In a bid to boost local production and spur economic activities, the federal government has granted 11 companies pioneer tax status in the third quarter of 2019.
According to the latest data by Nigerian Investment Promotion Commission (NIPC) released on Friday, 57.89 percent (11) of the 19 applicants were granted Pioneer Status Incentive (PSI), the highest since Q3 2018 when 18 companies were issued tax incentives.
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 survival, profitability, and sustainability of beneficiary companies.
According to the data by NIPC, the 11 companies that were granted the three years PSI in the review quarter were: Royal Mills and Foods Ltd, Gowus Nigeria Ltd, Triton Aqua Africa Ltd, Globus Resources Ltd, Crown Flour Mills Ltd, Dharul Hijra Fertilizer Company Ltd, and Olam Hatcheries Ltd. Others are Harvestfield Industries Ltd, Royal Pacific Group Ltd, Dangote Sinotrucks West Africa, and Montego Upstream Services Ltd.
“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,” Ayo Akinwunmi, head of research at FSDH Merchant Bank, said.
According to data from the Abuja-based commission, the surge in the PSI granted in the review quarter puts the current number of beneficiaries at 41 companies as of 30 September 2019. This is 28.13 percent higher than the 32 reported in the previous quarter and 115.79 percent more than the 19 recorded in the corresponding quarter in 2018.
“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.
While the incentive has been in place since 1971, it was suspended in 2015 by Ngozi Iweala, former minister of finance, based on perceived abuse and revenue leakages. However, the federal government in August 2017 lifted the administrative suspension on the scheme.
“Tax holiday to the companies is an incentive for them who invested heavily in various industries and also employ more labour,” Akinwunmi said.
Further analysis of the data by NIPC revealed that, of the 11 companies, Crown Flour Mills Limited located in Kwara State, and into the production of animal feeds, had invested the most amount at N41.01 billion.
This was followed by Olam Hatcheries Limited, which has its location in Kaduna State. The company, which is into poultry, has invested 23.06 billion.
Third on the list of companies that have invested the most amounts was Globus Resources Limited in Oyo State. The company is in the business of processing/preserving of meat/poultry production of table birds and has pumped about N18.74 billion investment into the industry.
According to Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), the tax incentive is granted to sectors that strengthen the Nigerian economy in terms of growth and profitability on investment.
Economic activities in Africa’s largest economy slowed to 1.94 percent from a revised 2.01 percent reported in the second quarter of 2019, data from the National Bureau of Statistics show.
Nigeria’s President Muhammadu Buhari recently directed the Central Bank of Nigeria (CBN) to stop providing foreign exchange to food importers. This is in line with his plans to encourage local production and spur growth in the country’s economy.
Since 2015, Nigeria’s economy has maintained a slow expansion pace that has remained lower than the country’s annual population growth rate. This means that Africa’s largest economy produces more people than it can feed.
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