Kenneth Erikume, a Partner at PwC Nigeria, has urged Nigerian businesses to urgently automate their tax compliance processes to avoid costly penalties under the country’s newly implemented tax regime.
Erikume gave the warning at FirstBank’s Nigeria Economic Outlook 2026, noting that Nigeria’s tax reforms, which took effect on January 1, 2026, impose stiff sanctions for compliance errors that should no longer be handled manually.
According to Erikume, the new tax laws leave little room for mistakes, making automation essential.
“Automate the processes that carry huge penalties under the new laws. Getting it right the first time is critical, and these are not areas you leave to human error,” he said.
Responding to questions on updating ERP, payroll and invoicing systems, Erikume warned that many companies are already behind schedule.
“If you’re trying to comply now, it’s almost too late. The law is already in full swing. It started on January 1,” he said.
However, he added that organisations that have not fully deployed updated systems still have a short window to review and correct them, as most regulatory audits are yet to be concluded.
Erikume identified payroll as the most urgent area for compliance, given employers’ monthly salary obligations.
He said payroll logic must be updated to reflect the new graduated tax structure, including:
- Tax exemptions of up to ₦800,000
- Higher marginal tax rates
- A 25 per cent tax rate on income above ₦50 million
“The logic and rules in your payroll system must reflect the new law,” he said.
Under the new structure, employees earning below ₦25 million annually will see higher take-home pay due to lower taxes, while higher earners will face increased deductions.
From a workforce management perspective, Erikume said companies must decide whether to absorb some of the additional tax burden for senior staff.
“For employees earning above ₦25 million, companies must decide whether to review payroll and absorb part of that cost,” he noted.
Beyond payroll, Erikume highlighted Value Added Tax (VAT) as another area requiring urgent system updates.
He described the VAT reforms as a major cost-saving opportunity, as businesses can now claim VAT on fixed assets and overheads, a benefit previously limited mainly to manufacturers.
“For every company in Nigeria today, costs can drop by 7.5% because VAT can now be claimed on a wider range of expenses,” he said.
Using PwC as an example, Erikume disclosed that the firm could save over ₦500 million annually under the new VAT framework.
However, he cautioned that companies must update their accounting systems to properly account for VAT as an asset, rather than incorrectly expensing it.
Erikume also warned that businesses risk penalties of up to ₦5 million for transacting with vendors that do not have a Tax Identification Number (TIN).
As a result, vendor onboarding and validation processes must be tightened.
“Every supplier must provide a TIN. Even informal transactions, including roadside artisans, now require proper tax documentation,” he said.
Withholding tax remains another high-risk area. Erikume warned that under-deduction or failure to remit can attract penalties of up to 40 per cent.
“Government can earn an extra 40 per cent penalty from you simply because of wrong deduction or remittance. That’s why automation is non-negotiable,” he said.
Erikume advised businesses to work closely with IT teams, not just finance departments, to deploy robust and automated compliance systems.
He also cautioned organisations to ensure their systems are aligned with the final version of the Tax Reform Act, noting that multiple draft versions circulated before passage.
“The systems must reflect the law as finally passed, not earlier drafts,” he said.
