The Nigerian Investment Promotion Council (NIPC) has been strengthened to enable it serve as a one-stop office for clearing all the requirements for investment in the country. The tariff structure is being reformed with a view to boosting local production. The Government offers a number of general and industry-specific incentives.
- A debit-conversion program allows foreign companies to obtain an enhanced exchange rate when they are injecting new equity into a production project that has been approved by the Central Bank of Nigeria (CBN).
- Small and medium-scale industries are eligible for loans from the Bank of industry and other development banks.
- The Raw Materials Research and Development Council provides grants for research and development that leads to the greater use ofNigerian raw materials in domestic industry.
Industry Specific Incentives
Fiscal measures have been drawn to provide for deductions and allowances in the determination of taxable income of manufacturing enterprises, including:
- Pioneer status, which is a concession to pioneer companies located in economically disadvantaged areas, providing a tax holiday period of five to seven years. These industries must be considered by the government, to be beneficial to the country’s economy and in the interest of the public.
- Companies that are involved in local raw material development; local value added; labour intensive processing; export oriented activities; in-plant training; are also qualified for additional concessions.
Tax Relief for Research and Development (R&D)
Up to 120% of expenses on R&D are tax deductible provided that such R&D activities are carried out in Nigeria and are connected with businesses to which allowances are granted. The result of such research could be patented and protected in accordance with internationally accepted industrial property rights.
Local Raw Materials Utilization
30% tax concession for five years to industries that attain minimum local raw materials utilization as follows; agro 80%, agro allied 70%, engineering 65%, chemical 60% and petro-chemical 70%
Labor Intensive Mode of Production
15% tax concession for five years. The rate is graduated in such a way that an industry employing one thousand persons or more will enjoy 15% tax concession while an industry employing one hundred will enjoy only 6%, while those employing two hundred will enjoy 7%, and so on.
Local Value Added
10% tax concession for five years. This applies essentially to engineering industries, while some finished imported products serve as inputs. This is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down parts.
2% tax concession for five years, of the cost of the facilities for training.
Export Oriented Industries
10% tax concession for five years. This concession will apply to industries that export not less than 6% of their products.
20% of the cost of providing basic infrastructures such as roads, water, electricity, where they do not exist, is tax deductible once and for all.
Investment in Economically Disadvantaged Areas
100% tax holiday for seven years and additional 5% depreciation over and above the initial capital depreciation.
Abolition of Excise Duty
All excise duties were abolished with effect from the 1st of January, 1999.
Import Duty Rebate
A 25% import duty rebate was introduced in 1995 to ameliorate the adverse effect of inflation and to ensure increase in capacity utilization in the manufacturing sector. Investors are however, advised to ascertain the current operative figures at the time of making an investment, because these concessions have undergone some amendments in the past few years.
This incentive is given to manufacturing companies that incur capital expenditure for purposes of approved expansion of production capacity; modernization of production facilities; diversification into related products. It is aimed at encouraging reinvestment of profits.
Investment Tax Allowance
Under this scheme, a company would enjoy generous tax allowance in respect of qualifying capital expenditure incurred within five years from the date of the approval of the project.
Dividends derived from manufacturing companies in petro-chemical and liquefied natural gas sub-sector are exempt from tax.
Companies with turnover of less than N1 million are taxed at a low rate of 20% for the first five years of operation if they are into manufacturing.
Dividend from companies in manufacturing sector with turnover of less than N100 million is tax-free for the first five years of their operation.