PIONEER STATUS AND OTHER INCENTIVES AVAILABLE TO FOREIGN AND INDIGENOUS INVESTORS IN THE NIGERIAN
The successive and current governments of the federal republic of Nigeria has deemed it expedient to adopt the international best practice of introducing a wide range of economic incentive and reliefs that would motivate investors so as to make Nigeria an investment safe haven
These incentives and reliefs are meticulously captured in various laws of Nigeria, but most specifically in the Nigerian Investment Promotion Commission (NIPC) Act, foreign exchange (monitoring and miscellaneous provisions) Act, customs and excise management Act, Industrial Development (Income Tax Relief) Act, Companies Income Tax Act and under the minerals Act etc.
The Nigerian investment promotion commission, being a parastatal under the Federal Ministry of trade is saddled with the responsibility of ensuring and facilitating the participation of non-Nigerians in the development of the Nigerian economy. This assertion is given credence based on the fact that there is no limitation imposed on any non-Nigerian with regards to investing in any business in the economic sub-sector of Nigeria. Foreigners who wish to participate in the growth of the Nigerian economy are allowed to do so by buying the shares of any Nigerian enterprise in any convertible foreign currency. The foreign investor who has made a profit from his/her investment in Nigeria is also guaranteed unconditional transfer of such dividends and profit provided it’s done through an authorized dealer in freely convertible currency. Moreover, the Act setting up NIPC states emphatically that no government in Nigeria would be allowed to nationalize any business or company whether private or public owned by a foreigner or Nigerian. The only exception to this general rule with regards to non-nationalization of business corporations is if the acquisition is in the national interest or for the overriding interest of the Nigerian population, but in both instances, fair and adequate compensation will be paid to the investor.
The Act went further to envisage a situation where the question of what is fair and adequate compensation would be asked. The answer is proffered in section 26 of the Act in which a dispute resolution mechanism is established to ensure that no advantage is given to any Nigerian or government over a foreign investor.
The Foreign exchange (monitoring and Miscellaneous Provisions) Act as the name entails was enacted for the sole purpose of ensuring that importation of foreign currency by non-Nigerian investors is made easy.
It is important to note that the foreign investors is expected as a matter of transparency as well as to avoid money laundering to declare his or her source of income only when the value of imported foreign currency is in excess of $5,000. Once the Foreign currency is allowed into Nigeria through an authorized dealer; the currency may be repatriated back to the country of the non-Nigerian if he or she has a change of mind with regards to the investment opportunity.
Another major incentive under the Foreign exchange Act is that a foreign investor is permitted to open, maintain and operate different domiciliary accounts in his or her company name(s), then lodge different foreign currencies through an authorized dealer at any of the banks and shall be entitled to interest at such rate as the central bank of Nigeria (CBN) may from time to time prescribe.
The Act has become an insurance cover for foreign investors to the extent that no money imported into Nigeria for the purpose of legitimate investment will be liable to seizure or forfeiture or suffer any form of expropriation by the Federal or a State Government of Nigeria.
The Customs and Excise Management Act also has some key incentive and reliefs available to foreign and Nigerian investors. These incentives are centered on Duty drawback policy of the federal government of Nigeria as contained in the Act. The reliefs are available in the form of a refund made on import duties on Raw materials and packaging materials used in producing goods for export and paper used for producing goods for educational purposes and educational establishment.
The incentives and reliefs granted by the Federal government of Nigeria to investors also take fiscal forms under the industrial development (income tax relief) Act, companies whether wholly foreign or a joint venture with a Nigerian(s) are granted a tax holiday in the form of pioneer status for a period of Three years. If the company has updated tax returns and after assessing the growth of the business decides to ask for an extension, the Commission has the prerogative to decide whether to extend for a period of two years or decline the application. The essence of these incentives is to afford companies in certain industry an opportunity to grow in business without undue government interference in the form of exorbitant taxation.
Below are the requirements for an application for pioneer status application in Nigeria.
The submission should include the following, amongst others:
- Formal covering letter to the Executive Secretary of NIPC
- Company information
- Company contact information
- Company external representative
- Project overview
- Project cost
- Financing sources
- Shareholders, directors, and management
- Production and financial performance
- Number of employees and emolument
- Training cost
- Skills and technology transfer
- Raw materials and components
- Export earnings and destinations
- Infrastructure developed
- Environmental, social and governance policies and plans
- Utilisation of tax savings
- 5-year business plan
- Declaration signed by Chief Executive Officer / Managing Director