Business, Investment and Industrial Incentives in Nigeria

The Nigerian Government has put in place a number of investment incentives for the stimulation of private sector investment from within and outside the country. While some of these incentives cover all sectors, other are limited to some specific sectors. The nature and application of these incentives have been considerably simplified. The incentives include:

(i) COMPANIES INCOME TAX

The Companies Income Tax Act has been amended in order to encourage potential and existing investors and entrepreneurs. The current rate in all sectors, except for petroleum, is 30 percent.

(ii) TAX RELIEF FOR RESEARCH AND DEVELOPMENT

Industrial establishments are expected to engage in Research and Development (R&D) for the improvement of their processes and products. Up to 120 per-cent of expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profits is derived. Also, for the purpose of R&D on Local raw materials, 140 per-cent of expenses are allowed. Where the research is long-term, it will be regarded as a capital expenditure and will be written off against profit. The result of such research could be patented and protected in accordance with internationally accepted Industrial Property Rights.


(iii) CAPITAL ALLOWANCES

 

The current rates applicable in respect of capital allowances are:

 

S/N Qualifying Expenditure in Respect of:- Initial Allowance (%) Annual Allowance (%)
1 Building Expenditure 5 10 per Annum
2 Industrial Building Expenditure 15 10
3 Mining 20 0
4 Plant excluding furniture and fittings 20 10
5 Furniture and Fittings 15 10
6 Motor Vehicle Expenditure 25 20
7 Plantation equipment expenditure 20 33
8 Housing Estate Expenditure 20 10
9 Ranching and Plantation Expenditure 25 15
10 Research and Development Expenditure 25 12
11 Public Transportation Motor Vehicle 30 -

 


The amount of capital allowance to be enjoyed in any year of assessment is restricted in Nigeria to 75% of assessable profit in case of manufacturing companies and 66% in case of others, except such companies in agro-allied industries that are not affected by this restriction. If leased assets are used in agro-allied ventures, the full (100%) capital allowance claimed will be granted. Moreover, where the leased assets are agricultural plants and equipment, there will be an additional investment allowance of 10% on such expenditure.