- Pioneer status: For three-to-five years, pioneer industries enjoy a 100% tax-free period if products are deemed “pioneer products” under the Industrial Development (Income Tax Relief) Act.
- Infrastructure: Investment tax relief is available for each year of expenditure to companies that provide basic infrastructure at the following rates: tarred roads (15%), water (30%), electricity (50%), and 100% for companies that provide all such basic facilities where they do not exist.
- Research and development (R&D): Qualifying R&D expenses are tax deductible by a company, but the amount deducted may not exceed 10% of the company’s total profits for the relevant year of assessment. In addition, companies and organisations engaged in R&D activities for commercialisation are granted a 20% investment tax credit on qualifying expenditure.
- Export trade: Companies engaged in export trade are entitled to the following incentives, among others:
- Profits of a Nigerian company relating to goods exported from Nigeria (provided the proceeds from the exports are repatriated to Nigeria and used exclusively for the purchase of raw materials, plant and equipment and spare parts) are exempt from tax.
- Profits of companies whose products are used exclusively as inputs for the manufacturing of products for exports are tax-exempt.
- An export expansion grant is available, which is settled by issuing an export credit certificate to the beneficiaries. The certificate can be used to settle federal government taxes, among other benefits.
- Incentives for investors in the agriculture sector: Numerous incentives are available to stimulate investment in agricultural activities. Import levies have been increased on certain agricultural products, such as wheat flour, wheat grain and brown rice, to encourage local production. These include an enhanced capital allowance regime; an agricultural credit guarantee scheme fund with a loan guarantee of up to 75%, an exemption from the minimum corporate income tax, and a 0% import duty on agricultural equipment and machinery.
- Incentives for the tourism sector: Incentives have been put in place to encourage domestic and foreign investor participation in the tourism industry. 25% of income in convertible currencies are exempted from tax.
- Free Trade Zones (FTZs): FTZs offer numerous incentives to businesses. Locating in any FTZ in Nigeria automatically confers on the investor certain locational advantages and other generous incentives. Essentially, companies operating in an FTZ are exempt from tax on business transactions concluded within the zones.
- Investment Promotion and Protection Agreement (IPPA): As part of an additional effort to foster foreign investor confidence in Nigeria, the federal government has continued to enter into IPPAs with countries that do business with Nigeria (e.g. China, South Africa, United Kingdom, etc.)
- Small- and Medium-Sized Enterprise Equity Investment Scheme (SMEEIS) – The SMEEIS requires all banks in Nigeria to set aside 10% of their profits after-tax (PAT) for equity investment and the promotion of SMEs.
- Gas industry: The government has approved various fiscal incentives, including an accelerated capital allowance, tax-free dividends, and a deduction for interest expense incurred on loans for companies involved in the utilisation of gas.
Pioneer Status Incentive (PSI)
The Pioneer Status Incentive is a tax holiday which grants qualifying industries and products relief from the payment of corporate income tax for an initial period of three years, extendable for one or two additional years.
Pioneer status is granted to an industry or product if:
- It is not or not sufficiently available in Nigeria
- There are favourable prospects for further development in Nigeria; or
- It is in the public interest to promote the development or establishment of such industry in Nigeria.
The Application Guidelines for the PSI are accessible here.
Find more about the Pioneer Status Incentive here.
Further Information on Investment Incentives
- Overview/Summary of Investment Incentives
- Compendium of Investment Incentives in Nigeria
- Investment Opportunities in the Renewable Energy Sector
- Import Duty Incentives