process of negotiating DTAs and ratifying them into law is usually long and difficult. Even after an agreement has been reached, it can still take many years before it takes full effect. For instance, the DTA between Nigeria and South Africa only came into force in 2008 even though the original agreement was signed in April 2000.
Negotiations for updating DTAs would typically not take as long as the negotiations for new agreements, but they still take a lot of time and resources. As a result of this, many countries do not update their DTAs as often as they should. This means that many DTAs are outdated.
For the BEPS project to be successful it was necessary to overcome this challenge since implementing the recommendations would require each country to update all of its DTAs. If countries followed the old way of having one-on-one negotiations with their existing treaty partners it would take many years for all the negotiations to be concluded and many more years for the agreements to be ratified by each country.
Such a delay would defeat the whole purpose of the BEPS project.
How the MLI solves the problem
The MLI removes the need for treaty partners to renegotiate the terms of existing DTAs one after the other making it possible to update the provisions of several double tax treaties with the relevant BEPS updates at the same time. It also makes it possible to pursue the domestication of the changes to all the treaties at once.
This is possible because the changes to be adopted through the MLI were based on collective negotiations between the countries that developed the instrument.
Some of the treaty changes are compulsory (these are the minimum standards) for all parties to the MLI while others are optional. Both the compulsory and optional changes have been standardized. The good thing about this is that the areas that will require one-on-one negotiations are not so many and these negotiations will be limited to choosing between several standardized options.
The process requires each country to submit an MLI position to the OECD. The MLI position is a document that contains details of the changes (based on the provisions of the MLI) that a particular country would like to make to each of its DTAs. This is then compared to the MLI positions of its other treaty partners.
Where the MLI positions of the parties to a particular treaty are the same, it means that an agreement has been reached on the specific provisions that match. The parties can then engage each other to discuss and agree on any positions that are different.
The effect is that a country can potentially renegotiate and ratify many of its tax treaties in almost the same time that it would normally have taken to re-negotiate one agreement. If I go back to my earlier puzzle for a second, the reason it takes only 5 minutes for the 100 machines to manufacture the 100 widgets is because they work simultaneously. This is pretty much how the MLI works.
What has Nigeria done so far?
Nigeria signed the MLI on 17 August 2017. Nigeria has also submitted its MLI position. This means that it is already possible to tell the changes that Nigeria plans to make to all of its existing double tax treaties.
In its MLI position, Nigeria listed DTAs with 19 treaty partners for amendment. These include the agreements that are already in force and those that are not yet in force (e.g. DTAs with Korea, Mauritius, United Arab Emirates etc.)
Also, of the 19 agreements, 13 treaty partners (including Belgium, Canada, China, Netherlands, and the United Kingdom) have all listed their DTAs with Nigeria for amendment under the MLI. This means that one can already check what treaty positions match and tell the changes that will likely be made to these DTAs.
The next steps will be for Nigeria and its treaty partners to agree on any parts of their proposals that do not match. Subsequent to this, each partner will then need to undertake the local domestication process to ensure that the changes become law. All of this could happen a lot quicker than we are used to.
Final thoughts
These are some of the changes that taxpayers need to be aware of due to the potential implications for their tax affairs. One of the changes is the introduction of the Principal Purpose Test (PPT) for tackling treaty shopping. Another important one is the amendments to the definition of Permanent Establishments in the treaties.
Nigerian resident taxpayers who currently enjoy treaty benefits should consider how the MLI will affect them. In addition, companies who plan to set up new structures that will allow them get treaty benefits will need to be mindful that the MLI could reduce the effectiveness of those structures.
Although the MLI position submitted by Nigeria on August 17 is provisional and subject to change, there is already a lot that one can deduce about how taxpayers will be impacted when the proposals finally become law.
Seun Adu is an Associate Director and Transfer Pricing Leader at PwC Nigeria. He is a regular writer and public speaker on tax and transfer pricing matters.
Olanrewaju Alabi is a Senior Associate with PwC Nigeria’s Transfer Pricing practice.
By Adedapo Adesanya
The Nigeria Customs Service (NCS) has intensified its nationwide sensitisation campaign on the implementation of the Green Tax Surcharge and related fiscal adjustments ahead of the policy’s commencement on July 1, 2026.
The service disclosed this in a statement published on its official X handle on Monday, saying the initiative is aimed at promoting environmental sustainability, reducing carbon emissions and encouraging the importation of cleaner vehicles into the country in line with global environmental standards.
According to the statement, the latest sensitisation programme was held at the Apapa Area Command on Friday, June 26, 2026, under the theme, “Implementation of the Green Tax Surcharge and Related Fiscal Adjustments.”
The event brought together customs officers, licensed customs agents, freight forwarders, importers and other key stakeholders to familiarise them with the new policy ahead of its implementation.
Representing the Comptroller-General of Customs, Mr Adewale Adeniyi, the Zonal Coordinator for Zone A, Mr Mohammed Babadende, said the exercise was organised to ensure stakeholders fully understand the policy and its implementation framework before it takes effect.
“This sensitisation is designed to ensure that every stakeholder clearly understands the policy before implementation. Our objective is to eliminate uncertainty, promote voluntary compliance and guarantee uniform application of the Green Tax Surcharge across all commands,” Mr Adeniyi said.
He stressed that effective stakeholder engagement would help ensure a seamless rollout of the policy while improving compliance across the country’s ports and border stations.
Delivering a technical presentation, the Comptroller in charge of Tariff, System Audit and Coordination, Mr Murtala Muazu, explained that the Green Tax Surcharge differs from conventional fiscal measures and would therefore require a separate assessment process.
Mr Muazu disclosed that the agency has introduced a simplified implementation mechanism through the Harmonised System (HS) Code declaration platform to facilitate accurate assessment and ease compliance by importers and clearing agents.
He further revealed that the federal government has simultaneously reviewed existing import charges on vehicles to cushion the effect of the new environmental levy.
According to him, import levies on vehicles have been reduced from 20 per cent to 10 per cent, while duties on used vehicles have been cut from 15 per cent to five per cent.
The customs said the reductions are intended to offset the impact of the Green Tax Surcharge while supporting legitimate trade and ensuring businesses are not unduly burdened by the new policy.
Area Controllers who attended the sensitisation programme urged importers, licensed customs agents and members of the public to support the initiative, noting that the reduction in import levies would lower the cost of doing business, facilitate legitimate trade and ultimately contribute to reducing transportation costs across the country.
Stakeholders at the event welcomed the initiative but called for sustained public awareness campaigns to ensure broader understanding, minimise confusion and encourage voluntary compliance as the rollout date approaches.
The Green Tax Surcharge is scheduled to take effect on July 1, 2026, as part of the federal government’s broader efforts to promote environmentally friendly transportation and align Nigeria’s import policies with global climate and sustainability objectives.
By Dipo Olowookere
The three busiest equities on the floor of the Nigerian Exchange (NGX) Limited last week were Access Holdings, Fidelity Bank, and Chams Holdco.
The trio accounted for 20.90 per cent and 5.69 per cent of the total trading volume and value, respectively, after trading 485.749 million units worth N7.656 billion in 17,843 deals.
In the week, investors transacted 2.324 billion shares valued at N134.486 billion in 249,328 deals versus the 3.075 billion shares worth N254.614 billion executed in 287,157 deals in the previous week.
The financial services space led the activity chart with 1.523 billion stocks sold for N47.542 billion in 105,230 deals, contributing 65.53 per cent and 35.35 per cent to the total trading volume and value, respectively. The ICT industry exchanged 198.821 million shares worth N32.622 billion in 29,905 deals, and the consumer goods sector posted a turnover of 151.635 million shares worth N10.933 billion in 23,951 deals.
In the five-day trading week, 22 equities appreciated versus 11 equities a week earlier, 57 equities depreciated versus 78 equities of the previous week, and 67 equities remained unchanged versus 57 equities in the preceding week.
McNichols gained 26.47 per cent to trade at N8.60, International Energy Insurance appreciated by 14.43 per cent to N5.79, GTCO expanded by 10.69 per cent to N127.90, First Holdco jumped by 10.00 per cent to N55.00, and Airtel Africa also climbed 10.00 per cent to settle at N4,358.80.
On the flip side, Trans-Nationwide Express declined by 26.79 per cent to N3.28, Deap Capital slipped by 23.31 per cent to N3.75, Abbey Mortgage Bank lost 20.30 per cent to trade at N8.05, Aradel Holdings contracted by 19.00 per cent to N1,417.50, and Regency Assurance dropped 18.56 per cent to close at 79 Kobo.
The All-Share Index (ASI) and the market capitalisation, which measures the performance level of Customs Street, depreciated last week by 1.65 per cent and 1.60 per cent each to 232,049.02 points and N148.905 trillion, respectively.
Similarly, all other indices finished lower except the CG, banking, AFR Bank Value, AFR Div Yield and MERI Value indices, which grew by 2.40 per cent, 3.51 per cent, 3.28 per cent, 9.93 per cent and 0.56 per cent, respectively.
By Adedapo Adesanya
The Centre for the Promotion of Private Enterprise (CPPE) has cautioned against the Senate’s resolution seeking to ban the importation of textile fabrics, warning that such a move could be counterintuitive as it would undermine key industries, threaten millions of jobs and fail to revive Nigeria’s struggling textile sector.
According to the chief executive of the think-tank, Mr Muda Yusuf, while the objective of revitalising the textile industry was commendable, an outright import prohibition would likely create more economic challenges than solutions.
The Senate had urged the federal government to implement an import ban for an initial period of five years. The motion, sponsored by Senator Sunday Katung, is to create a protected window for domestic cotton farmers and local textile mills to scale up production.
Mr Yusuf noted that the import ban wasn’t the major driving force behind the country’s ailing textile sector, adding that it was driven mainly by structural constraints such as high energy costs, poor infrastructure, expensive credit and obsolete technology.
Other factors, he said, driving the decline of the sector included logistics bottlenecks, smuggling and policy inconsistency, rather than import competition.
According to him, restricting textile imports will disrupt production across the country’s garment, fashion, tailoring, furniture and interior design industries, which depend heavily on imported fabrics as production inputs.
He said that Nigeria’s fashion, garment-making and tailoring industry, valued at about N10 trillion, supported an estimated 10 million livelihoods and represented one of the country’s most vibrant creative economy sectors.
He further stated that the sector generates significant domestic value addition through design, tailoring, branding, embroidery, merchandising and retailing, often exceeding the value of the imported textile inputs.
“Restricting textile imports would increase production costs, reduce consumer choice and threaten thousands of micro, small and medium enterprises engaged in fashion, tailoring and garment manufacturing,” he said.
Mr Yusuf added that textile fabrics were also critical inputs for the furniture and interior design industry, valued at about N7 trillion, warning that supply disruptions would weaken the competitiveness of manufacturers.
He further noted that imported textile fabrics already attracted a combined Import Duty and Import Adjustment Tax of between 35 per cent and 45 per cent, yet the existing tariff protection had not restored the competitiveness of local textile manufacturers.
“The core problem lies in production economics rather than import penetration. An import ban addresses the symptom while leaving the underlying causes unresolved,” he said.
Mr Yusuf also maintained that local textile manufacturers currently lacked the capacity to meet the quantity, quality and diversity of fabrics required by the country’s fashion, garment, furniture and interior design industries.
He warned that an outright import ban could therefore create supply shortages and negatively affect downstream sectors that generated significantly more employment than textile manufacturing itself.
The CPPE boss advocated a comprehensive value-chain strategy to revive the textile industry and called for the restoration of domestic cotton production through improved security, mechanisation, better seedlings, extension services and guaranteed off-take arrangements.
He also stressed the need for affordable long-term financing, access to modern technology, a reliable energy supply and a more competitive operating environment for manufacturers.
Among other recommendations, Yusuf urged the government to prioritise locally produced textiles and garments for uniforms used by the military, paramilitary agencies, schools and other public institutions.
He also recommended the establishment of a Textile Competitiveness Fund financed from textile-related import tax revenues to support technology upgrades and industry modernisation.
Other measures proposed include strengthening border enforcement to curb smuggling and implementing reforms aimed at reducing energy and financing costs while improving industrial infrastructure.
Mr Yusuf stressed that sustainable revival of Nigeria’s textile industry would depend on improving competitiveness rather than imposing additional import restrictions.
He warned that a blanket import ban could encourage smuggling, reduce customs revenue and weaken a broader value chain that contributed substantially to employment and economic growth.
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