The Federal and State Governments continue to provide different incentives to business and industries. Some of the incentives are in form of cash, guarantees, rebate, infrastructure. Some are provided direct by government and some through government agencies. They include:
The N75 billion FGN/BOI Industrial Fund
The scheme commenced in 2011 and is meant to assist at least 1,000 SMEs in Nigeria. It is of two phases comprising of Training/Capacity building and secondly funding through Bank of Industry.
Interest Rebate on Agricultural Loans.
The CBN grants a 40% interest draw back scheme on agricultural loans. This is to encourage investment in Nigeria’s agriculture. An investor can get back 40% of the interest he paid on his loan at the end of the loan tenor from the CBN.
Fiscal measures have been drawn to provide for deductions and allowances in the determination of taxable income of manufacturing enterprises, including Pioneer status, which is a concession to pioneer companies located in economically disadvantaged areas, providing a tax holiday period of five to seven years. These industries must be considered by the government, to be beneficial to the country's economy and in the interest of the public.
Companies that are involved in local raw material development; local value added; labour intensive processing; export oriented activities; in-plant training; are also qualified for additional concessions.
Tax Relief for Research and Development (R&D
Up to 120% of expenses on R&D are tax deductible provided that such R&D activities are carried out in Nigeria and are connected with businesses to which allowances are granted. The result of such research could be patented and protected in accordance with internationally accepted industrial property rights.
Local Raw Materials Utilization:
30% tax concession for five years to industries that attain minimum local raw materials utilization as follows: - - agro 80% - agro allied 70% - engineering 65% - chemical 60% - Petro-chemical 70%
Labor intensive mode of production:
15% tax concession for five years. The rate is graduated in such a way that an industry employing one thousand persons or more will enjoy 15% tax concession while an industry employing one hundred will enjoy only 6%, while those employing two hundred will enjoy 7%, and so on.
Local Value Added
10% tax concession for five years. This applies essentially to engineering industries, while some finished imported products serve as inputs. This is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down parts.
2% tax concession for five years, of the cost of the facilities for training.
Export Oriented Industries
10% tax concession for five years. This concession will apply to industries that export not less than 6% of their products.
20% of the cost of providing basic infrastructures such as roads, water, electricity, where they do not exist, is tax deductible once and for all.
Investment in Economically Disadvantaged Areas
100% tax holiday for seven years and additional 5% depreciation over and above the initial capital depreciation.
Abolition of excise duty
All excise duties were abolished with effect from the 1st of January, 1999.
Import duty rebate
A 25% import duty rebate was introduced in 1995 to ameliorate the adverse effect of inflation and to ensure increase in capacity utilization in the manufacturing sector. Investors are however, advised to ascertain the current operative figures at the time of making an investment, because these concessions have undergone some amendments in the past few years.
This incentive is given to manufacturing companies that incur capital expenditure for purposes of approved expansion of production capacity; modernization of production facilities; diversification into related products. It is aimed at encouraging reinvestment of profits.
Investment Tax Allowance
Under this scheme, a company would enjoy generous tax allowance in respect of qualifying capital expenditure incurred within five years from the date of the approval of the project.
Dividends derived from manufacturing companies in Petro-chemical and liquefied natural gas sub-sector is exempt from tax.
Companies with turnover of less than n1 million are taxed at a low rate of 20% for the first five years of operation if they are into manufacturing.
Dividend from companies in manufacturing sector with turnover of less than n100 million is tax-free for the first five years of their operation.
Investment Guarantees/Effective Protection
Transferability of funds section 24 of NIPC decree provides that a foreign investor in an enterprise shall be guaranteed unconditional transferability of funds through an authorized dealer in freely convertible currency of:
· Dividends or profit (net of taxes) attributable to the investment;
· Payments in respect of loan servicing where a foreign loan has been obtained;
· Remittance of proceeds (net of all taxes)and other obligations in the event of a sale or liquidation of the enterprise or
· Any interest attributable to the investment.
Guarantees Against Expropriation
By the provision of section 25 of the same NIPC decree, no enterprise shall be nationalized or expropriated by any government of the federation, unless the acquisition is in the national interest or for public purpose; and no person who owns either wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person.
These can only be done under a law that makes provision for:
· Payments of fair and adequate compensation; and
· Right of access to the courts for the determination of the investor's interest or right and the amount of compensation to which he is entitled.
In addition to all these safeguards, the Nigerian government is prepared to enter into investment protection agreement with foreign enterprises wishing to invest in Nigeria.
Access to Land
Any company incorporated in Nigeria is allowed to have access to land rights for the purpose of its activity in any state in the country. It is, however, a requirement that industrial companies comply with regulations on use of land for industrial purposes and with environmental regulations. Land lease is usually for a term of 99 years unless the company stipulates a shorter duration.