Managing Tax Risks for Improved Creditworthiness: Lessons for Nigerian Companies.


In Nigeria’s ever-evolving business landscape, access to credit is fundamental for growth, expansion and financial stability. However, managing tax risks is a critical but often overlooked aspect of enhancing creditworthiness for Nigerian companies. In this article, we will explore the essential lessons for Nigerian businesses on how effectively managing tax risks can significantly improve their creditworthiness, paving the way for better access to credit.

The Importance of Creditworthiness:

Creditworthiness, often assessed through credit reports and scores, is a measure of a company’s ability to repay its financial obligations. It plays a pivotal role in determining whether a business can secure loans, lines of credit or other forms of financing. Improved creditworthiness offers several benefits, including:

  1. Access to Financing: Strong creditworthiness makes it easier to secure financing, enabling businesses to invest in growth opportunities.
  2. Lower Borrowing Costs: Companies with higher creditworthiness often enjoy lower interest rates, reducing the overall cost of borrowing.
  3. Enhanced Negotiating Power: A favorable credit profile provides negotiating leverage when discussing credit terms with lenders.
  4. Risk Mitigation: Strong creditworthiness reflects financial stability and mitigates the risk of potential loan defaults.

Managing Tax Risks for Improved Creditworthiness: Key Lessons

  1. Proactive Tax Planning: Engage tax professionals to develop proactive tax planning strategies that optimize your company’s financial position. Identify opportunities for tax savings and efficient tax management.
  2. Timely and Accurate Tax Filing: Ensure that your company files its tax returns accurately and on time. Late or incorrect filings can lead to penalties and negatively impact creditworthiness.
  3. Transparent Financial Records: Maintain transparent financial records and reporting practices consistently. Transparent financial management showcases financial responsibility and helps build trust with lenders.
  4. Regular Compliance Audits: Conduct regular compliance audits to identify and address potential tax issues proactively. Addressing these issues promptly can prevent them from becoming major liabilities.
  5. Risk Assessment: Evaluate your company’s tax risk exposure comprehensively. Identify areas of potential tax risk and develop strategies to mitigate these risks.
  6. Consistent Tax Payments: Prioritize timely payment of taxes. Consistent tax payments demonstrate financial responsibility and compliance with tax regulations.
  7. Diversified Financing: Explore various financing options to reduce reliance on a single source of credit. Diversification can enhance financial stability and reduce credit risk.
  8. Communication with Lenders: Maintain open communication with your lenders. Inform them of any challenges or changes in your financial circumstances promptly. Lenders may be more willing to work with companies that are transparent about their challenges.


Managing tax risks is a crucial component of improving creditworthiness for Nigerian companies seeking access to credit. By implementing proactive tax planning, maintaining transparent financial records, and prioritizing timely tax payments, businesses can mitigate tax risks and enhance their credit profiles. Improved creditworthiness not only increases access to financing but also leads to lower borrowing costs and enhanced negotiating power. Ultimately, the lessons learned from effectively managing tax risks contribute to financial stability and resilience in Nigeria’s competitive business environment. Companies that recognize the importance of these lessons can position themselves for growth and success in the credit-driven landscape of Nigerian business.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.