Investment Incentives

INVESTMENT INCENTIVES IN NIGERIA

AS PART OF THE EFFORTS TO PROVIDE AN ENABLING ENVIRONMENT THAT IS CONDUCIVE TO THE GROWTH AND DEVELOPMENT OF INDUSTRIES, INFLOW OF FOREIGN DIRECT INVESTMENT (FDI), SHIELD EXISTING INVESTMENTS FROM UNFAIR COMPETITION, AND STIMULATE THE EXPANSION OF DOMESTIC PRODUCTION CAPACITY; THE FEDERAL GOVERNMENT OF NIGERIA HAS DEVELOPED A PACKAGE OF INCENTIVES FOR VARIOUS SECTORS OF THE ECONOMY. THESE INCENTIVES, IT IS HOPED, WILL HELP REVIVE THE ECONOMY, ACCELERATE GROWTH AND DEVELOPMENT AND REDUCE POVERTY.

NIGERIAN GOVERNMENT ACCEPTS THE PRIVATE SECTOR AS THE ENGINE OF GROWTH AND THE CREATOR OF WEALTH, WHILE THE GOVERNMENT'S MAJOR RESPONSIBILITY IS TO PROVIDE THE ENABLING ENVIRONMENT FOR THE PRIVATE INVESTORS TO OPERATE.

IN THIS REGARD, LAWS WHICH HAD HITHERTO HINDERED PRIVATE SECTOR INVESTMENTS HAVE BEEN EITHER AMENDED OR REPEALED AND A NATIONAL COUNCIL ON PRIVATIZATION HAS BEEN ESTABLISHED TO OVERSEE ORDERLY DIVESTMENT TO PRIVATE OPERATORS IN VITAL AREAS OF THE ECONOMY SUCH AS MINING, TRANSPORTATION,

ELECTRICITY, TELECOMMUNICATIONS, PETROLEUM AND GAS.

NIGERIAN GOVERNMENT'S POLICY OF ECONOMIC DEREGULATION AND LIBERALIZATION HAS OPENED UP NEW WINDOWS OF OPPORTUNITY TO ALL INVESTORS WISHING TO INVEST IN THE COUNTRY'S ECONOMY. IN THIS CONNECTION, AN INTEREST RATE REGIME 
SUPPORTIVE OF THE REAL SECTOR OF THE ECONOMY AS WELL AS AN EXCHANGE RATE THAT IS MARKET DETERMINED IS THE OBJECT OF GOVERNMENT POLICY. THE SECURITY OF LIFE AND PROPERTY OF THE CITIZENS ARE BEING VIGOROUSLY PURSUED WITH THE REORGANIZATION AND STRENGTHENING OF THE NIGERIAN POLICE FORCE. 
IN ADDITION, 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.

GOVERNMENT HAS INTRODUCED A NEW VISA POLICY TO ENABLE GENUINE FOREIGN INVESTORS TO PROCURE ENTRY VISA TO NIGERIA WITHIN 48 HOURS OF SUBMISSION OF REQUIRED DOCUMENTATION.

EXISTING "EXPATRIATE QUOTA" REQUIREMENT FOR FOREIGN NATIONALS WORKING IN NIGERIA IS IN THE PROCESS OF BEING REPLACED WITH "WORK PERMIT" WHICH WILL BE ADMINISTERED BY THE NIGERIAN INVESTMENT PROMOTION COUNCIL (NIPC). 
WITHIN THE PAST FEW YEARS FOLLOWING THE END OF MILITARY DICTATORSHIP IN NIGERIA, GOVERNMENT HAS PROGRESSIVELY INTRODUCED A NUMBER OF INCENTIVES DESIGNED TO PROMOTE INVESTMENTS. THESE ARE GROUPED AS FOLLOWS: 

INDUSTRIAL SECTOR

TAXATION

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. THE GOVERNMENT MUST CONSIDER THESE INDUSTRIES, 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; LABOR 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% - 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.

IN-PLANT TRAINING
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. 

INFRASTRUCTURE 
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. 

RE-INVESTMENT ALLOWANCE 
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.