News in brief:
– Nigeria’s FG will launch a new Economic Development Incentive (EDI) scheme, offering performance-based tax credits to firms investing in key sectors like agriculture.
– The initiative aims to boost sustainable economic activity and raise the country’s tax-to-GDP ratio to 18% by 2027.
The Nigerian government is set to launch a new tax incentive scheme to attract investment into strategic sectors such as agriculture, energy, and manufacturing.
Dubbed the Economic Development Incentive (EDI), the initiative will replace the current Pioneer Status Incentive (PSI), which has faced criticism for its structural flaws and limited economic impact.
The old programme has structural weaknesses, which have allowed companies to exploit tax exemptions without delivering meaningful economic contributions. Firms could import ‘pioneer products’ tax-free and operate with minimal value addition, benefiting from prolonged tax relief even after their holiday period ends.
The system created loopholes that enabled long-term tax advantages beyond the policy’s original intent and lacked transparency, making it difficult for both the government to track forgone revenue and investors to evaluate the incentive’s true value.
The EDI, announced by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, links tax relief directly to actual investments.
Speaking at BusinessDay’s Policy Intervention Series on April 22 2025, in Lagos, Oyedele noted that the PSI allowed firms to operate tax-free without delivering substantial economic value.
Under the initiative, qualifying firms will receive multi-year tax credits based on the scale and consistency of their investments.
For example, a company investing ₦10 billion in the first year would receive ₦500 million in annual tax credits for five years. Additional investments trigger new five-year cycles, allowing for extended benefits of up to 10 years.
Sectors eligible for these incentives include agriculture, manufacturing, and critical infrastructure like power, waterways, and ports.
However, utility investors must commit a minimum of ₦200 billion to qualify.
Oyedele emphasised that companies must maintain investment momentum, as unused credits will be forfeited if capital deployment stalls.
This initiative is part of broader tax reforms aimed at increasing Nigeria’s tax-to-GDP ratio from 13.6% in 2024 to 18% by 2027.
With its performance-based structure, the EDI aims to encourage sustainable economic activity, reduce tax evasion, and position Nigeria as a more attractive destination for long-term investments.
