Economists react to Nigerian govt’s decision to grant tax breaks to 27 industries

Acting President Yemi Osinbajo; Chief of Staff Abba Kyari; Head of Civil Service; Mrs. Winifred Oyo-Ita during the Federal Executive Council Meeting held at the Council Chamber of the State House in Abuja. 26th April 2017. Photo by: Novo Isioro
Acting President Yemi Osinbajo; Chief of Staff Abba Kyari; Head of Civil Service; Mrs. Winifred Oyo-Ita during the Federal Executive Council Meeting held at the Council Chamber of the State House in Abuja. 26th April 2017. Photo by: Novo Isioro

Granting tax break to additional 27 industries and products in Nigeria is a right step towards economic recovery, some economists have said.

They also described the move as an indication that Nigeria is on course out of economic recession and firmly towards growth.

These were the views of some notable economists and analysts, including ‎Chief Consultant, B. Adedipe Associates Limited, Biodun Adedipe; and Chief Executive Officer, Economic Associates, Ayo Teriba, who spoke to PREMIUM TIMES on Tuesday.

“The approval by the Executive Council of the Federation, FEC, of 27 additional industries and products to enjoy pioneer status is a step in the right direction,” Mr. Adedipe said.

“The decision is showing two things – that there are thinkers in the present government and that they are doing the right things at the right time,” he added.

He said if the system and its processes are not abused, Nigeria would experience a strong recovery towards sustained growth.

“Malaysia and several other enviable economies have used the same instrument to good effect. Rather than reduce government revenue, it has huge potential to lever revenue and enable rapid job creation,” Mr. Adedipe said.

For Mr. Teriba, government’s move by giving incentives to prospective investors means it was determined to attract investors to do business under the atmosphere created with the National Economic Recovery and Growth Plan.

He said since October 2015, following the suspension of the scheme, prospective investors had been applying for the incentive without success.

“With the approval of additional industries and products to enjoy the incentive, investments will come in based on the industries that have just been given the incentives.

“The decision is a positive development for the economy. It is going to be an increase in the investment flow and technology inflow and a boost to employment generation.”

The Lead Director, Centre for Social Justice, CENSOJ, Eze Onyekpere, however is of the opinion that granting tax breaks to prospective investors does not add up to government’s commitment to raise more revenue.

“Government wants to raise more revenue, and government is now doing more tax exemptions. How does that add up?

“It doesn’t make sense to me, because if one was raising more revenue and creating more tax breaks, how long would these tax breaks last?”

For Mr. Onyekpere, even assuming tax breaks were good, there was no structured investment by the federal government to ensure the investors would pay-back the tax in future, to take care of whatever was lost.

“We can’t continue this not well thought out ideas by people who simply wake up in the morning and have brainwaves and not subject it to proper scrutiny,” Mr. Onyekpere said.

Last week, the federal government, at the end of the weekly FEC meeting announced the reviewed of the provisions guiding the pioneer status incentive to cover the 27 new industries.

Minister of Industry, Trade and Investment, Okechukwu Enelamah, said the new industries were arrived at after a review of the previous list to bring them in line with the country’s current economic realities captured under the ERGP.

Pioneer status is a tax holiday granted companies investing in new sectors of the economy approved by the government to boost employment generation and grow the economy.

Governed by the Industrial Development Income Tax Relief Act, the pioneer incentive scheme allows beneficiaries to enjoy tax reliefs for venturing into sectors considered either not mature, or requiring government support to grow.

Under the current arrangement, benefitting companies would enjoy an initial three years tax holiday, subject to either additional one year, or maximum two years renewal, but not exceeding five years in total.


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  • Abdulmojeed Nojeemdeen

    If not abused, let’s see how it works out.

  • thusspokez

    He [Ayo Teriba]said since October 2015, following the suspension of the scheme, prospective investors had been applying for the incentive without success.

    Really? Does this man think that the tax break is for all investors? The Federal government should make it clear to the likes of Mr. Teriba that its tax breaks are not available to every investors but only to those who meet the government strict requirements.

  • Opekete

    Job creation and direct foreign investment are the major reasons for these tax incentives. It is true that the government may lose corporate tax being paid by these companies in the short run but it will make up for it by how many jobs were created. The next one year will show the success or otherwise of the scheme.

  • thusspokez

    Under the current arrangement, benefitting companies would enjoy an initial three years tax holiday, subject to either additional one year, or maximum two years renewal, but not exceeding five years in total.

    Bear in mind that companies can only have tax break if they make profit, otherwise I don’t see the point for applying.

    • Zekopssuht

      Only yesterday Charley Boy was beaten up by an Hausa fulani policeman for leading the #ResumeOrResign protest group. 24 hours after, the policeman is free. He has not even been quizzed nor identified. Truth is; the reaction of the Nigerian police and the so called Nigerian govt would have been the same had Charley Boy been shot dead. A useless government of crooks and thieves who have made lying to the citizenry its past time. How can a so called President of a so called country of 200 million people be on sick bed for 99 days in a foreigh country? And this good for nothing Buhari is the same person who took all his children to study in UK, and now recieves treatment in UK but he is claiming to be president of a country. How stumpid! That you preside over a country whose schools and hospitals are too filty for your children and you to attend and get treatment. How stumpid indeed. How stumpid that Nigerians will even open their mouths to support such infamy. Yeye fowls!

      …and you, be here drawing lines up and down everywhere. Insider mugu.

      • thusspokez

        And the subject of discource on this page is……“Economists react to Nigerian govt’s decision to grant tax breaks to 27 industries”

        I wonder if you are one of those Nigerians who defecate anywhere. Your appalling attitude here is that you don’t respect or care about the subject matter, you will go ahead and defecate on the discussion anyway.

    • emmanuel

      These are very wrong interventionist strategy that will lead nowhere.
      Dead or dying companies; with over eighty percent of them having bad debts everywhere cannot run again? Only the likes of 9mobile that will be funded by banks not minding the huge bad debts acn benefit, as the banks would not bend back to fund delinquent clients in this very trying times

      • thusspokez

        These are very wrong interventionist strategy

        It is done everywhere. — Europe, USA, Asia, etc. The government wouldn’t be handing out cash; a business will have to generate profit in other to qualify for tax break. I don’t know what your problem is with this fantastic idea. Also I don’t think that 9Mobile or whatever will qualify for the tax break.

        Many western companies get a lot of handouts from their governments. Take the giant pharmaceutical companies in the USA for example, some say that up to 80% of their research and discovery is funded by the American tax payers by way of government grants to US universities and research institutes.

        These pharmaceutical companies keep a watch on innovations and move in quickly to buy the copyrights, then refine and manufacture the product to sell and make billions of dollars — giving back to the research department, just a few change.

        • emmanuel

          You are only re-affirming my postulation.
          The first phase is spend, spend, spend. Spending for researches, Capital projects and infrastructural renewal (not Chinese loan type of non-disbursements) is part of it and by the time the economy begins to pick up, tax relief becomes one of the last phases.
          contractors are all frustrated, yet Kemi keep coming to press to tell how she has released monies she has never.
          That woman is another satan working very hard to destroy Nigeria economy – I may not sound cool to her tribal people, but she is a misfit!

          • thusspokez

            You are only re-affirming my postulation.

            No I am not, I am making my own argument.

            The first phase is spend, spend, spend…, tax relief becomes one of the last phases.

            They are not mutually exclusive. Besides, from the government point of view, tax relief is still spending or put another way, giving away money that it could spend itself, i.e., Keynesian economics.

            by the time the economy begins to pick up

            The reason for the tax relief, in the first place, is to help the economy pick up.

            I may not sound cool to her tribal people, but she is a misfit!

            Fúck! There you go. What has tribe got to do with the discussion? Gosh, how so terribly difficult to have a civilised discussion with a Nigerian on any serious issue with he or she inject tribalism into it.

            I sometimes feel dirty after going on Nigerian websites and consequently feel the need for a wash before going on websites of other nations.

          • emmanuel

            The reason why Kemi has remained in office is tribal. Countries need cerebral economist or financial experts to drive recovery, not a revenue sharing minister who has caused Nigeria pains. She has superintended Nigeria failures effectively.
            Meanwhile, you do not put the cart before the horse in such situations. Which available funds would be deployed by firms to effect production or as additional investments on which the tax relief would be derived?

  • Pluti

    It’s actually good because the acting president is open to try something new, in the long run; a year or two, we will know if it’s been a good tax policy.

    • emmanuel

      Trash.
      It is not about trying something new. They have completely un-workable fiscal policies to the rescue.
      Even if they grant all the companies in Nigeria today tax break, this economy will not move

      • Pluti

        So what do you suggest?

        • emmanuel

          Talk to most FG capital project contractors and know if they receive any payment. The easiest way out was similar to what the USA did immediately the 2008 economic bubble bursted.
          This is a good solution at the wrong time.
          All new capital projects issued out recently are said to phoney companies with little or no staff and some are Arab money launderers, so nothing will happen to reflate the system or jump start recovery.
          Absolute corruption.
          It is also said, that most of those contractors now issue fake documentation to back their bids which are conducted privately in ‘Ogas’ office in the relevant MDA’s – criminality.

  • Secession Referendum

    Give us a date for Secession referendum. This is what we are waiting for

    • Tonnero

      10th August 2017.

  • Olatubosun

    Oshibajo is representing buhari well

  • emmanuel

    I just dey laugh. These people have resorted to deploying textbook models to run Nigeria economy. It is a big shame.
    What is needed today is a mix of automatic self adjusting economic mechanisms, along with Government spendings in the real sector.
    Not borrowing for infrastructural renewal from China, in which actual funds flow will not be experienced.
    Which kind nonentity dey run this economy?
    The effect of very high pricing and cyclical hardship will render the tax relief worthless.
    By the way, what is a company that has folded up or almost folded up do with tax relief, when they cannot even raise additional capital to operate.
    As at date – Maritime business has not been given any attention, Na only Yam we dey plant.

    • thusspokez

      By the way, what is a company that has folded up or almost folded up do with tax relief, when they cannot even raise additional capital to operate.

      And presumably, you want the government to handout cash to prop up unsuccessful bossiness?

      • emmanuel

        Governments must spend out of recession. Not steal available monies, award contracts to China in which cash spending will not take place.
        If you understand what nominal government spending is and the impact it has in depression, you would not think tax cut as the immediate interventionist mechanism.
        Go back history, do some economic analysis.
        Nigerias current state is such that needs huge spending and that is where all the trillions we hear were recovered and the consistent Crude sale above the budget becnh mark would work.
        As at date, all Capital project contractors have not received any money since 2015 May 29.
        Do you know what happens when such contractors het huge payment? Their Banks get paid, Staff get paid, sub-contractors and suppliers get paid, households spendings improves, they all pay taxes, FG staff gets paid from the taxes.
        Unfortunately, all available monies are now stowed away by the hand of Oke and all others positioned to steal in-waiting for 2019 election. Then Tax relief to be issues of course to cronies

  • thusspokez

    Indeed, in addition to tax breaks, I would like the government to increase spending on research in universities and research institutes. This is where innovations could come and benefit Nigerian companies and Nigeria.

  • Dr Pat Kolawole Awosan

    Granting tax break to 27 industries, will go a long way to boost further investment in Nigeria economy, in order to create provision for expanding employment creation and generation for our unemployed graduates and youths.Private sector must be encourage to donate more funds for research projects in our leading universities.It is not FGN that should be funding research but private sector as it is done in other clime.

    • thusspokez

      Governments across the world are the biggest funders of research, whether for military or civilian use.

  • Arc_Deji_Alabi

    Nice move, hope all works out fine