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 Aduragbemi Omiyale
One of the players in the hydrocarbon business in Nigeria, Geo-Fluids Plc, which trades its securities on the NASD OTC Securities Exchange, is planning to restructure its share capital with an increased of about 1,090 per cent.
Next Monday, the company will hold its Annual General Meeting (AGM) and one of the resolutions to be tabled to shareholders by the board is an authorisation for raising the share capital from N2.1 billion to N25.0 billion.
This is to be achieved by creating an additional 45,742,332,488 ordinary shares of 50 kobo each, each ranking pari passu in all respects with the existing ordinary shares of the firm.
Funds from this action would be used to expand the business scope to include hydrocarbons, mining, and natural resource development.
“That the share capital of the company be and is hereby increased from N2,128,833,756 to N25,000,000,000 ordinary shares of 50 kobo each, each ranking pari passu in all respects with the existing ordinary shares of the company,” a part of the resolutions read.
In addition, Geo-Fluids wants approval, “To undertake the business of bitumen production and processing in all its forms, including but not limited to the exploration, prospecting, drilling, extraction, refining, treatment, blending, storage, packaging, distribution, marketing, importation, exportation, shipping, transportation, trading, and general supply of bitumen, its derivatives, by-products, and ancillary materials; and to carry on all other related or incidental undertakings, services, or operations that may be considered advantageous, beneficial, or necessary for the advancement, expansion, or diversification of the bitumen industry.”
Also, it wants the authority of shareholders, “To engage in the acquisition, development, and management of mining assets and concessions for the purpose of exploring, extracting, processing, and producing hydrocarbons, oil and gas, minerals, and other natural resources; and to develop, mine, and process coal, industrial minerals, and other raw materials required for industrial, commercial, energy, or infrastructural purposes, together with all related activities necessary to ensure the effective exploitation, utilisation, and commercialisation of such resources.”
Further, it wants, “To operate and participate in all segments of the oil and gas value chain, including but not limited to the exploration, prospecting, drilling, extraction, refining, processing, storage, blending, supply, marketing, distribution, importation, exportation, transportation, shipping, and trading of crude oil, refined petroleum products, petrochemicals, liquefied natural gas, compressed natural gas, and other related hydrocarbons and derivatives; and to establish, own, operate, or participate in facilities, ventures, or partnerships that advance the energy and petroleum sector.”
At the forthcoming meeting, the organisation wants its name changed from Geo-Fluids Plc to The Geo-Fluids Group Plc.
By Adedapo Adesanya
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has warned against the full privatisation of the country’s government-owned refineries.
Recall that the Nigerian National Petroleum Company (NNPC) is putting in place mechanisms to sell the moribund refineries in Port Harcourt, Warri, and Kaduna.
However, this has met fresh resistance, with the President of PENGASSAN, Mr Festus Osifo, saying selling a 100 per cent stake would mean the government losing total control of the refineries, a situation he warned would be detrimental to Nigeria’s energy security.
Mr Osifo said the union was advocating the sale of about 51 per cent of the government’s stake while retaining 49 per cent, which he described as being more beneficial to Nigerians.
“PENGASSAN, even before the time of Comrade Peter Esele, had been advocating that government should sell its shares. The reason why we don’t want government to sell it 100 per cent to private investors is because of the issue bordering on energy security,” he said on Channels Television, late on Sunday.
“So, what we have advocated is what I have said earlier. If government sells 51 per cent stake in the refinery, what is going to happen? They will lose control, so that is actually selling. But for the benefit of Nigerians, retain 49 per cent of it.“
The PENGASSAN leader maintained that if the government had heeded the union’s advice in the past, the oil industry would be in a better state than it is today.
He addressed concerns in some quarters over whether investors would be willing to buy stakes in government-owned refineries, insisting that there are investors who would be interested.
“Yes, there are investors who surely will be willing to buy a stake in the refinery because our population in Nigeria is quite huge, and those refineries, when well maintained without political pressures and political interference, will work,” he said.
However, Mr Osifo warned that even if the government decides to sell a 51 per cent stake, it must ensure that a complete valuation is carried out to avoid selling the refineries cheaply.
By Aduragbemi Omiyale
Capital market operators have been given a deadline by the Securities and Exchange Commission (SEC) for the renewal of their registration.
A statement from the regulator said CMOs have till Saturday, January 31, 2026, to renew their registration, and to make the process seamless, an electronic receipt and processing of applications would commence in the first quarter of 2026.
“These initiatives reflect our commitment to leveraging technology for faster, more transparent, and efficient regulatory processes.
“The commission is taking deliberate steps to make regulatory processes faster, more transparent, and technology-driven. We are investing in automation, database-supervision, and secure infrastructure to improve how we interact with the market,” the Director General of SEC, Mr Emomotimi Agama, was quoted as saying in the statement during an interview in Abuja over the weekend.
He noted that through the digital transformation portal, the organisation has automated registration and licensing end-to-end as operators can now submit applications, upload documents, and track approvals online, cutting down manual processing time and reducing the need for physical visits.
According to him, the agency has also rolled out the Commercial Paper issuance module, which allows operators to file documents, monitor progress, and receive approvals electronically while feedback from early users shows a clear improvement in turnaround time.
“Work is ongoing to automate quarterly and annual returns submissions, with structured templates and system checks to ensure accuracy. A returns analytics dashboard is also in development to support risk based supervision and exception reporting.
“To back these changes, we have started upgrading our IT infrastructure, servers, storage, networks, and security layers, to boost speed and reliability.
“Selective cloud migration is underway for platforms that need scalability and external access, while core internal systems remain on premisev5p for now as we assess security and cost implications.
“At the same time, we are strengthening data integrity and cybersecurity with vulnerability assessments and planned penetration testing once automation and migration phases are stable.
“These efforts show our commitment to building a modern, resilient regulatory environment that supports efficiency, investor confidence, and market stability,” he stated.
Mr Agama affirmed that the nation’s capital market was clearly on a path toward digital transformation adding that there is an urgent need for regulatory clarity on advanced technologies, targeted support for smaller firms, and capacity-building initiatives.
“A phased and proportionate approach to regulating emerging technologies such as AI is essential, complemented by internal readiness through supervisory technology tools.
“Furthermore, investor education, particularly among younger demographics, will be critical to future-proof participation and drive fintech adoption.
“Innovation is vital, but it must be accompanied by responsibility. As operators embrace automation, artificial intelligence, and data-driven tools, they bear a duty to ensure ethical, secure, and compliant deployment. Safeguarding investor data, preventing market abuse, and maintaining operational resilience are non-negotiable,” he declared.
The SEC DG said that ultimately, responsible technology adoption is about building trust, the cornerstone of our markets saying that trust thrives on fairness, transparency, accountability, and regulatory compliance.
He, therefore, urged operators to uphold these principles adding that it will not only protect investors and systemic stability but also strengthen the long-term credibility and competitiveness of the Nigerian capital market.
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