By Kehinde Ibrahim, Lagos
BUSINESS that depend on Nigeria’s vast informal distribution network could face higher operating costs and growing pressure on their supply chains as the Federal Government rolls out the Presumptive Tax Regulations, 2026, according to a new report by professional services firm KPMG.
The advisory firm warned that although the new tax framework is primarily targeted at bringing informal businesses into the tax net, its ripple effects are likely to extend far beyond the affected taxpayers. Companies that rely on informal distributors, wholesalers, agents and service providers may ultimately encounter increased procurement and distribution expenses, with much of the additional cost expected to be transferred to consumers through higher prices.
The warning was contained in KPMG’s report titled “Nigeria’s Presumptive Tax Regulations, 2026: Key Highlights and Practical Implications for Taxpayers.” The report stated that while corporate organisations are generally excluded from the presumptive tax regime, many businesses could still experience indirect commercial consequences because significant portions of their supply chains are linked to operators within the informal economy.
According to KPMG, distributors and other informal businesses with annual turnover exceeding N12 million will be subject to a one per cent presumptive tax on turnover under the new regulations. The firm noted that this could substantially increase operating expenses for affected businesses, particularly those that generate high sales volumes but operate on relatively low profit margins.
It explained that for distributors operating under a high-volume, low-margin business model, a turnover-based tax could consume a sizeable share of their earnings, reducing profitability and creating pressure to increase prices in order to sustain their operations.
The report stated, “Where these distributors operate a high volume, low margin business model, a turnover-based tax may represent a significant proportion of their net profit. This could reduce profitability and result in upward price adjustments.”
KPMG therefore advised businesses to begin assessing the likely impact of the regulations on their operations and commercial relationships, especially where they depend on informal distributors, agents or service providers that may now fall within the scope of the presumptive tax regime.
The report explained that the Presumptive Tax Regulations were introduced as part of the Federal Government’s broader strategy to expand Nigeria’s tax base by bringing previously unregistered businesses in the informal economy into the tax system. The framework is designed to simplify tax compliance for businesses that do not maintain adequate accounting records while improving tax collection across the sector.
Despite acknowledging the policy’s objective of improving tax compliance and increasing government revenue, KPMG cautioned that the regulations could produce wider economic and commercial consequences beyond their fiscal intent.
According to the report, informal businesses exceeding the prescribed turnover threshold are likely to experience increased tax liabilities, placing additional strain on businesses already operating on thin margins. Such financial pressure could affect the efficiency and cost structure of supply chains across several industries.
The report further advised organisations that engage informal vendors, distributors, agents and other service providers to carefully evaluate how the new tax obligations may influence procurement costs, product pricing and overall supply chain resilience.
While recognising that the regulations have the potential to strengthen Nigeria’s tax administration and improve compliance within the informal sector, KPMG stressed that businesses should not view the framework solely from a tax compliance perspective.
Instead, companies should proactively review sourcing strategies, distribution arrangements and pricing models to mitigate the potential impact of higher operating costs across their value chains.
The report also identified possible implementation challenges associated with the prohibition of cash tax payments under the new regime. Although the provision aligns with the government’s objective of improving transparency, strengthening accountability and reducing revenue leakages, KPMG observed that its effectiveness would depend significantly on the availability of reliable digital payment infrastructure nationwide.
According to the report, inadequate access to digital payment channels in underserved and rural communities could pose practical difficulties for many informal businesses expected to comply with the new tax requirements.
KPMG further noted that the regulations empower Relevant Tax Authorities to identify and register previously unregistered taxpayers and issue them Tax Identification Numbers ,TINs. However, the firm emphasised that achieving this objective would require substantial investments in taxpayer identification systems, digital infrastructure, data integration and effective collaboration among government agencies.
Given the size and complexity of Nigeria’s informal economy, KPMG argued that successful implementation of the presumptive tax framework would depend not only on sound policy design but also on the government’s capacity to build efficient administrative systems capable of identifying eligible taxpayers and facilitating seamless compliance.
The report concluded that while the Presumptive Tax Regulations represent a significant step toward expanding Nigeria’s tax base, businesses should prepare for the indirect commercial implications that may accompany the reforms. It added that companies with extensive exposure to informal distribution networks would need to closely monitor developments and adapt their operational strategies as the new tax regime takes effect.
