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Investment Incentives

Investment Incentives & Trade Promotion

The Nigerian Government has put in place a number of investment incentives for the stimulation of private sector investment from within and outside the country. While some of these incentives cover all sectors, other are limited to some specific sectors. The nature and application of these incentives have been considerably simplified.

The incentives include:

 

(i) COMPANIES INCOME TAX

The Companies Income Tax Act has been amended in order to encourage potential and existing investors and entrepreneurs. The current rate in all sectors, except for petroleum, is 30 percent.

 

PIONEER STATUS INCENTIVE

The grant of Pioneer Status to an industry is aimed at enabling the industry concerned to make a reasonable level of profit within its formative years. The profit so made is expected to be ploughed back into the business.

Pioneer status is a tax holiday granted to qualified or (eligible) industries anywhere in the Federation for a period of 3 years ( with additional 2 years where merited) or 7 years in respect of industries located in economically disadvantaged local government area of the Federation. At the moment, there is a list of 71 approved industries declared pioneer industries, which can benefit from tax holiday.

To qualify, a joint venture company or a wholly foreign-owned company must have incurred a capital expenditure of not less than five million Naira whilst that of qualified indigenous company should not be less than N150,000.00. In addition, an application in respect of Pioneer Status must be submitted within one year the applicant company starts commercial production otherwise the application will be time-barred.

REQUIREMENTS

  1. Formal application letter to the Executive Secretary, NIPC
  2. Minimum share capital requirement of N10million   
  3. NIPC business registration certificate
  4. Duly completed NIPC form 2
  5. Certificate of incorporation
  6. CAC forms CO2 and CO7
  7. Tax Clearance Certificate (up to date)
  8. Certified true copy of Memorandum & Articles of Association
  9. Regulatory license where applicable ( eg NERC, NAFDAC, SON)
  10. Fee – N200,000.00

Notes on the Pioneer Status Incentive:

  • Successful applicants will be asked to make a Power Point Presentation (PPP) to NIPC Management (an outline of the PPP will be sent alongside the invitation letter).
  • Subsequent to the PPP, NIPC will conduct a verification visit before approval is granted. NIPC approval takes approximately one month.
  • The grant of the Pioneer Status Incentive (PSI) by NIPC is not an end, as a Production Day will have to be determined by the Industrial Inspectorate Department of Federal Ministry of Industry, after they have carried out their own inspection.
  • The Production Day is the period that the successful applicant begins to enjoy the PSI. Please note also that applications for the PSI are time bound, and have to be made within the first year of operation.
  • NIPC will play a strong facilitatory role through above processes.
  • If application is granted, applicant will pay 2% service charge  determined from its estimated savings.

CAPITAL IMPORTATION

Capital importation and remittances -To fund their investments in Nigeria, foreigners are free, subject to money laundering restrictions, to bring in any recognised foreign currency into Nigeria. Such funds will have to be brought in through an authorised dealer (usually a bank authorised by the CBN). The bank through which the funds were imported will need to issue a certificate of capital importation (“CCI”) to the investor to evidence the inflow of such funds into Nigeria. Where capital is not imported in form of funds but is imported in form of equipment, machinery or raw materials, a CCI will also be required.

In the absence of a CCI, foreign exchange cannot be purchased from the official foreign exchange market for an easy repatriation of the proceeds of the foreigner’s investment from Nigeria. If, for example, no CCI was issued to a foreign lender as evidence of funds disbursed to a Nigerian business, the foreign lender may be unable to receive any principal or interest payments in its offshore accounts because the borrower will be unable to access the official foreign exchange market for the purpose of purchasing foreign currency to remit such principal and interest payment. However, it could if it has access to independent sources of foreign currency (as would a borrower that generates foreign currency through exports) lawfully make such interest and principal payments from its own resources.

Where a foreign national is investing in an enterprise in Nigeria, the bank through which the investment is received, shall issue a Certificate of Capital Importation (CCI) within 24 hours of receipt of capital subject to the prescribed documentation requirements. Capital importation means the inflow of foreign currency in cash or goods (raw materials, machinery and equipment).

Issuance of CCI is based on presentation of the following documents:

  1. Authenticated SWIFT/Telex message advising payment;
  2. Board Resolution of the Nigerian beneficiary authorizing the investment;
  3. Purpose of capital importation e.g. working capital requirement, purchase of fixed assets etc.;
  4. Evidence of incorporation where applicable.
  5. Original Clean Report of Inspection;
  6. Original Invoice duly attested/sealed by the relevant Inspection Agents
  7. Original Bill of Lading;
  8. Original Exchange Control Documents.

Documents (e) to (h) above will apply only where capital is imported in form of equipment/machinery or raw materials. Non-resident investors are also required to register their investments with the NIPC for records and statistical purposes. Issuance of CCI is very important in processing repayment of external loans including suppliers’ credits. Very typical are projects financed by multilateral bodies and Export Credit Agencies (ECAs). The CCI will be required in accessing funds from the Foreign Exchange Market and effecting payment.

The main benefits in issuance of CCI are:

  • Foreign investors are guaranteed unconditional transfer of their dividends, profits and capital relating to their investment in any convertible currency through the banking system in Nigeria.
  • Funds may be sourced officially from the Nigerian Foreign Exchange Market i.e. CBN and Inter-bank subject to the prescribed documentation requirements.
  • Foreign loan repayment including suppliers’ credit may be repaid through the Nigerian banking system on the basis of the CCI and other required documents such as (i) duly completed Form ‘A’, (ii) copy of Loan agreement showing schedule of repayment, (iii) schedule of drawdown of the loan, and (v) Demand Note. For the purpose of remittance of dividends and profits the following documents are required:
  • Duly completed and approved Form ‘A’.
  • Audited accounts for the year dividends were declared.
  • Board/AGM Resolution authorizing payment of dividend/profits to both local and foreign shareholders.
  • Evidence of tax payment on the amount to be repatriated issued by the Federal Inland Revenue Services.
  • CCI or approved Status Certificate (in the case of old companies).
  • Copy of dividend warrant to be repatriated. Where the foreign investor intends to withdraw its capital, the following documents would be required:
  • Duly completed and approved Form ‘A’.
  • Copy of sale agreement
  • Original certificate of capital gains tax paid.
  • CCI or approved Status Certificate (in the case of old companies).
  • Evidence to show that the beneficiary has sold or transferred assets.
  • Evidence of valuation by an independent third party

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