Who pays Nigeria's Development Levy? Every company chargeable to tax under the Nigeria Tax Act 2025 whose annual turnover exceeds ₦100 million owes a flat 4% charge on assessable profits, effective from 1 January 2026. Small companies below that line, and non-resident companies, are exempt. For businesses hovering near the threshold, the real risk isn't the rate. It's not noticing you've crossed it.
That is exactly what nearly happened to one of our clients this quarter, and it's why we're using this week's Case in Point to walk through who the levy actually catches, and how a mid-sized contractor caught its own exposure just in time.
What Is the Development Levy, and Who Does It Apply To?
The Development Levy is not a new burden stacked on top of old ones, it is a consolidation. Before the Nigeria Tax Act 2025, companies separately remitted the Tertiary Education Tax, the NITDA information technology levy, the NASENI levy, and the Police Trust Fund levy. Combined, these four charges typically exceeded 4% of profit before tax. The Act folds all of them into a single 4% levy on assessable profits, collected under one line instead of four.
The revenue is split across seven beneficiaries, led by the Tertiary Education Trust Fund (50%) and the Nigerian Education Loan Fund (15%), with the balance shared among NITDA, NASENI, the National Board for Technological Incubation, the Defence and Security Infrastructure Fund, and the National Cybersecurity Fund. The Federal Government projects the levy will raise ₦1.9 trillion in 2026, climbing to ₦2.41 trillion in 2027 and ₦3.13 trillion in 2028, which tells you how closely NRS will be tracking who owes it.
Liability turns on one number: turnover above ₦100 million. Cross it, and the 4% applies to your assessable profit for that year of assessment. Stay under it as a small company, and you're exempt. Non-resident companies are exempt regardless of size.
The Case: A Construction Firm's ₦100 Million Wake-Up Call
A mid-sized engineering and construction contractor in Abuja came to us in July for what was meant to be a routine mid-year management accounts review. The business had operated for years as a small company for tax purposes, with turnover comfortably under the threshold. In the 2025 financial year, a single new infrastructure subcontract pushed its revenue past ₦100 million for the first time, and by mid-2026 a second contract had it tracking well above that line again.
Nobody had flagged the shift internally. The finance team was still budgeting as if the Development Levy simply did not apply to them, because it never had before. Left unaddressed, the firm would have filed its 2026 self-assessment without the 4% levy provisioned at all, an underpayment that would have surfaced the moment NRS cross-checked assessable profit against turnover data, increasingly visible in real time now that large taxpayers are transmitting live invoices through the national e-invoicing platform.
How Was the Exposure Resolved?
We ran three things in parallel. First, we recomputed the firm's turnover trajectory against the ₦100 million threshold to confirm exactly when small-company status had lapsed. Second, we recalculated assessable profit for the relevant years of assessment, correctly excluding items not chargeable under Chapters Two and Three of the Act, so the levy was applied to the right base rather than a rough estimate. Third, we built the 4% charge into a revised quarterly provisioning schedule so it stops being a year-end surprise and becomes a routine cost line, the same way PAYE or VAT already is.
Because the firm engaged us ahead of its self-assessment filing rather than after an NRS query, we were able to file accurately from the outset, with no amended return, no interest exposure, and no adversarial back-and-forth with the tax authority. The diagnostic work cost a few weeks. Getting it wrong would have cost the levy itself, interest on the shortfall, and the kind of scrutiny that tends to invite a broader audit.
What This Means for Your Business
Treat ₦100 million turnover as a compliance trigger, not just a growth milestone. Three habits matter most: track turnover quarterly against the threshold rather than waiting for year-end accounts to reveal it; build the 4% levy into your budgeting the moment you cross the line, so it never competes with working capital as a surprise liability; and review your assessable profit calculation with a professional adviser, since the levy applies to a specifically defined base, not simply reported profit. This discipline sits alongside the PAYE compliance checks and audit readiness steps most finance teams are already running under the Nigeria Tax Act 2025.
This is especially true in construction, engineering, and other project-based sectors, where revenue can jump sharply in a single year on the back of one contract award, pulling a company across the threshold with no warning.
FAQ
What is Nigeria's Development Levy? It is a flat 4% charge on the assessable profits of companies chargeable to tax under Chapters Two and Three of the Nigeria Tax Act 2025, other than small companies and non-resident companies. It consolidates the former Tertiary Education Tax, NITDA levy, NASENI levy, and Police Trust Fund levy into a single charge, effective from 1 January 2026.
Who is exempt from the Development Levy? Small companies, generally those with annual turnover at or below ₦100 million, and non-resident companies are exempt. Once turnover exceeds that threshold, the exemption no longer applies for that year of assessment.
How is the levy calculated? The 4% rate is applied to assessable profits as determined under the Act, excluding amounts computed under the hydrocarbon tax regime. It is not a turnover tax; turnover is the test for whether you are liable, and assessable profit is the base once you are.
Not sure whether your turnover has crossed the line, or whether your assessable profit is being calculated correctly for the new levy? VOG Global Consult can run a Development Levy exposure review alongside your mid-year accounts, before NRS runs it for you. Contact VOG Global today to schedule a review. Suite 060 to 061, Orago Complex, Area 10, Garki, Abuja.