The total number of local and foreign companies exempted from remitting tax revenue to government coffers has risen to 105 as of December 2024, including prominent names like Dangote Fertilisers and Mikano International Limited. This increase occurs against a backdrop of uncertainty surrounding the effectiveness of the Pioneer Status Incentive (PSI) scheme and the government's stated intention to discontinue the policy as part of a broader strategy to bolster its dwindling revenue base.
Data from the Nigerian Investment Promotion Commission (NIPC) reveals that the Federal Government approved tax holidays for 22 new companies in the final quarter of 2024 under the PSI scheme, pushing the total number of beneficiaries to 105. This follows a fluctuating trend throughout the year, with beneficiary numbers reaching 104 in the first quarter, declining to 88 in the second, and further dropping to 83 in the third quarter.
These figures were disclosed in the latest PSI reports released by the NIPC. Findings also indicate that since September 2023, when the Chairman of the Presidential Tax Reform Committee, Taiwo Oyedele, announced a comprehensive review of tax waivers, a total of 25 companies have received regulatory approval for tax exemption for the next three years.
The PSI is an incentive offered by the Federal Government that exempts eligible companies from paying income tax for a specified period, either fully or partially. Established under the Industrial Development Income Tax Act, this incentive typically grants tax relief for an initial three-year period and is intended as an industrial measure to stimulate investments in sectors deemed pioneering or crucial for economic development and not already prevalent in the country.
However, the PSI has become a contentious issue due to the significant amount of revenue the government reportedly foregoes annually through these waivers, estimated at around N8 trillion. Concerns have been repeatedly raised about the transparency and objectivity of the approval process.
Last week, the Executive Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, at the 2025 Tax Expenditure Workshop, highlighted the difficulty in quantifying revenue lost to tax expenditure due to inadequate data across relevant government agencies. He noted that the benefits of tax incentives are often not properly weighed against their actual economic impact, making it challenging to determine their true cost and leading to inconsistencies in reported tax expenditure figures.
Adedeji argued that while tax incentives might appear to be revenue losses, the expected benefits derived by the recipient entities, if adequately quantified in terms of socio-economic impact, could demonstrate that the actual financial cost to the government is minimized, leading to positive developmental growth.
To address these challenges, the government has proposed four new tax bills aimed at stimulating economic growth and attracting investment. One key proposal is a new tax credit scheme called the Economic Development Incentive (EDI), intended to replace the existing PSI. However, the legislative process for these bills has stalled at the National Assembly, delaying their implementation.
The Presidential Tax Committee Chairman, Taiwo Oyedele, explained that the EDI is designed to stimulate real economic activity by directly linking tax relief to verifiable investments. This proposed tax credit system represents a shift from the current one-size-fits-all approach of the PSI. Instead, the EDI will be structured around priority sectors – primarily manufacturing, followed by services and infrastructure – that have strong multiplier effects on the economy.
A significant design feature of the EDI is the introduction of minimum investment thresholds to ensure that only scalable and impactful projects qualify for tax relief. For instance, companies operating in capital-intensive sectors like utilities would need to invest at least N200 billion to be eligible for the tax credit.
Oyedele also pointed out a perceived loophole in the current PSI, stating, “The assets used during the pioneer period are essentially frozen in time. They’re treated as if acquired after the incentive ends—meaning companies only start claiming deductions once the holiday period is over. This creates long-term tax advantages that go well beyond the policy’s original intent.”
Meanwhile, analysis of the quarterly PSI report reveals that 89 new applications for tax holidays were received, while 213 applications are currently pending. Additionally, 34 companies had their applications approved in principle, and 14 firms were granted incentive extensions for another three years until 2027. Another 30 companies are seeking renewal applications for extension.
Notable companies with new PSI applications include Aradel Refineries Limited, Pro Pipes and Metal Industries Limited, Transgreen Nigeria Limited, and Zen Cylinders Manufacturing Company Limited, among others. These applications were received between October 2 and December 17, 2024.
The reports also indicate that the total investments made by the 107 companies benefiting from the PSI during the year amounted to N2.53 trillion. These companies operate across various sectors, including manufacturing, solid materials, pharmaceuticals, information and communication, trade, construction, waste management, electricity and gas supply, tourism, and infrastructure.
The list of companies currently benefiting from the PSI includes Dangote Fertilisers, Mikano International Limited, Sinotrucks West Africa Limited, West African Cubes Limited, Jigawa Rice Limited, JMG Nigeria Limited, Rain Oil Limited, Okpella Cement Plc, Greenville Liquified Natural Gas Company Limited, and numerous others across diverse industries.
Economic experts, including the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, have acknowledged the crucial role of tax incentives in stimulating economic growth and attracting investment in pioneer businesses.
Dr. Yusuf noted that there is nothing inherently wrong with waivers if they align with sound tax policies and are implemented transparently as a strategic effort to grow the economy, considering not just immediate revenue but also employment generation and multiplier effects in the medium to long term. He cautioned against viewing such incentives solely as revenue losses, especially if the policy is non-discriminatory and aimed at fostering economic development.