The Nigerian Investment Promotion Council (NIPC) has generated N9.2 billion in revenue from charges related to the issuance of Pioneer Status Incentive (PSI) to eligible companies and renewal fees over the past four years, according to Sunday PUNCH reports. This equates to an average annual revenue of about N1 billion for the NIPC from 2020 to 2023, with the revenue being a significant part of the commission’s internally generated funds.
The Pioneer Status Incentive offers tax holidays to eligible companies, exempting them from income tax for a certain period, either fully or partially. This incentive is granted under the Industrial Development Income Tax Act and is aimed at stimulating investments in the economy by supporting companies involved in industries not previously existing in Nigeria.
In the first quarter of 2024, the NIPC granted tax holidays to 12 companies, increasing the total number of beneficiaries to 104. These companies include Fouani Nigeria Limited, Neway Power Technology Company Limited, Starich Recycle Technologies Company Limited, Gerawa Rice Mills Limited, Shafa Energy Limited, Mafa Rice Mills Limited, A. A Rano Nigeria Limited (haulage), A.A Rano Nigeria Limited (Natural gas supplier), Basma Agric Processing Limited, Flex Films Africa PVT Limited, Addmie Nutrition Limited, and Dufil Prima Foods Plc. The investments made by these companies total N125.74 billion.
Additionally, the NIPC approved nine other companies in principle, contingent on fulfilling certain conditions, and received 18 new PSI applications in the first quarter of the year. Eight firms applied for an extension of their tax holiday, but only two were granted extensions.
The commission’s revenue fluctuated over the four years: N3.1 billion in 2020, N1.92 billion in 2021, N2.1 billion in 2022, and N2.11 billion in 2023.
The PSI and other tax incentives have been a contentious issue due to the significant revenue loss from waivers, estimated to be worth N6 trillion annually. While tax incentives are seen as crucial for driving economic growth, experts have raised concerns about the transparency and fairness in granting these waivers.
The Presidential Tax Reform Committee, chaired by Mr. Taiwo Oyedele, is working on new tax reforms to address these issues. Oyedele emphasized that existing tax holidays would be honored even after new laws are enacted, ensuring that companies currently benefiting from the PSI will continue to enjoy their tax holidays for the agreed period. The goal of the reform is to ensure a fair and transparent process for granting tax incentives moving forward while still attracting investments.
Overall, the NIPC’s significant revenue from tax waiver fees underscores the financial importance of the PSI program, while ongoing reforms aim to balance incentivizing investment with ensuring equitable and transparent tax practices.
