Insurers Warn of Profit Erosion Amid Economic Pressures

in digital tax reporting sys­tems. Operators without robust in-house tax and compliance infrastructure may face higher operating costs and exposure to penalties.

Minimum Effective Tax Rate And De­velopment Levy

Kayode identified the intro­duction of a global minimum effective tax rate of 15 percent as one of the most significant fiscal challenges for larger insurers, particularly those with multi­national operations or foreign investment income. The mini­mum tax and top-up tax rules, aligned with global tax norms, are expected to increase effective tax liabilities for major industry players.

Compounding this challenge is the introduction of a four per­cent development levy, which industry leaders warn will further erode profitability at a time when insurers are already under pressure to shore up cap­ital and meet stricter regulatory standards.

Interaction With Other Regulatory Reforms

The insurance sector’s con­cerns are amplified by the fact that the tax reforms are un­folding alongside other major regulatory changes, notably the Nigeria Insurance Industry Reform Act (NIIRA) 2025, which significantly raised minimum capital requirements across the industry.

Stakeholders argue that the combined impact of higher tax­es, increased compliance costs and recapitalisation demands could disproportionately affect smaller and mid-tier insurers, potentially accelerating consol­idation in the sector.

Industry leaders and share­holders have therefore called on the government to consider transitional measures, includ­ing temporary tax reliefs or phased implementation, to al­low insurers to adjust to both fiscal and regulatory reforms without undue financial strain.

Opportunities And Strategic Impli­cations

Despite these challenges, Kayode acknowledged that the Nigeria Tax Act 2025 also presents notable opportuni­ties for the insurance sector. Clearer and consolidated tax provisions can improve predictability and long-term planning, while industry-spe­cific deductions help align tax liabilities more closely with economic realities.

In addition, modernised compliance requirements and alignment with global tax stan­dards could enhance the credi­bility of Nigeria’s insurance in­dustry among foreign investors and international partners.

Nevertheless, he cautioned that insurers will need to strengthen tax planning capa­bilities, invest in compliance infrastructure and maintain proactive engagement with reg­ulators to navigate the evolving fiscal landscape effectively.

Broader Economic Concerns

Beyond the insurance in­dustry, concerns have also been raised about the wider econom­ic implications of the reforms. Mr. Muda Yusuf, Chief Exec­utive Officer of the Centre for the Promotion of Private En­terprise, warned that success­ful implementation of the tax reforms will depend more on strategic execution than policy intent alone.

Yusuf noted that Nigeria’s fragile economic recovery makes timing critical, stressing that poorly sequenced reforms could undermine business con­fidence.

He expressed particular con­cern about the informal sector, which employs millions of Nige­rians and operates on thin mar­gins, warning that mandatory filings and penalties could effec­tively “criminalise informality” if introduced too abruptly.

He recommended a reve­nue-efficient approach that fo­cuses enforcement on large cor­porations and high-net-worth individuals, who account for the bulk of tax revenue, while using incentives, education and gradu­al integration to bring informal businesses into the tax net.

With 2026 shaping up as a pre-election year, Yusuf also cau­tioned against rushing reforms that could provoke political backlash and further erode pub­lic trust in government policies.

Balancing Revenue And Sustainability

Ultimately, while the Nigeria Tax Act 2025 represents a pivotal transformation of the country’s fiscal framework, its impact on the insurance sector will depend on balanced implementation, stakeholder engagement and complementary policy mea­sures.

For insurers, the Act intro­duces clearer tax treatment and modern compliance standards, but also imposes heavier fiscal and operational demands at a sensitive moment for the indus­try. Achieving the government’s revenue objectives without un­dermining sector stability will require careful calibration to ensure that tax reform sup­ports, rather than constrains, sustainable growth in Nigeria’s insurance market.