In the quest to boost local production and spur economic growth, the Nigerian government granted eight companies pioneer tax status in the third quarter of 2021.
Out of the 28 companies that applied for the Pioneer Status Incentive (PSI) between July 1 and September 30, 2021, 28.57 percent got a nod from the Federal Government, as compiled from the latest report by the Nigerian Investment Promotion Commission (NIPC).
According to the data by NIPC, the eight companies that were granted the three-year PSI include Belanova Apartment and Suites Limited, Al-Wabel Rice Mill Limited, JMG Nigeria Limited, Jigawa Rice Limited, DCP Cement Plc, Locodove Ventures Limited, Resource Improvement and Manufacturing Company Limited and Okpella Cement Plc.
“Tax holiday to the companies is an incentive for investing heavily in various industries and also employing more labour,” Ayo Akinwunmi, head of research, FSDH Merchant Bank said.
While one of the eight companies (JMG) that were granted tax incentives in the review period is into generator and other electrical appliances distribution, two are into rice milling (Al-Wabel and Jigawa) and others specialize in hotel development and office construction (Belanova and Locodove respectively). Also on the list was cement manufacturers (Okpella and DCP) and processor of edible oil (Resource).
“The PSI is a tax holiday which grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional years,” the Federal Ministry of Industry, Trade, and Investment said.
Established by the Industrial Development (Income Tax Relief) Act, No 22 of 1971, PSI is designed by the Federal Government to reduce the cost of doing business in Nigeria by providing corporate income tax relief to qualifying companies making investments in industries designated as ‘pioneer’.
In effect, PSI seeks to enhance the survival, profitability, and sustainability of beneficiary companies.
“It is to further support the sectors amid the high operating cost; infrastructure, and unavailability of steady power supply. It is one of the initiatives to encourage the companies,” a Lagos-based analyst said.
According to the data by the Abuja-based Commission, the PSI granted in the review quarter puts the current number of beneficiaries at 35 companies as of September 2021. While NIPC reported that two companies’ applications were declined in the review quarter, analysis of its data revealed that 168 applications were pending approval.
Some of the companies on the waitlist for PSI approval include Afam Power Plc, a firm that operates as a power generation company. Neway Power which is into the production of alternative energy like Power Inverter, pumping inverter, solar charge controller was also on the list.
Meanwhile, companies like Lafarge Africa Plc, Confluence Metals Fabrication Company Limited, and Unicane Industries Limited had their tax incentive extended for the next three years.
While the incentive has been in place since 1971, it was suspended in 2015 by the then minister of finance, Ngozi Iweala based on perceived abuse and revenue leakages. However, the Federal Government in August 2017 lifted the administrative suspension on the scheme.
Further analysis of the data by NIPC for Q3 revealed that, of the eight companies, Okpella Cement Plc located in Edo State, and into the manufacturing of cement had invested the most amount of N178.15 billion.
It was followed by another cement manufacturer, DCP Cement Plc located in Kogi State. The company has invested N127.91billion in its operations.
Located in Lagos State, JMG Nigeria Limited which is into electric generators, power control and distribution switchgear, H.T metering business was reported to have invested N 8.19 billion.
Fifth on the list of companies that have invested the most amounts was Locodove Ventures Limited. The company that is Office building has injected about N6.95 billion worth of investment in the industry.
Belanova Apartment and Suites Limited, Resource Improvement and Al-Wabel Rice Mill Limited invested N3.32 billion, N1.75 billion and N1.38 billion respectively. Jigawa Rice Limited invested N971.20 million.
According to Madu Yusuf, the director-general of Lagos Chamber of Commerce and Industry (LCCI), the tax incentive is granted to “sectors that strengthen Nigerian economy; in terms of growth and profitability on the investment.”
Economic activities in Africa’s largest economy grew by 4.03 percent in real terms in the third quarter of 2021, showing sustained growth over the last four quarters since the exit from the 2020 recession.