The government of Nigeria is the first to admit that doing business in the country is difficult, whether because of poor infrastructure, unhelpful bureaucracy, rife corruption or insecurity in some areas. But the administration makes up for it with an effusively welcoming attitude towards investors, with ministers and even the president smoothing the way for new investment into the country and touting a slew of incentives and concessions.

The government has aimed its most generous incentives at the sectors and industries that present the greatest obstacles to economic development, particularly in infrastructure.


Nigeria is generally investor-friendly, with the relevant laws allowing for 100% foreign ownership of businesses and unhindered repatriation of capital. Tax on company profits is 30%. In addition, the government has put in place a range of incentives designed to lower the cost of doing business to offset the higher-cost operating environment arising from factors such as deficient infrastructure.

Pioneers’ tax holiday

Various industries have been afforded ‘pioneer status’, giving start-ups a five-year tax holiday. There are 69 industries benefiting from this incentive, including mining, large-scale commercialised agriculture, food processing, manufacturing and tourism. In exceptional cases, for the purpose of promoting strategic investments, the government can negotiate specific and expanded incentive packages.

Other industries also get tax relief, albeit less generously. Manufacturers that add value to imported inputs are eligible for a five-year 10% local VAT concession. Manufacturers using a prescribed minimum level of local raw materials – for instance, 70% for agro-allied industries and 60% for engineering industries – are entitled to a five-year 20% tax concession. Other sectoral incentives also exist.

Further reductions

Investors can take advantage of an infrastructure incentive that permits a 20% tax deduction of the cost of providing infrastructure facilities that should ordinarily have been provided by the government. Such facilities include access roads, pipe-borne water and electricity supply.

There is a generous tax allowance on research and development (R&D), with up to 120% of expenditure being tax deductible, provided that such R&D activities are carried out in Nigeria and are related to the business from which profits are derived. In the case of research into the use of local raw materials, the tax-deductible allowance rises to 140%.

The government is also targeting investment into so-called economically disadvantaged areas, extending the tax holiday available to ‘pioneer status’ industries to seven years and adding a 5% capital depreciation allowance. Additional tax breaks are available for labour-intensive modes of production.

To increase the value of exports from Nigeria, in particular non-oil exports, a number of incentives are in place that are designed to permit effective duty-free importation of raw material inputs and other intermediate products for the production of exportable goods. The duty on the imports is bonded and only discharged on evidence of exportation and repatriations of foreign exchange.

A simpler structure

Nigeria has a cumbersome ban on a number of imported items (designed to stimulate growth of import substitution industries) and a complex tariff structure. However, under pressure to harmonise tariffs with its neighbours, the trend is towards a simplified five-band tariff structure and an elimination of the outright import ban. That said, the import ban, which now lists 63 items, poses challenges, requiring negotiation to secure concessions.

Nigeria has double taxation agreements with the UK, France, Netherlands, Belgium, Pakistan, Canada, the Czech Republic, the Philippines and Romania. Negotiations are in progress with India, Russia, South Korea and Turkey, among others. As a concession to treaty partners, Nigeria has approved a lower treaty rate of 7.5% on dividends, interest, rent and royalties.

In an additional effort to foster foreign investors’ confidence in Nigeria, the government has entered into a number of bilateral investment promotion and protection agreements with countries that do business with Nigeria, helping to guarantee the safety of the investment of contracting parties in the event of war, revolution, expropriation and nationalisation, as well as guaranteeing the transfer of dividends and other profits. Countries involved include the UK, France, Netherlands, Spain, Switzerland, Romania and South Africa.