Nigeria provides a number of incentives aimed at the promotion of key industries and employment in Nigeria. The following outlines the main incentives:

Pioneer Status

Companies in industries that are considered vital for the economic development of Nigeria may make an application for Pioneer Status.

A company with pioneer status is eligible for a number of benefits, including:

3-year corporate income tax holiday that may be extended up to 5 years;
Dividends paid out of exempt pioneer profits are exempt from tax;
Certified losses can be carried forward after the exemption period; and
Capital allowances can be carried forward after the exemption period.

Companies with pioneer status located in economically disadvantaged areas of Nigeria may be eligible for an extended tax holiday of 7 years, as well as an additional 5% initial capital allowance for assets.

Certain company types granted pioneer status include:

Ship repair and maintenance;
Agriculture;
Mining;
Manufacturing;
Food processing;
Deep-sea fishing; and
Printing.

R&D Tax Relief

Up to 120% of expenses incurred for research and development (R&D) are tax-deductible as long as the R&D activities are carried out in Nigeria and are connected with the business from which income or profits are derived.

In-Plant Training Tax Concession

Industrial companies that have established in-plant training facilities can enjoy a 2% tax concession for 5 years.

Labor Intensive Production Companies Tax Concessions

Qualifying companies in industries conducting highly labor-intensive activities with minimal automation are eligible for tax concessions based on their number of employees. The concessionary rates range from 6% for companies with 100 employees up to 15% for companies with 1000 employees or more.

Local Raw Materials Utilization Tax Credit

Companies that meet certain thresholds for the utilization of local raw materials as inputs are eligible for a 20% tax credit for up to 5 years. The thresholds by industry are as follows:

Agro/ Agro-allied	80%/ 70%
Petrochemicals	70%
Engineering	65%
Chemicals	60%

Agricultural Incentives

Effective 1 January 2021, qualifying small and medium enterprises (SMEs) engaged primarily in agricultural production are provided a tax-free period of 4 years with a possible extension of 2 years.

Agricultural companies in Nigeria also enjoy the following incentives:

No duties on imported agricultural machinery and equipment;
Concessionary rates of duty on wheat, tea, maize, and other animal feeds;
Losses incurred in the first year of operation may be carried forward indefinitely;
No restriction on the amount of capital allowance that can be claimed in a year of assessment; and
Tax exemption on interest on loans provided by banks for agricultural purposes.

Mining, Oil and Gas Incentives

Companies engaged in mining, oil, and gas industries in Nigeria can enjoy the following incentives:

3 to 5 year tax holiday;
10 years tax holiday for investments in the gas pipeline;
Tax exemption for dividends paid during the tax holiday;
Accelerated capital allowances after the tax holiday; and
Certain assets are eligible for a 15% investment allowance.

Oil and Gas Free Zones

In addition to the above incentives, oil and gas companies located in Nigeria's oil and gas free zones can enjoy the following benefits:

No import or export license requirements;
Exemption from duties on imports used for the business;
Up to 25% of production can be sold in the domestic market;
100% foreign ownership allowed;
No restrictions on the repatriation of capital and profits;
No pre-shipment inspection for goods imported into the free zone; and
No foreign exchange controls.

Tax Credits for Non-Associated Gas (NAG) Greenfield

Effective 28 February 2024, a tax credit incentive is introduced for companies engaged in non-associated gas (NAG) greenfield developments in onshore and shallow water locations, where the first gas production of the greenfield NAG project is on or before 1 January 2029. The tax credits depend on the level of hydrocarbon liquids (HCL) content as provided below:

Where the HCL content does not exceed 30 barrels per million standard cubic feet (SCF), a gas tax credit is provided at the rate of USD 1.00 per thousand cubic feet or 30% of the fiscal gas price, whichever is lower; and
Where the HCL content exceeds 30 barrels per million SCF but does not exceed 100 barrels per million SCF, a gas tax credit is provided at the rate of USD 0.50 per thousand cubic feet or 30% of the fiscal gas price, whichever is lower.

For any other greenfield NAG project with first commercial production after 1 January 2029, a gas tax allowance is provided at a rate of USD 0.50 per thousand SCF, provided the HCL content does not exceed 100 barrels per million SCF.

The tax credit/ allowance available is subject to a maximum of 30% of the fiscal gas price.

The tax credit applies for a maximum of 10 years, after which it becomes a tax allowance which can be claimed at the respective rates set out above. The gas tax credit accruable in any year must not exceed the income tax payable for that year and cannot be combined with the Associated Gas Framework Agreement incentives for the same greenfield NAG project. Any surplus tax credit is allowed to be carried forward up to a maximum of 3 years.

The price for calculating a gas tax credit is the price used for determining royalties under the Petroleum Industry Act.

Midstream Capital and Gas Utilization

Effective 28 February 2024, a gas company can avail of a gas utilization investment allowance at a rate of 25% of the qualifying expenditure incurred on plant and equipment in respect of any new and ongoing project in the midstream oil and gas industry. The allowance is allowable as a deduction from the assessable profits of the company from the year of purchase and is not considered in ascertaining the residue of qualifying expenditure incurred on such plant and equipment.

The allowance is provided only after the expiration of the tax holiday period of 3 to 5 years granted to companies in the gas industry under the Companies Income Tax Act.

However, the allowance cannot be claimed if, within a period of five years from the date on which the expenditure was incurred:

The plant and equipment are sold or transferred, unless the acquirer uses the plant and equipment for the same or related business and purpose as the previous holder or for scrap;
The plant and equipment are used for a purpose other than for gas utilization; or
The expenditure for the plant and equipment is incurred in a manner other than as a bona fide business transaction or if the same is an artificial or fictitious transaction.

The acquiring entity is not eligible for the allowance on any plant or equipment on which the allowance has already been claimed before transfer.

Export Incentives

Companies operating in designated export processing zones (EPZ) in Nigeria can enjoy the following incentives:

Tax exemption for all federal, state, and local government taxes; and
No foreign exchange controls.

A 100% export-oriented company located outside an EPZ is eligible for a 3-year tax holiday, provided the company is not formed by splitting up or reconstruction of an already existing business, and the export proceeds represent at least 75% of its turnover.

Companies engaged in approved manufacturing activity in an EPZ are eligible for a 100% capital allowance on expenditure incurred on qualifying building and plant equipment.

Companies exclusively supplying inputs for manufacturing export products are eligible for a tax exemption provided a certificate of purchase of the input is obtained from the exporter.

Power Sector Incentives

Power companies in Nigeria enjoy the following incentives:

3 to 5 year tax holiday;
Tax exemption for dividends paid during the tax holiday; and
Accelerated capital allowances after the tax holiday;
Plant, machinery, and equipment purchased for utilization of gas in down-stream petroleum operations are exempt from VAT; and
Custom duties exemption for machinery, equipment, and spare parts imported for power generation into Nigeria.

Real Estate Investment Companies

The Finance Act 2019 introduced a special framework for the taxation of Real Estate Investment Companies (REICs) in Nigeria, which inter alia includes Real Estate Investment Trusts (‘REITs’) and which is approved or regulated by the Securities and Exchange Commission (SEC) under the relevant provisions on the Real Estate Investment Scheme (‘REIS’). REICs are eligible for the following incentives:

Dividend and rental income received by a REIC on behalf of their shareholders are exempted from corporate income tax, provided that at least 75% of such income is distributed within 12 months of receipt of the income;
Dividends or mandatory payments made by a REIC to its shareholders under REIS are deductible for income tax purposes;
Dividend and rental income distributed by an REIC to its shareholders are exempted from excess dividend tax (see Sec. 8.1.); and
Dividends received by a REIC are exempted from withholding tax.

Road Infrastructure Investment Tax Credit

The Road Infrastructure Refurbishment and Development Tax Credit Scheme, introduced in 2019, provides a tax and legal framework for private investments in the construction and refurbishment of qualifying road infrastructure projects. The scheme provides that the total investment cost incurred by participants in qualifying projects, plus a single uplift equivalent to the Central Bank of Nigeria (CBN) Monetary Policy Rate plus 2% of the project cost, may together be recovered as a tax credit against future corporate income tax payable. Unused tax credits may be carried forward indefinitely for offset in subsequent years. Companies receiving the tax credit may also opt to sell the credit as security to another company or, if part of a group, may transfer the credit to another group member. The scheme will remain valid for a 10-year period.

Incentives for Startups

The Nigeria Startup Act 2022 was enacted on 19 October 2022 to provide an enabling environment for the establishment, development, and operation of startups in Nigeria. Qualifying startups can enjoy the following incentives:

3 to 5 year exemption from corporate tax and other taxes chargeable on income or revenue;
Additional tax relief of 5% of the taxable profits for up to 5 years for qualifying startups having at least 10 employees, 60% of which have no work experience and are within 3 years of graduating;
Investment tax credit of 30% of the investment made in qualifying startups;
35% individual income tax exemption for startup employees for 2 years;
Capital gains tax exemption on the disposal of assets by an investor in relation to a qualifying startup provided that the assets have been held for a minimum of 24 months; and
5% withholding tax rate on technical, consulting, professional, or management services provided by non-resident service providers to qualifying startups.

A company is considered a qualifying startup if:

It is registered as a limited liability company under the Companies and Allied Matters Act 2020 and has been in existence for a period of not more than 10 years from the date of its incorporation;
Its objects are innovation, development, production, improvement, and commercialization of a digital technology innovative product or process;
It is a holder or repository of a product or process of digital technology or the owner or author of a registered software; and
It has at least one Nigerian as a founder or co-founder having a share in any gains that may be derived from the sale of shares of the startup.

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