Carrying forward a trading loss in Nigeria
How a Nigerian company can use a trading loss against later profits under the NRS's guidance, the same-trade rule, and the ring-fence for virtual assets.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
A hard first year, a contract that went wrong, a slow season that never picked up: plenty of Nigerian companies make a loss at some point. The consolation is that a trading loss is not simply gone. Under Nigerian tax law it can be set against profits in later years, reducing the tax on them. But only if the company uses it the right way, against the right profits, and can show where the figure came from.
This article explains what the NRS says about relief for trading losses, the limits on which profits a loss can reduce, the separate rule for losses on virtual assets, and how to keep a loss record that survives a change of accountant.
Relief for losses of earlier periods
The NRS says taxpayers are entitled to relief for losses from prior accounting periods against future taxable profits. That is the principle. The detail of how the relief works for companies is in the NRS's Information Circular No. 2026/01 on ascertaining the income tax of companies and the Development Levy, published on 29 June 2026.
The relief is not automatic in the sense of looking after itself. The NRS also says that to qualify for tax reliefs a taxpayer must keep proper books and records, file accurate and timely returns, and submit the supporting documents the NRS requires. A loss claimed without the records behind it is a loss that can be challenged.
Same trade, next year onwards, until used up
The circular sets out three limits on a company's trade loss:
- Same trade. A trade loss can be deducted only from the trade or business in which the loss was incurred.
- From the next year. The deduction starts with the assessable profits of the first year of assessment after the loss.
- Until recouped. It continues in later years until the loss is fully recouped.
The first limit is the one that catches diversified businesses. A company running a loss-making restaurant and a profitable catering contract may not simply use one against the other if they are different trades. Whether two activities are one trade or two is a question to put to your adviser, with a description of how the business actually operates.
The NRS sets out how company income tax and the Development Levy are ascertained, including the treatment of losses, in its Information Circular on ascertainment of company income tax.
Losses on virtual assets stay ring-fenced
The same circular deals separately with virtual assets. A chargeable loss from disposing of virtual assets may only be deducted from chargeable gains on virtual assets. Any excess is carried forward against such gains in later years, and it cannot be set off against assessable profits from the company's other business streams.
So a company that lost money on crypto-assets cannot use that loss to cut the tax on its trading profit. Keep virtual-asset gains and losses in their own record, separate from the trading loss.
Keeping a loss memorandum beside your management accounts
A tax loss is not the same figure as the loss in your management accounts. Depreciation, capital allowances and items the tax rules disallow all move the number. The figure that carries forward is the tax-adjusted loss from the computation, and it needs its own running record.
Keep a loss memorandum, one page, updated every year:
| Year | Trade | Loss arising | Used this year | Balance carried forward | Source |
|---|---|---|---|---|---|
| The year of the loss | Name of the trade | From the tax computation | Nil | Same as loss | Computation reference |
| Each later year | Same trade | Nil | Against that year's assessable profits | Remaining balance | That year's computation |
Keep virtual-asset losses on a separate page. Achekam's Revenue Service Centre computes Nigerian company income tax with the Development Levy once its rules are approved, but nothing in this article says it keeps a loss balance from year to year for you, so maintain the memorandum yourself and file it with each year's computation.
Reading the balance sheet when the books have no year-end close
Management accounts in Achekam show an income statement for a chosen period beside the period before, and a balance sheet at period end, both added up from the business's own journals and exportable as PDF or CSV. The year-to-date preset starts on 1 January rather than your own year start, so set the dates yourself if your year ends in another month.
One more thing to know when you look at a loss on the balance sheet: Achekam has no year-end closing entry. Profit, or loss, is not closed to retained earnings; it shows as its own line on the balance sheet. After a loss year, that line will show the loss, and the retained earnings line will not yet reflect it. Your accountant will deal with this when preparing the annual financial statements. Do not mistake the separate line for an error, and do not try to fix it with a journal of your own.
Questions to settle with your accountant
- Is the loss figure the tax-adjusted loss from the computation, not the accounting loss?
- Which trade did the loss arise in, and does the company carry on more than one?
- Have any virtual-asset losses been separated out?
- Which year of assessment does relief start in, and how much is used each year?
- Where is the loss memorandum kept, and who updates it?
How company income tax works under the new Act is covered in Nigerian company income tax from 2026, and a small company's filing duties in the small company annual tax return.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
