In a bold move to reset its economic trajectory, the Nigerian government has proposed a sweeping overhaul of its tax incentive framework, introducing a sector-specific tax credit scheme aimed at catalysing investments in critical areas such as manufacturing, healthcare, renewable energy, and transportation.
The initiative, unveiled as part of new tax reform bills, is designed to replace the longstanding and often-criticised pioneer status incentive with a more targeted and transparent model known as the Economic Development Incentive (EDI).
Speaking at the BusinessDay Policy Intervention Series in Lagos on Tuesday, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, emphasised that the new policy places manufacturing at the heart of Nigeria’s growth strategy.
“At this point in our national development, we must prioritise manufacturing, It presents significant challenges, but also the highest potential for transformative growth.”
Under the proposed scheme, eligible businesses in priority sectors will receive a five percent tax credit on qualifying capital investments annually, for up to five years—amounting to a cumulative 25 percent tax credit. However, access to the incentive is contingent on meeting specific conditions, including post-investment verification by the Industrial Inspectorate Division.
Unlike the pioneer status regime, which has been criticised for lacking transparency and measurability, the EDI ties tax relief directly to real-time, verifiable capital deployment.
“The new model is people-centered, growth-focused, and efficiency-driven. It moves away from blanket exemptions to a performance-based system that ensures the government and investors both get value.”
He further explained that assets acquired under the pioneer scheme are often “frozen in time,” preventing companies from claiming deductions until after the incentive period ends—creating a long-term distortion in tax planning. Oyedele noted.
The reforms are part of Nigeria’s broader effort to harmonise tax legislation, reduce fiscal deficits, and improve the country’s tax-to-GDP ratio, which stood at a low 10 percent in 2023. Recent estimates suggest the figure has risen to 13.6 percent, with the government aiming for an 18 percent target by 2026.
Crucially, the new framework is also expected to reduce Nigeria’s debt servicing burden, which consumed 97 percent of total revenue in 2022. Authorities aim to bring that figure down to 50 percent through better fiscal management and efficient revenue collection.
To ensure only impactful and scalable projects benefit from the scheme, the EDI introduces investment thresholds. For instance, firms in capital-heavy sectors like utilities must commit a minimum of ₦200 billion to qualify for tax credits.
“This is not about paperwork approvals,” Oyedele stressed. “The incentive only kicks in after the capital is deployed, with all investments subject to rigorous inspection.”
Commenting on the proposal, Olamide Obajimi, a partner at Olaniwun Ajayi LP, supported the transition from the pioneer incentive but warned that poor implementation could erode investor confidence.
“The government must leverage technology for transparency. No investor wants to operate in an uncertain incentive environment,” he said.
Meanwhile, Samuel Agbeluyi, President of the Chartered Institute of Taxation of Nigeria (CITN), called for a national campaign to raise awareness of the reform’s objectives, urging political leaders to set the example.
“It would be powerful to see our president publicly show his tax compliance. It’s about building trust in the system,” Agbeluyi added.
