Transfer Pricing in Nigeria

The legal framework

Transfer pricing in Nigeria rests on the Income Tax (Transfer Pricing) Regulations 2018, made by the Federal Inland Revenue Service with effect from 12 March 2018, sitting atop the arm's length anchor in section 22(2)(b) of the Companies Income Tax Act. Parallel adjustment powers in section 17 of the Personal Income Tax Act, section 15 of the Petroleum Profits Tax Act and section 20 of the Capital Gains Tax Act extend the principle across the pre-2026 tax code. The Regulations reach every controlled transaction — domestic as well as cross-border — spanning goods, tangible and intangible assets, services, financing and manufacturing arrangements.

The relationship with the OECD framework is deliberately calibrated. Regulation 18 directs that the rules be applied consistently with the OECD Transfer Pricing Guidelines and the UN Practical Manual, but Regulation 19 provides that Nigerian domestic law prevails wherever the two diverge. Practitioners defending a Nigerian position should therefore never argue from the TPG alone: the Regulations, not the Guidelines, are the operative law, and the divergences — the commodity quoted-price rule, the 5% EBITDA royalty cap — are precisely where audits concentrate.

The connected-persons net is wide. Regulation 12 catches any person able to control or influence another's financial, commercial or operational decisions, and imports related-party concepts from the income tax statutes, Article 9 of the OECD and UN Models and Nigeria's treaties. The CITA Seventh Schedule goes further, treating even unconnected lenders as connected where implicit or explicit guarantees or matching-debt deposits stand behind the loan — a trap for structured financing.

Methods, comparables and the benchmarking problem

All five OECD methods are available under Regulation 5, selected on a most-appropriate-method basis with no hierarchy; an unlisted method may be used only where the taxpayer satisfies the Service that none of the five can reasonably be applied. In practice TNMM dominates, and the Tax Appeal Tribunal's endorsement of FIRS's TNMM over the taxpayer's CUP in Prime Plastichem underlines the risk of switching methods between years without a documented rationale. Where the analysis produces indicators of uncertain comparability, Regulation 5(6) mandates a statistical approach, with the interquartile range treated as the arm's length range.

Nigeria's distinctive pressure points are two. First, the commodity rule in Regulation 5(9): exports priced below, or imports priced above, the transaction-date quoted price are deemed to occur at the quoted price unless the taxpayer evidences appropriate arm's-length adjustments — and where a related party on-sells exported goods to a third party above the quoted price, that higher price becomes the deemed Nigerian sale price. Second, royalty and intangible-fee deductions are capped at 5% of EBITDA irrespective of arm's length pricing, so a technically defensible royalty can still be partly non-deductible.

On comparables, there is no domestic preference for the simple reason that reliable Nigerian comparables barely exist. Regional African sets are the emerging standard, with the Service resisting pan-European benchmarks for Nigerian tested parties. Secret comparables are not used.

Documentation: what the tax authority expects

Nigeria implements the full BEPS Action 13 architecture: master file, local file, Country-by-Country report and two annual TP returns. Contemporaneous documentation must exist by the income tax return due date — six months after year-end — and be produced within 21 days of a request under Regulation 16; it is not filed with the return. Documentation must be in English, with financials in naira and disclosed exchange rates; non-English source documents may require certified sworn translation at the taxpayer's expense.

The annual returns are the TP Declaration Form (entity structure, connected persons, directorships) and the TP Disclosure Form (transaction-by-transaction detail of controlled dealings), both due with the tax return no later than six months after year-end or 18 months from incorporation, whichever is earlier, now filed on the TaxPro Max platform following the February 2024 migration from e-TP Plat.

Taxpayers whose total controlled transactions fall below NGN 300 million may elect out of contemporaneous documentation under Regulation 17(3), but the Service can still demand a compliant file within 90 days of notice — the exemption buys time, not immunity. The CbC layer is currently unsettled: the Federal High Court in FIRS v Check Point (May 2025) declared the CbCR Regulations 2018 void as ultra vires, though prudent groups above the NGN 160 billion threshold continue to prepare on a protective basis pending any appeal or re-issuance by the Nigeria Revenue Service.

Audits and enforcement

Nigeria's penalty regime is among the sharpest on the continent. Failure to produce documentation within 21 days of request attracts the higher of NGN 10 million or 1% of the total value of controlled transactions, plus NGN 10,000 for each day the failure continues. Missing the TP Disclosure attracts the higher of NGN 10 million or 1% of undisclosed transactions on the same daily-accrual basis, and incorrect disclosure is penalised at the higher of NGN 10 million or 1% of the transactions misdisclosed. Adjustments themselves carry a 10% penalty on the additional tax plus interest pegged to the Central Bank monetary policy rate plus a spread — and Regulation 10 forecloses unilateral downward corresponding adjustments outside a mutual agreement procedure.

Two developments reshape the enforcement calculus. The Check Point litigation established that FIRS-made regulations imposing penalties beyond the ranges authorised by the enabling Act are ultra vires; commentators note the same logic could be turned against the TP Regulations' administrative penalties, an argument yet to be tested. In the opposite direction, section 36 of the Nigeria Tax Administration Act 2025 allows an audit commenced within the six-year limitation window to continue and generate additional assessments beyond it, and lifts the time limit altogether where a deliberate misstatement is found — the deliberate-misstatement test replacing the repealed CITA fraud, wilful default or neglect carve-out from 2026. These changes are expected to lengthen, not shorten, TP audits of multinationals. Audit intensity remains high, with the extractives, petrochemical and shipping sectors — Prime Plastichem, Nigeria LNG, CMA CGM Delmas — supplying the case law.

Dispute resolution and advance certainty

The first port of call after a TP adjustment is the Decision Review Panel under Regulation 21: a taxpayer has 30 days from receipt of an assessment to refer it to this internal panel of senior Service officials, whose determination is the final decision of the Service. From there the route runs through the Tax Appeal Tribunal to the Federal High Court, Court of Appeal and Supreme Court. The Tribunal has shown itself willing to engage with method-selection substance, but Prime Plastichem demonstrates it will also defer to the Service where the taxpayer's own analysis is inconsistent.

Advance certainty arrived late but concretely. The APA Guidelines issued on 27 November 2024, effective 1 January 2025, give Regulation 9 operational life: unilateral, bilateral and multilateral APAs are available for controlled transactions of at least USD 10 million per year (USD 50 million for a group of transactions), against a USD 20,000 non-refundable application fee plus costs, with a maximum three-year term, rollback of up to three years, and processing targets of 24 to 36 months. MAP is available under Nigeria's treaties per the updated May 2023 Guidelines. What Nigeria still lacks is any operative safe harbour — Regulation 22's exemption awaits implementing guidelines that have never been published — and the Amount B simplified approach has not been adopted domestically, although Nigeria, as a covered jurisdiction, benefits from the Inclusive Framework commitment that other members respect Amount B outcomes applied to it.

Pillar Two and what changes in 2026

The Nigeria Tax Act 2025 and Nigeria Tax Administration Act 2025, signed on 26 June 2025 and effective 1 January 2026, consolidate the federal tax statutes and rename FIRS the Nigeria Revenue Service. Pre-2026 periods remain governed by the repealed laws, so 2018-Regulations positions stay live in audit for years; for 2026 onwards, replacement TP Regulations are in preparation and their continuity should be confirmed before filing positions are locked.

Nigeria has not enacted the GloBE rules, but the Tax Act introduces a Pillar Two-inspired 15% domestic minimum effective tax rate for members of MNE groups with aggregate turnover of £750 million or more and for companies with turnover of NGN 50 billion or more — practitioners should note that circulating gazette prints diverge, with one version (followed by EY) stating a NGN 20 billion standalone threshold and no group figure — with a Nigerian parent obliged to top up where group members are taxed below 15%. Alongside it comes a tightened interest limitation: the 30% of EBITDA cap, which since the Finance Act 2019 has already reached third-party debt backed by connected-person guarantees, extends from 2026 beyond foreign connected persons to all connected persons including local ones, with five-year carryforward of disallowed interest. Stricter Significant Economic Presence rules and a minimum 4% deemed-profit rule for non-resident companies whose Nigerian profits cannot be reliably determined complete the package. Transfer pricing outcomes now feed directly into minimum-tax exposure: an aggressive deduction that survives a TP audit may still trigger top-up tax.

How practitioners should respond

Four disciplines matter most. First, document to the Nigerian statute, not the TPG: address the quoted-price rule, the 5% EBITDA royalty cap and the interest limitation explicitly, because these are where the Regulations depart from OECD orthodoxy and where the Service concentrates. Second, treat the 21-day production window as a design constraint — documentation that exists only in draft when the request lands is, for penalty purposes, documentation that does not exist. Third, build African-region comparable sets and defend them with a documented screening rationale; imported European benchmarks invite challenge. Fourth, for material recurring flows, price the new APA programme seriously: a three-year term with rollback can neutralise up to six years of exposure in a jurisdiction where audits are lengthening and downward corresponding relief is unavailable outside MAP. Above all, watch the 2026 transition — the replacement TP Regulations, the fate of the Check Point ultra vires reasoning and the interaction between TP adjustments and the 15% minimum tax will define the next phase of transfer pricing Nigeria practice.