The Nigerian Investment Promotion Commission (NIPC) has released its Q4 2023 report on the Pioneer Status Incentive (PSI), revealing that a total of 107 companies are currently benefiting from the federal government’s tax exemption program. This tax holiday, offered under the Industrial Development Income Tax Act, is designed to encourage investment by granting qualifying companies relief from corporate income tax for an initial three-year period, with the possibility of extending the exemption for up to two additional years.
The PSI aims to stimulate industrial growth by providing financial relief to businesses in sectors critical to Nigeria’s economic development. The report indicates that the number of companies benefiting from the incentive has grown significantly, from 83 in Q1 2023 to 107 by Q4. These 107 companies have collectively invested over N2.49 trillion in the Nigerian economy throughout 2023.
The industries benefiting from the PSI include manufacturing, pharmaceuticals, construction, agriculture, electricity and gas supply, tourism, and more. Prominent firms receiving this incentive include Dangote Fertilizers, Mikano International Limited, Rain Oil Limited, Sinotrucks West Africa Limited, and others in the automotive, infrastructure, and energy sectors.
Additionally, the report highlighted that 79 new applications for the incentive were received, 56 companies had their applications approved in principle, and 211 applications remain pending. Eighteen firms also received extensions for their tax exemptions, with 13 receiving a three-year extension, and five, including Honeywell Flour Mill, granted a two-year extension.
The NIPC further emphasized that the approval of extensions is contingent upon the payment of application fees. The payment must be made before the extension becomes effective.
While the PSI has supported economic growth, discussions are underway regarding its long-term sustainability. On December 14, 2022, the federal government expressed intentions to phase out tax exemptions for mature industries, including the PSI, as part of the 2022 finance bill. Moreover, Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee, noted in September 2023 that tax waivers, which cost the government an estimated N6 trillion annually, are being reviewed. He acknowledged concerns over the lack of transparency and efficiency in granting these waivers and assured that reforms would be implemented to ensure more equitable tax collection.
In another development, the Senate Committee on Finance has raised alarms over the N17 trillion loss Nigeria has incurred due to tax exemptions over the past five years, urging the Federal Inland Revenue Service (FIRS) to suspend such waivers going forward.
