What tertiary education tax means
Tertiary education tax is a levy on the profits of companies registered in Nigeria, applied to funding higher education institutions.
It is assessed on assessable profits, which is a tax computation figure rather than the accounting profit, and it is administered by the Federal Inland Revenue Service alongside company income tax.
The proceeds are applied through the fund established for the purpose, which finances infrastructure, research and development in Nigerian tertiary institutions.
It is a separate charge from company income tax rather than a component of it. A company computes its assessable profits, pays company income tax on its taxable profits, and pays this levy on the assessable profits as well.
The rate has changed more than once in recent years, increasing through successive Finance Acts, and the tax reform legislation passed in 2025 revised the framework of levies further. Any specific rate should be confirmed against the current legislation rather than taken from an older description.
How it is used
For a company with a Nigerian tax adviser, the levy is handled as part of the annual compliance cycle.
The accounts are prepared. The tax computation adjusts accounting profit to assessable profit by adding back non deductible items such as depreciation and deducting capital allowances and other reliefs.
Company income tax is computed on taxable profits, and the education levy is computed on assessable profits at the applicable rate.
The returns are filed and the amounts paid within the statutory timeframe.
The practical points for a business are two.
Budget for it as a separate line rather than assuming the company income tax figure is the whole corporate tax bill. A company modelling its effective tax rate on the headline income tax rate alone will be wrong.
And track the rate, because it has moved. A finance model built on a figure from several years ago understates the liability.
Small companies should also confirm their position, because thresholds and exemptions for smaller entities have featured in the reform legislation and the position for a small company is not necessarily the same as for a large one.
Key features
- A levy on the assessable profits of Nigerian companies
- Administered by the Federal Inland Revenue Service
- Assessed on assessable profits rather than accounting profit
- Separate from company income tax rather than part of it
- The rate has been increased through successive Finance Acts
- The 2025 tax reform revised the framework of levies
How this works in Nigeria
The rate history is the practical point, because it affects planning.
The levy was long charged at two percent of assessable profits. It was increased to two and a half percent by the Finance Act 2021 and to three percent by the Finance Act 2023, and the 2025 tax reform legislation revised the structure of levies again.
Anybody computing a Nigerian company's tax burden should therefore confirm the current rate and structure rather than relying on any figure they remember, including the ones above.
The second practical point is the cumulative effect. A Nigerian company pays company income tax, this education levy, and depending on its sector may pay further levies and contributions: the Industrial Training Fund contribution where thresholds are met, the Nigeria Social Insurance Trust Fund employee compensation contribution, the National Housing Fund where applicable, and sector specific levies.
Each is small in isolation and together they matter, which is why the effective burden on a Nigerian company is materially above the headline income tax rate.
For a business modelling a Nigerian operation, particularly a foreign investor comparing jurisdictions, building the full stack of taxes and levies rather than the headline rate is the difference between a realistic model and an optimistic one.
Small companies should check their specific position. Reliefs and thresholds for smaller entities have been a feature of recent reform, and a small company may be treated differently from a large one.
Company income tax vs education levy vs other contributions
The Nigerian corporate tax burden is a stack rather than a single rate.
Company income tax is charged on taxable profits, computed by adjusting accounting profit for non deductible items and reliefs including capital allowances.
The tertiary education levy is charged on assessable profits, at a rate that has increased through successive Finance Acts. It is a separate charge, not a component of income tax.
Other statutory contributions apply by threshold and sector: the Industrial Training Fund contribution based on payroll for employers meeting the size or turnover threshold, the employee compensation contribution to the Nigeria Social Insurance Trust Fund, National Housing Fund contributions where applicable, and sector specific levies.
A business modelling its Nigerian tax position should build all of these rather than the headline income tax rate, because the effective burden is materially higher.
Limits and risks
The rate has moved repeatedly, which makes long term modelling difficult and makes any published figure date quickly.
The levy is charged on assessable profits, so a company with substantial capital allowances may find the levy base differs materially from its taxable profit base, which is not always modelled correctly.
It applies regardless of whether the company benefits from what the fund finances, which is the usual criticism of hypothecated levies.
And the interaction with incentives such as pioneer status requires specific advice, because relief from company income tax does not automatically mean relief from every levy.
Worth knowing
Build the full stack of Nigerian corporate taxes and levies into your model, not the headline income tax rate. A foreign investor comparing Nigeria on the income tax figure alone is understating the effective burden by a meaningful margin.
Questions people ask
What is tertiary education tax?
A levy on the assessable profits of companies registered in Nigeria, collected by the Federal Inland Revenue Service and applied to funding higher education institutions.
Is it part of company income tax?
No. It is a separate charge. A company pays company income tax on its taxable profits and this levy on its assessable profits, and both are computed in the same annual cycle.
What is the rate?
It has increased more than once, from two percent to two and a half percent under the Finance Act 2021 and to three percent under the Finance Act 2023, with the 2025 reform revising the framework. Confirm the current rate against the legislation.
Do small companies pay it?
Confirm your specific position, because reliefs and thresholds for smaller entities have been a feature of recent reform and a small company may be treated differently from a large one.
What other levies should a Nigerian company budget for?
Depending on thresholds and sector: the Industrial Training Fund contribution, the employee compensation contribution to NSITF, National Housing Fund contributions where applicable, and sector specific levies.
Does pioneer status exempt me from it?
Do not assume so. Relief from company income tax does not automatically mean relief from every levy, and the interaction requires specific advice.