The Nigerian government offers various tax benefits to attract foreign capital to its domestic investments.
Its primary focus lies in technology-led industries and large-scale plant projects aimed at reducing dependence on imported food, raw materials, and machinery.
Additionally, these efforts result in significant industrial ripple effects.
The government extends benefits to regions with potential for domestic resource conservation and utilization.
However, industries that merely import and assemble parts are excluded from these incentives.

The Buhari government is currently reevaluating its approach to deregulation, with the aim of expanding investment attraction and cultivating a more conducive corporate environment while safeguarding domestic industries.

Notably, the Petroleum Industry Government Bill (PIGB), passed by the National Assembly in March 2018, represents a pivotal change.
This bill shifts the focus from safeguarding the interests of oil companies to securing Nigeria's interests, thereby altering the conditions governing oil production and sales, which have favored oil companies for the past four decades.

In a systematic effort, the federal government introduced a voluntary asset and income reporting system in July 2017.
This system allows individuals and entities to submit their own tax returns within a nine-month period.
Following requests from companies, the reporting deadline was extended to the end of June 2018.
Additionally, the government seeks to foster an inviting investment climate for foreigners by streamlining the company establishment process compared to previous procedures.
Furthermore, a Nigerian arrival visa system has been implemented.

Nigeria's ranking in the "Doing Business 2021" report, released by the World Bank, dropped two spots from the previous year, placing the country at 133rd out of 190 evaluated nations.
While improvements were observed in numerous sectors such as start-ups, building permits, electricity supply, tax payment, customs clearance administration, and legal dispute resolution, challenges persist for American and European enterprises seeking large-scale investments in sectors like power, crude oil, and telecommunications due to insufficient social infrastructure.

Particularly focused on promoting investment in mineral resource development, the Nigerian government is extending the following special incentives.

• Tax-free for 3 to 5 years (3 to 5 years Tax Holiday)

• Deferred Royalty Payments depending on the amount of investment and the strategic value of the investment

• Possible capitalization of expansion on exploration and surveys

• Support roads and electrical facilities in development areas, allow up to 100% foreign ownership in mining development investment incentives

Income Tax Exemption for Pioneer Status Company

Under the Industrial Development-Income Tax Relief Act 22 of 1971 and 1988, investments made in sectors designated as key industries receive exemptions for up to three years, extendable for an additional one to two years.
These key industries encompass grain and vegetable processing, fruit processing, cocoa production, oil processing, dairy, livestock, deep-sea fishing and processing, decontamination, zinc and zinc development, iron smelting, non-ferrous metal refining, heavy refining, utilization of Nigerian raw materials, cement manufacturing, marble quarrying, ceramics, industrial rubber production, and textile manufacturing.
This list comprises a total of 65 industries, including commercial vehicle manufacturing.
Moreover, capital expenditures exceeding 10,000,000 naira require approval from the federal government as a prerequisite for classification as a leading industrial enterprise

Benefits of Domestic Raw Material Use Ratio:

If the domestic raw material use ratio meets the following conditions, 30% of tax will be reduced for five years, and the domestic raw material use ratio by industry is 80% in agricultural manufacturing, 70% in agriculture, 60% in engineering, 60% in chemistry, and 70% in petrochemical.
Tax benefits for the labor-intensive industry are as follows:

• A tax reduction of 15% for five years if there is an effect of hiring more than 1,000 workers

• A tax reduction of 7% for five years if there is an effect of hiring more than 200 workers

• If there is an employment effect of 100 or more workers, a reduction of 6% for 5 years

For value-added industries that go beyond simple assembly, a 10% tax reduction or exemption is granted for a duration of five years.
Tax incentives aimed at covering training expenses experience a 2% reduction over a five-year span, applicable to both employee and engineer training initiatives.

Export-oriented industries, when exporting over 60% of their total production, receive a 10% tax reduction for a consecutive five-year period.
Meanwhile, tax benefits intended for the construction of essential social infrastructure like roads, industrial water facilities, and electricity systems undergo a 20% reduction, independent of the timeframe.

Tax advantages for investments in non-economic sectors result in complete tax exemption.
In the context of non-economic industries, initial investment depreciation is extended to a seven-year period.

In terms of tax incentives pertaining to investments in the research and development (R&D) sector, a reduction of 120% of the incurred costs is applied for R&D investments.
This percentage escalates to 140% for R&D ventures concerning raw materials sourced from Nigeria.

The following incentives will be provided to all investment companies moving into the export processing zone:

• 100% foreign capital investment and ownership recognition

• 35% of manufactured products are allowed to be sold in the domestic market

• Benefit from ONE-STOP support services for administrative procedures

• Issuance and approval of applications

• Company Registration

• construction of a factory

• Permission for Establishment, etc.

• Import and export permits are not required

• Duty-free imports of raw materials

• Allow unlimited transfer of capital, profits and equity

• Exemption from taxation and refusal of labor disputes for a certain period of time

• Exemptions from taxes and tariffs by federal, state, and local governments

• Factory site rent exemption during factory construction period

Until 1995, Nigeria limited foreign investment in industries based on economic importance and citizen management.
However, in September 1995, a policy shift aimed at boosting foreign investment was introduced.

The new policy allows investment in all sectors except oil and specified negative categories (weapons, drugs, gunpowder, military equipment).
It permits foreign ownership exceeding 50% in banking, insurance, and mining.
Trading stocks via the Nigerian stock exchange is permitted, ensuring free transfer.
This enables foreign investment, both solo and joint, across all sectors except oil and Negative List industries.
No limitations on securing or acquiring shares exist.

Investment Location Conditions Special Economic Zones and Free Trade Zones

Between 2007 and 2011, the Special Economic Zones (SEZs) policy led to the development of specialized areas like Free Trade Zones (FTZs) and Industrial Parks.
Currently, there are 25 official free trade zones, with 11 located in the southwest and 6 in the economic capital.

The federal government aims to stimulate the manufacturing sector through capital injection for SEZ development.
However, due to basic infrastructure challenges, tangible outcomes remain limited.
Industrial complexes primarily emerge in major cities such as Lagos, Port Harcourt, Kaduna, Kano, and Enugu.
These complexes accommodate diverse manufacturers and exhibit clustering within similar industries.
Nigeria employs free trade zones with tax and tariff exemptions, reducing costs for imports and enabling foreign investors to hold 100% ownership.

As per the 2020 NEPZA report, the Nigerian government is actively creating employment opportunities via specialized zones for solid minerals.
Public-private cooperation is sought to enhance transportation logistics around these zones and address operational challenges.

Information Related to Nigeria Export Processing Zones

Regulator: Nigeria Export Processing Zones Authority Export processing zone incentives For enterprises approved by NEPZA under the NEPZA Act and operating within an approved Zone:

• 100% foreign ownership of investment;

• Free transferability of capital, profits and dividends by foreign investors;

• Rent-free land at construction stage, thereafter rent shall be payable;

• All industrial undertakings including foreign companies and individuals operating in an Export Processing Zone are allowed full tax holiday from Federal, States and Local Governments;

• Duty-free, tax free on import of raw materials for goods destined for re-export;

• Waiver on all import and export licenses; and

• Waiver on all expatriate quotas for companies operating in the zones.

Section 35(1) CITA provides that a company which has incurred expenditure on its qualifying building and plant equipment on an approved manufacturing activity in an export processing zone shall be granted 100 percent capital allowance in any year of assessment.

ACTIVE FREE ZONES BY LOCATION

Enacted in 1995, the Nigerian Investment Promotion Commission Act No. 16 governs foreign investment.
It assures foreign capital protection, corporate management, and serves as a legal foundation for tax reductions and foreign employment quotas.
It also covers foreign asset guarantee aspects like remittances and ownership transfer security.
For more details, visit www.nipc.gov.ng

Foreign investment primarily takes the form of local corporation establishment.
This Foreign Investment Act grants foreign capital companies distinct qualifications from domestic counterparts.

A lawyer readies essential documents and initiates company registration via the Corporate Affairs Commission (Lagos Liaison Office).
Simplified online procedures are accessible at www.new.cac.gov.ng
The following documents are needed:

• (MEMORANDUM OF ARTICLE)STATEMENT OF AHTHORIZED

• SHARE CAPITAL OF THE COMPANY

• Board composition status and list

• a certificate of appointment of a director of the board of directors

• NOTICE OF ADDRESS OF REGISTERED OFFICE

The expenses required for CAC registration (time required: 2 weeks to 1 month) are as follows, and the CAC website details each item, and it is customary for a lawyer to handle it on his behalf.
However, it is better to proceed with the lawyer's expenses after agreeing in advance.

Upon completion of the company registration, documents such as a company registration certificate, a capital introduction certificate, a business plan, and securing a workplace must be submitted to the Nigeria Investment Promotion Commission for approval.
Nigeria's Investment Authority (NIPC) reviews the submission documents and permits operations, and determines the expatiate quota.

NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)

• Necessary documents: prescribed forms, company establishment registration certificates, articles of incorporation, board composition and equity holding status, copies of business plans, annual tax payment receipts

• Cost: 30,000 naira

• Duration: 2–8 weeks

• NOTE: MINIMUM CAPITAL OF FOREIGN INVESTMENT IS NAIRA 2 MILLION

The lawyer submits related documents, including the company registration certificate, to the Local Immigration of Internal Affairs, to secure the assignment certificate (Expatriate Quota Position) of the expatriate who will work for the established company.

MINISTRY OF INTERNAL AFFAIRS

• Documents required: Business permit application, business area and staffing details

• Cost required:

  • President or TECHNICAL DIRECTOR Position: $2,000

  • Other positions: It offers a two-year temporary stay visa and takes about 30,000 naira for each two-year renewal.

• Note: If the company's capital is over 5 million naira, 2 foreign recruitment QUOTAs will be automatically granted, and if it is over 10 million naira, 4 QUOTAs will be granted.

Upon completion of the procedure, the Federal Ministries of Internal Affairs will issue The Following Certificates

If you obtain a Combined Expatriate Residence Permit, you will contact the immigration office again and receive a Reentry Visa that is free to enter and exit Nigeria.

Upon corporate registration, companies should secure a Tax Clearance Certificate from the Federal Inland Revenue Service.
To acquire a tax return, a lease contract or landlord's letter validating the current office address is essential.
While the tax return may show no activity for newly registered firms, the document serves as evidence of Nigerian registration and authorization for investment in Nigeria.

In order to obtain an Expatriate Quota, you must apply to the Nigeria Immigration Service.
If you obtain a Combined Expatriate Residence Permit, you will contact the immigration office again and receive a Reentry Visa that is free to enter and exit Nigeria.

The foreign quota varies depending on the size of the company's investment and has a validity period of two to three years.
However, only one quota per company is issued without an expiration date, and the remaining quota must be renewed to the immigration office before the expiration date arrives.

Nigeria cannot establish a branch office, only a liaison office or a local subsidiary can be established.

In order to establish a liaison office, it must first be registered with CAC (CORPORATE AFFAIRS COMPOSITION), and the necessary documents are as follows and take about 14 days.
It is possible to establish a liaison office just by registering CAC.

• Articles of Incorporation

• Share Capital of the Company

• Board composition status and list

• A certificate of appointment of a director of the board of directors

• NOTICE OF ADDRESS OF REGISTERED OFFICE

If a stock company needs to be listed, it must be registered with the Securities and Exchange Commission

• Duration: 1 to 2 weeks

• Cost: Over 200,000 naira application fee, 100,000 naira registration fee

In fact, it is common to fill out only documents as if they had flowed in without capital inflow, and related brokers are hired to provide a small fee.
For more information, visit www.nse.com.ng (Nigeria Stock Exchange website).