For the first time since 2017, more companies from the agro-allied sector had their applications for Pioneer Status Incentive (PSI) approved due to high local value addition, second quarter figures from the Nigerian Investment Promotion Commission (NIPC) show.
NIPC is the agency of the Federal Government established to encourage, promote and coordinate investments in Nigeria.
Ten companies were granted three years tax holiday in Q2 2019, out of 24 that applied, and five were from the agro-allied industry, the highest recorded for one industry in the review quarter.
A dive into the most recent data by NIPC revealed that the agro-allied companies that were granted tax holiday in Q2 2019 were Amarava Agro Processors Limited, Wacot Rice Limited (both into rice processing), Olam Hatcheries Limited (poultry), Solis Agro Limited (crop production) and Crown Flour Mills Limited (animal feeds).
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), said Nigeria’s agro-allied sector has high local value addition, hence the increase in the number of companies granted tax holiday.
“Agro-allied is one of the major sectors that strengthen Nigerian economy. In terms of growth and profitability on investment, it has a lot of advantage,” Yusuf told BusinessDay.
The record is also the first for the agro-allied industry, at least since August 2017 when the suspension on tax holiday was lifted.
Pioneer Status Incentive (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.
While the incentive has been in place since 1971, it was suspended in 2015 by the then minister of finance, Ngozi Okonjo-Iweala, based on perceived abuse and revenue leakages. But in 2017, the Federal Government lifted the administrative suspension on the PSI scheme.
Yusuf said “investors like very competitive industries”, adding that that may have “predisposed the number of investments in that sector and hence the increase in incentive”.
According to the most recent data by the NIPC as analysed by BusinessDay, the manufacturing sector closely followed the agro-allied, reporting four companies that were granted tax holiday.
They included Indigo Feeds Company Nigeria Limited located in Nasarawa (into manufacturing of fish feeds), Polar Petrochemicals Limited in Kwara (produces lubricant), Gowus Nigeria Limited in Ogun (into assembling of generators) and Harvestfield Industries Limited (Ogun), which manufactures pesticides and agrochemicals.
Also on the list was the tourism industry, which was represented by Royal Pacific Group Limited located in FCT. The hospitality brand which is into hotel services was granted tax holiday for three years.
A further probe into the data by NIPC revealed that Oando Oil Limited (into processing and production of oil and gas) with an investment of N51.66 billion and ATC Nigeria Limited (operating in the ICT/telecommunication sector) with investment of N260.31billion had their extension application approved in the review quarter.
Also, Obu Cement Company Limited (Edo) into cement manufacturing, Edimara Properties Limited (Lagos) with resources in office complex, and Karshi Agro Farms Limited (Kaduna) into poultry/animal feeds were granted pioneer status incentive. The three companies reported investment worth N127 billion, N9 billion and N2.9 billion, respectively.
“The Pioneer Status Incentive was established by the Industrial Development (Income Tax Relief) Act, No 22 of 1971 and 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 in a statement.
Ayo Akinwunmi, head of research, FSDH Merchant Bank, said tax holiday to the different sectors “is an incentive to the various companies who invest more heavily in the industry and also employ more labour”.
The remaining companies that applied for tax exemption in the period under review were declined mainly due to the fact that the activities they are into were not on the PSI list.
According to NIPC, as at 30 June, 2019, 24 companies were pioneer status incentive beneficiaries. Since inception, though, about 104 companies have abandoned their applications for the tax holiday.
Endurance Okafor
