15% Minimum Tax + 4% Levy: The Math Insurers Can’t Ignore
By FIDELUS ZWANSON
Between Revenue and Ruin: The Fiscal Shock Test
A Sector Already in a Corner
NIGERIA’S insurance industry entered 2025 already defensive, not offensive. The NIIRA 2025 reform raised minimum capital requirements across life, general and reinsurance firms, forcing companies to either raise new equity or face regulatory non-compliance. The Tax Act arrived as another heavyweight mandate before the first had settled.
The Layering Effect
Unlike manufacturing or tech firms, insurers already operate under premium-based taxation, investment income taxes, stamp duties, withholding tax on commissions, and now top-up corporate tax under the consolidated Act. The industry’s central complaint is not the tax itself — but the stacking effect. Multiple taxes once spread across different statutes are now harmonised into a single, enforceable instrument, leaving insurers unable to stagger, contest or optimise their tax exposure without appearing non-compliant.
Global Standards, Local Fragility
The Act mirrors OECD-style global minimum tax rules, enforcing a 15 percent effective tax floor for large or multinational insurers. Any company reporting below that threshold must pay a top-up tax, ensuring no major insurer enjoys a lower real tax rate through deductions, credits or offshore structuring. In global markets, these rules target profit-shifting; in Nigeria, insurers argue the rules may instead target profit existence.
Add the new four percent development levy, and Nigeria’s insurers face a 19 percent baseline fiscal drain before operational costs, claims payouts, and capital injections for recapitalisation are even deducted.
The Informality Warning
Economist Muda Yusuf of the Centre for the Promotion of Private Enterprise warns that Nigeria’s broader reform risks criminalising the informal sector if filings and penalties are imposed too quickly. Though insurers are not informal players, Yusuf’s warning highlights a systemic risk: reforms that assume infrastructure, margins, and compliance readiness where none exists.
His recommendation for a revenue-efficient enforcement model — targeting large corporations and high-net-worth entities while onboarding smaller players gradually — mirrors what insurers want for themselves: time, buffers and sequencing.
Political Economy: 2026 and the Reform Paradox
With 2026 expected to be a pre-election year, stakeholders worry political cycles may weaponise economic reforms. If insurers begin reporting losses, layoffs or forced mergers, opponents could frame the Tax Act as anti-business, even though the core issue is policy collision, not policy intent.
Survival Strategy
Insurers now face three choices:
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Raise capital and absorb taxes, risking profit erosion,
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Merge and consolidate, risking identity loss,
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Restructure aggressively, risking regulatory scrutiny.
Most firms appear to be leaning toward option 2, not by strategy but by fiscal exhaustion.
