Nigerian investment promotion commission is a Federal Government agency established to encourage, promote and coordinate investment in Nigeria. It was established by Nigerian Investment Promotion Act Chapter N117 Laws of the Federation of Nigeria 2004.
- To act on behalf of government in coordinating all investment opportunities under this Act;
- Provide information on existing investment incentives to investors;
- Advise Federal government on policy matters;
- Perform other functions that enhance the attainment of the objectives of the Act.
VARIOUS OPPORTUNITIES AND INCENTIVES
Agricultural sector contributes about 25% of Nigeria’s Gross Domestic Product (GDP) and accounts for 48% of the total labour force. The sector deals in Crop production, livestock, fisheries and forestry that account for 22.6%, 1.7%, 0.5% and 0.3% of the total GDP respectively.
The development framework of this sector is guided by Agricultural Promotion Policy 2016-2020 which succeed the defunct Agricultural Transformation Agenda of 2011-2015.
Broad categorization of investment opportunities in the Nigerian Agricultural Sector include, but not limited to:
- Mechanized crop production such as rice, millet, cassava, etc.
- Food processing and preservation.
- Cash crop processing.
- Horticulture development.
- Agricultural input supplies.
- Livestock cultivation.
- Market Research.
In order to encourage private sector participation in the development of Agricultural Sector, the Government has deliberately designed some investment incentives inform of tax holiday, exemption and/or relief. Some of these include:
- Income tax relief for a period of three years which can be extended further for a period of two years.
- Zero import duty for importation of agricultural equipment.
- Exemption of interest from tax on loans granted for agricultural purpose.
- Exception from Value Added Tax (VAT).
- Access to Agricultural Credit Guarantee Scheme up to 75% and many more incentives.
Nigeria is a suitable location for various industrial activities due to her riches in natural resources, affordable labour cost and readily made market.
The sector contributes an annual average rate of 21% of the total GDP which can be traced to: oil & gas (9%), manufacturing (7%), and construction (5%).
The major philosophy behind Nigeria’s aspiration to broaden the scope of industry and expand manufacturing sub-sector is the Nigeria Industrial Revolution Plan (NIRP). This Revolution plan is to ensure that Nigeria becomes the preferred manufacturing hub in West Africa as well as the preferred source of supplying low and medium-technology consumer and industrial goods domestically and regionally.
Every individual or corporate body who is willing to invest in the Nigerian industrial sector can consider the following:
- Oil & Gas Industry: this include Oil, natural gas and all oil related products which account for over 90% of the total export volume and more than 80% of the government revenues.
- Manufacturing: this is a sector with a potential annual growth rate of about 9% and it cut across; Food processing, Brewing industry, Cement industry, textile industry and many more.
Investment incentives designed by government to support investors who are interested in the Nigeria Industrial sector is closely related to that of the Agricultural sector. This is as a result of symbiotic relationship between the two sectors.
The World Bank published a 27.1 Service Trade Restriction Index as regard Nigeria’s Service sector in 2018, this shows that Nigeria is one of the most open service markets in Africa.
Services currently accounts for 53% of the Nigeria’s gross domestic product (GDP). This is respectively shared by top services activities such as trade (16%), information and communication (12%), real estate (6%), professional, scientific and technical services (4%), and financial and insurance (3%).
The services and their sub-sectors have the potential to grow substantially in the nearest future due to government policies and investment incentives as provided in the Compendium of Investment Incentives in Nigeria.
PIONEER STATUS INCENTIVE AND PROCESS
The Pioneer Status Incentive was established by the Industrial Development (Income Tax Relief) Act, No 22 of 1971 and it is a tax holiday which grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional years.
Application process (new applicants)
The underlisted steps are to be taken when applying for Pioneer Status Incentive:
- Write to NIPC:
- New applicants will download guidelines, application form and presentation format,
- Request date to present project to NIPC.
- Present Project:
- Agree presentation date and present project on the selected date to NIPC
- NIPC then provides feedback and request payment of application and due diligence fee.
- Make Fee Payment: New applicants are expected to make the following payments
- Application fee: N200,000
- Due diligence fee: N500,000
- Submit Application:
- Submit completed Part I of the application form to the Executive Secretary of NIPC with supporting documents in soft or hard copy.
- NIPC carries out Due Diligence, makes Decision, request for service charge and then makes approval in principle. A copy of the approval will be sent to IFRS, IID and State Ministry.
- After the application is approved, the applicant can apply for production date certificate and Pioneer Status Incentive certificate.
Application Process for Extension
When applying for Pioneer Status Extension, applicant will observe step i to iv as it is stated for new applicant above. If the application is successful, NIPC issues the applicant with PSI Extension Certificate and send copy to FIRS and IID.
List of approved industries and products
- Professional services
- Information and Communication
- Financial Services
- Electricity and Gas supply etc.
SPECIAL INCENTIVES AND PROTECTIONS POLICIES
- Sections 17 & 18 NIPC Act: this policy is put in place to liberalise ownership of investment by any national in any enterprise except enterprises that deal in activities listed on ‘negative list’ such as- production of arms and ammunitions, production of and dealing in narcotic drugs and psychotropic substance, military and paramilitary wears etc.
- Free transferability of capital and returns: Section 24 NIPC Act provides that a foreign investor in an enterprise, to which this Act applies, shall be guaranteed unconditional transferability of funds through an authorized dealer in a freely convertible currency.
- Protection against nationalization and expropriation: Section 25 NIPC Act provides guarantees to investors against nationalization and expropriation. Where an acquisition is done in public interest, the investor has the right to go to court and has right to adequate compensation without delay.
These and many more investment protection policies are embedded in the NIPC Compendium of Investment Incentives.
GENERAL TAX BASED INCENTIVES
There are various Tax and relief based incentives available that can be accessed by new and existing investors. These taxes cut across Personal Income Tax (PIT), Capital Gain Tax (CGT), Company Income Tax (CIT) and Value Added Tax (VAT). These incentives are summarized below:
- Consolidated relief allowance as stated in section 33(1) PITA
- Returns not to be filed where income is less than N30,000 as stated in section 43 PITA
- Tax credit allowable against tax payable on income derived from outside Nigeria as stated in Section 11 PITA
- Exemption of interest on loans granted by banks as stated in section 19(7) PITA
- Exemption of gains accruing on securities, stocks and shares as stated in section 30 CGTA
- Tax exemption on gains arising from take-overs, absorption or merger as stated in section 32 CGTA
- Tax exemption on proceeds re-invested as stated in section 33 CGTA
- Exemption of tax on the profits of some companies as explicitly listed in section 23(1) CITA
- Accelerated capital allowance for companies in gas utilization operations as stated in section 39(c) CITA
- 20% Income tax rate for companies with turnover less than #1million as stated in section 40(6) CITA
- Exemption of some listed goods and services from value added tax as stated in section 2 & 3 First schedule VAT Act.
Above listed tax based incentives and reliefs and many more are embedded in NIPC Compendium of Investment Incentives.
SECTOR SPECIFIC INCENTIVES
- Enhanced capital allowance: companies engaged in wholly agricultural activities are entitled to:
- unrestricted capital allowance up to 95% in the year a qualifying expenditure is incurred,
- carry forward unutilized capital allowance indefinitely.
- Agricultural credit guarantee scheme fund: loan guarantee of up to 75%
- Exemption from minimum Corporate Income Tax
- Indefinite carry over of losses
- Exemption from company income tax
- 95% accelerated capital allowance
- Interest drawback program fund for cassava processing: 60% repayment of interest paid by those who borrow from banks under ACGS for the purpose of cassava production and processing.
Oil & Gas
Graduated royalty rates approved for oil companies
- On shore production – 20%
- Production in territorial waters and continental shelf areas up to 100 meters Water depth – 18.5%
- Production in territorial waters of continental shelf areas beyond 100 meters – 16.67%
- For production sharing contract for deep offshore operation, the royalty rates are
- Investment tax credit allowance
TARIFF BASED INCENTIVES
Agriculture: Agriculture, Agro-allied and Agro-processing
- 0% Import duty on agriculture equipment and machinery
- 0% Import duty rate greenhouse equipment has been classified as agricultural equipment
- 0% Import duty on commercial aircraft HS Heading 88 only for registered commercial aircraft operators
Power: Electricity Generation, Distribution and Transmission
- 0% Import duty on equipment & machinery in the power sector
Solid Minerals: Mineral Mining
- 0% Import duty on equipment & machinery in the mineral mining sector
Manufacturing: Sugar Processing
- 5% Import duty rate and 5% levy on raw sugar import for local processing. Available to sugar refineries that are signed onto the backward integration policy of Government on sugar development
Manufacturing: Iron & Steel
- 0% Import duty rate on importation of billets
- 0% Import duty rate on importation of hot rolled steel sheets/coils HS Heading 72.08
ACCESS TO VARIOUS AVAILABLE FINANCE
There are numerous sources of finance that can be considered by new investors and existing investors who are looking for a way to expand their investment. These include:
- Government Fund: there are various government regulated institutions that provide loans, insurance and credits to investors at a very low or no interest rate. These institutions include: Bank of Agriculture (BOA), Bank of Industry (BOI), Development Bank of Nigeria (DBN), Federal Mortgage Bank of Nigeria, Nigeria Sovereign Investment Authority and many more of them.
- Private Finance: investors and aspiring investors can also get funds from commercial banks (Guaranty Trust Bank, Access Bank, First Bank, etc) and Private Equity and Venture Capital such as- AFRICINVEST, CBO Capital, Coronation Capital, FBN Quest and so many more.
There are also Development Finance Institution such as Africa Finance Corporation (AFC) and International Finance Corporation (IFC) that grant credit to investors for easy establishment and expansion.
The above-mentioned opportunities and many more abound in the Nigerian Economy waiting to be harnessed. Investors are advised to select areas of interest in any of the sectors, carry out feasibility studies and come up with an investment plan that will yield highest returns in the long run.