Businesses may pay more for foreign borrowing, Kreston warns - The Guardian Nigeria News
Nigeria’s cost of raising foreign debt could increase as tougher tax rules remove longstanding exemptions on interest paid on foreign loans and tighten scrutiny of financing arrangements between related companies, tax advisory firm Kreston Pedabo has warned.
According to the firm, in its September 2026 Monthly Report obtained by The Guardian, the prevailing tax regime in Nigeria expands transfer pricing obligations, restricts interest deductions and subjects interest on foreign loans, including those from related parties, to a 10 per cent withholding tax, a move it says could reduce returns for overseas lenders and raise borrowing costs for Nigerian businesses.
Pedabo warned that the change could increase the cost of foreign borrowing for Nigerian businesses and reduce net yields for overseas lenders, potentially influencing foreign investment decisions.
The firm urged multinational and domestic corporate groups to review their intercompany loan terms, debt-to-equity ratios and transfer pricing policies, warning that financing arrangements lacking commercial substance or adequate documentation could attract heightened tax scrutiny under the new regime.
The report, titled Impact of the Nigeria Tax Act 2025 on Related Party Financing, was authored by Manager, Tax Services, Adewale Kayode; Senior Associate, Tax Services, Ayodeji Adenugba; and Senior Associate, Tax Services. Esther Nofiu
According to the report, the reforms represent one of the most significant shifts in Nigeria’s corporate tax framework, bringing the country closer to Organisation for Economic Co-operation and Development (OECD) standards designed to curb profit shifting and ensure taxes are paid where economic value is created.
The firm said the law placed greater scrutiny on transactions between connected companies, including shareholder loans, parent-subsidiary financing, affiliate lending, guarantees and other intra-group funding arrangements.
