What are the incentives for investing in Nigeria?

Are there any investment Incentives in Nigeria? Nigeria, an entrepreneurial population with innovative, creative, and highly resilient has conveniently been established as a frontier market for bullish investors and its GDP flow has convincingly made her Africa’s largest economy.

To continue to attain the spot of Africa’s Largest economy as a large and competitive market with huge and unmet demand and flexible workforce, the government has considered vital deliberations and various investment incentives in Nigeria to ensure a welcoming investment haven that is;

  • Advocacy of investment in sectors that have vast effects on economic growth.
  • Encouragement of manpower development and employment generation in all sectors.
  • Readily available support for baby crawlers’ businesses in all sectors.
  • Aversely promoting exports that will permanently have a positive impact on foreign exchange earnings.

In adopting the key deliberations, The Nigeria Government has fervently ensured efforts are maintained in areas that concern foreign investors especially taxation policies, business incorporation, visa policies and red tape discussions as these are enablers to fostering an open competitive economy and the right doses of prosperity.

The Nigeria Investment Promotion Commission was established as an agency charged with the jurisdictions to encourage all efforts set up are consistently promoting investments in the economy and related matters and that includes incentivizing packages in vital areas of investment activities.

These packages have stimulated an environment with tax holidays for pioneer businesses in the manufacturing and exportable goods and non-tax incentives to non-pioneer companies.

A few Government Incentives are described below;

 Investment Incentives in Nigeria

1.     Tax Holiday as a Pioneer Status Industry

Incorporated companies in agro-allied, manufacturing and mining sectors are beneficiaries of the Pioneer Status in Nigeria. This is a 5-7 tax holiday granted to sectors in Nigeria with the aim of enabling these industries to make a great amount of profit in their developmental states.

These industries enjoy quite a reasonable amount of capital allowance with a restriction of 75% assessable profit compared to other industries that have 66% assessable profit resistance.

Agro-allied industries leased assets also enjoy a full 100% capital allowance claim especially if the leased assets are agricultural plants with an accrued 10% investment allowance on the expenditure of the leased assets.

Other Tax Policies

Companies enjoy standard companies’ income tax rates at 20% -30%, 5% withholding tax, education tax at 2% for both income and company tax, and value-added tax (VAT) at 7%.

Foreign investors also enjoy a 10% withholding tax on dividends as their final tax on dividends, a 10% capital gains tax rate. Company shares are generally exempted from capital gains tax and the benefits of having stamp duties charged at a flat rate of a maximum of 2% depending on the nature of the instrument.
Read More: Why Invest in Nigeria?

2.     Economic Community of West African States (ECOWAS) Trade Liberalization Scheme

The ECOWAS region has the benefits of export liberalization which is mainly focused on export activities within the ECOWAS sub-region. The plan is to increase significantly intra-community trade in the sub-region and remove trade tariffs and non-tariff barriers.

3.     The Debt Conversion Programme

The Nigerian government created the Debt Conversion Programme (DCP) in 1988, overseen by the Debt Conversion Committee (DCC), for the importation and repatriation of capital. This is to encourage export-oriented sector development and is an excellent means to expand the export market of the economy.

Foreign businesses can subscribe to a better exchange rate when starting a new production project with the approval of the Central Bank of Nigeria. This also applies to foreign investors who purchase their Nigerian stock with the CBN in a different currency and sell and invest them in naira.

4.     100% Foreign Ownership Allowed

According to the NIPC Act, it is not mandatory to have local partners because any foreign national looking to invest in any business, except the ones ruled out, can have full ownership of the business. That is, foreign investors can own 100% of the shares of the company without having Nigerian shareholders.

5.     Africa Continental Free Trade Agreement Attracted Alliances

Africa Continental Free Trade Investment serves the purpose of organizing and developing investment interest in African countries that has the right locations for investment ventures. and competitiveness for business production.

Steps are taken by Companies and Allied Matters (CAMA) 2020 and Finance Act 2019 to help SME businesses to survive by offering them the full benefits of being a part of the AFCFTA which are;

  • Tax-free raw materials supply and exports within the Africa Bloc
  • Free capital movement within the African bloc
  • Access to a bigger market within the African Bloc
  • Better ease for growth and expansion
  • A bigger labour market that entertains healthy competition
  • Easy location of partnerships across borders that serves a wide supply and distribution chain

6.     Transferable Capital and Profits

The NIPC Act and the Foreign Exchange Act, Monitoring, & Miscellaneous Provision Act allow foreign investors to guarantee the right to transfer funds in a freely convertible currency through an authorised dealer. This includes repatriation of profits, dividends, loan service payments, and remittances from business or investment sales or liquidations.

7.     Assurance Against Expropriation

The Nigerian Investment Promotion Commission protects the non-nationalization or expropriation of any foreign-owned investment or business by the Nigerian Government, wherein investment is acquired for a public purpose, and the investor is given sufficient compensation.

8.     Free Trade Zone (FTZ) Incentives

With 33 FTZs with 15 operational and 18 under construction, foreign investors can incorporate their businesses directly with FTZs and apply to operate as a separate entity for the following benefits;

  •       i.         Exemption from all Federal, State and Local Government Taxes, Rates, and Levies
  •      ii.         Duty-free importation of capital goods, machinery/components, spare parts, raw materials, and consumable items in the zones.
  •     iii.         100% foreign ownership of investments.
  •     iv.         100% repatriation of capital, profits, and dividends.
  •      v.         Waiver of all import and export licenses.
  •     vi.         One-stop approvals for permits, operating licenses, and incorporation papers.
  •   vii.         Permission to sell 100% of goods into the domestic market (in which case applicable customs duty on imported raw materials shall apply).
  •  viii.         For prohibited items in the customs territory, free zone goods are allowed for sale as long such goods meet the requirement of up to 35% domestic value addition.
  •     ix.         Rent-free land during the first 6 months of construction (for government-owned zones).

The above-listed investment incentives in Nigeria are few of many that categorised Nigeria as a country that gives absolute room for high investment returns.

If you require more specific information on certain industries in Nigeria, various investment incentives, and how to attain the incentives, please reach out to us here and we are happy to help.



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