Doing Business In Nigeria: Some Of The Incentives Available To Investors

By the provisions of Section 21 of the NIPC Act, ownership of enterprises in Nigeria has generally been liberalized. To this effect, a foreign enterprise can generally invest in all or a portion of the shares of any Nigerian enterprise (other than few business activities expressly prohibited by the NIPC Act) in any convertible foreign currency; thereby opening up the Nigerian economy to foreign investment capital.

By virtue of Section 23 of the NIPC Act, the NIPC is empowered to issue guidelines and procedures designating certain sectors of the Nigerian economy as “priority areas” for the purpose of receiving targeted incentives. Further, Section 30 of the NIPC Act grants the NIPC power to generally make regulations for the implementation of the objectives for which the NIPC was set up, as well as exercise its powers. Pursuant to such powers and those conferred by the Industrial Development (Income Tax Relief) Act (“IDITRA”), Cap I7, LFN 2004 (note that Section 1 of IDITRA empowers the President to cause to be published in the gazette of the Federal Government of Nigeria, a list of such industries and products that may be considered as pioneer industries and pioneer products, having regard to national industrial development plan and public interest), the NIPC has published several lists of pioneer industries/products that are eligible for the conferment of “Pioneer Status” – a major investment incentive in Nigeria, which effectively operates as a tax holiday for a specified period, up to a maximum period of five (5) years. The Pioneer Status Incentive Regulations 2014 issued by the NIPC and which became effective from 30th January 2014 specify the conditions for eligibility, application fees and other requirements for benefitting from this incentive.

It is instructive to note that most of the incentives provided to enterprises in Nigeria come in form of tax reliefs. For instance, the Companies Income Tax Act, Cap C21, LFN 2004 (“CITA”), permits deduction, from taxable income, of expenses incurred wholly exclusively and necessary in the promotion of a business venture, provides for capital allowances for qualifying capital expenditure incurred in the course of doing business (as provided for under the Second Schedule to the CITA) and grants tax exemption for interest payable in relation to foreign and agricultural loans invested in Nigeria under certain circumstances, as provided for under the Third Schedule (pursuant to Section 11) to the CITA, amongst other incentives.

Also, as a way of encouraging international trade and investment by cutting down on costs of international transactions, Nigeria has entered into Double Taxation Agreements (“DTAs”) with a number of countries to provide relief from double taxation, in respect of taxes which are payable on any taxable profit in Nigeria and any taxes of similar character imposed by the laws of the foreign country involved. Countries with which Nigeria has signed subsisting DTAs include Belgium, Canada, China, France, the Netherlands, Pakistan, Philippines, Romania, South Africa, and the United Kingdom.

Further, for the purpose of encouraging rapid industrial and local content development, attracting foreign direct investment and promoting public-private-partnership for economic development (especially in export-orientated industries), the Nigerian government has designated certain areas as free zones or export processing zones where enterprises enjoy exemption from taxes on their profits and other fiscal incentives and benefit from economies of scale and concentration of infrastructure. In this connection, Section 2 of the Nigeria Export Processing Zones Act (“NEPZ Act”), 1992 (Cap N107 LFN 2004) establishes the Nigeria Export Processing Authority (the “NEPZA”) as the agency charged, under Section 4 of the NEPZ Act, with general administration, supervision and coordination of the activities within Export Processing Zones (“EPZ”) in Nigeria. The President is empowered (under Section 1 of NEPZ Act), on the recommendation of the NEPZA, to designate any area in Nigeria as an EPZ.