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:
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.
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.
Notes on the Pioneer Status Incentive:
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:
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:
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