Since the drop in crude oil prices in 2014/2015, the Nation’s focus had been drifting away from oil revenue to taxation. Hence the intensifying tax drive by all levels of government and the several measures taken by the Federal Government to increase government’s revenue from taxation. These measures included the mandate of the Presidency to State Governments in 2015 to generate and enhance internal revenues; the 45-day tax amnesty window opened by the Federal Inland Revenue Service (FIRS) in 2016; and the subsisting Voluntary Assets and Incomes Declaration Scheme (VAIDS) and its attendant national campaigns/ Tax Thursdays.

In the midst of all the tax, tax, tax, it felt good for stakeholders to receive the news of the revision of Nigeria’s Pioneer Status Incentive Scheme on 7 August 2017, following critical reforms after almost two years of administrative suspension placed on the scheme. The reforms resulted in addition of 27 new industries to the ‘List of Approved Pioneer Industries’ and the issuance of a new set of application guidelines which now provides a better insight into the step by step processes involved in a ‘New’[1] and ‘Extension’[2] applications respectively. We will examine these new revisions in details.

Pioneer Status Incentive (PSI) is a fiscal incentive provided for under the Industrial Development (Income Tax Relief) Act (“IDA”) 1971 for grant of income tax relief to eligible companies operating in designated pioneer industries and/or producing pioneer products. Such income tax holiday is granted for up to five years (three years in the first instance, extendable for an additional maximum period of two years). The agency charged with the administration of the PSI is the Nigerian Investment Promotion Commission (NIPC).

In addition to income tax holiday, pioneer companies enjoy other benefits such as carry forward of capital allowances on pioneer period fixed assets for post-tax holiday assessable profit offset, carry forward of tax losses after pioneer period, and tax-free dividends from the pioneer profits.


In addition to the hitherto subsisting list, the Federal Executive Council has approved the inclusion of the following industries as eligible for the PSI:

  1. Mining and processing of coal;
  2. Processing and preservation of meat/poultry and production of meat/poultry products;
  3. Manufacture of starches and starch products;
  4. Processing of cocoa;
  5. Manufacture of animal feeds;
  6. Tanning and dressing of Leather;
  7. Manufacture of leather footwear, luggage and handbags;
  8. Manufacture of household and personal hygiene paper products;
  9. Manufacture of paints, vanishes and printing ink;
  10. Manufacture of plastic products (builders’ plastic ware) and moulds;
  11. Manufacture of batteries and accumulators;
  12. Manufacture of steam generators;
  13. Manufacture of railway locomotives, wagons and rolling stock;
  14. Manufacture of metal-forming machinery and machine tools;
  15. Manufacture of machinery for metallurgy;
  16. Manufacture of machinery for food and beverage processing;
  17. Manufacture of machinery for textile, apparel and leather production;
  18. Manufacture of machinery for paper and paperboard production;
  19. Manufacture of plastics and rubber machinery;
  20. Waste treatment, disposal and material recovery;
  21. E-commerce services;
  22. Software development and publishing;
  23. Motion picture, video and television programme production, distribution, exhibition and photography;
  24. Music production, publishing and distribution;
  25. Real estate investment vehicles under the Investments and Securities Act;
  26. Mortgage backed securities under the Investments and Securities Act; and
  27. Business process outsourcing.

The pioneer products under each of the industries are yet to be specified though (as is in the master list), since this new list is yet to be published in an official Federal Government Gazette. NIPC therefore recommends that applicants experiencing any ambiguity whatsoever with determining eligibility under the new list should write to the Executive Secretary of the NIPC to seek formal clarifications. Suggestions as to additional industries that may be included as eligible for the PSI are also welcomed through the same medium.

As much as it is heartwarming that certain industries with broad coverage and the potential to benefit many players have now been included in the list (e-commerce services, software development, motion picture, music and business process outsourcing), intending applicants may still be discouraged by the huge minimum tangible non-current asset base requirement of N100million provided for in the new guidelines. It is common knowledge that most service or software development businesses are more non-tangible asset base intensive.


The new guidelines specify these basic conditions which applicants must satisfy in order to be eligible to apply in the first place:

  1. The applicant must make a new application in the first year of production/service and must apply for an extension within a month after the expiration of the initial tax relief period of three years or an extension of one year.
  2. The activity or business engaged in must be listed as a pioneer industry or pioneer product.
  3. The applicant company must have a non-current tangible asset of over one hundred million naira (N100 million). This automatically disqualifies smaller businesses or service companies with smaller tangible asset bases from benefitting from the Incentive.
  4. Evidence of all required legal and regulatory compliance documentation must be available.
  5. The applicant must demonstrate the tangible impact its activity (project) will have on Nigeria’s socio-economic space, including economic diversity and growth, industrial and sectoral development, employment, skills and technology transfer, export development and/ or import substitution.
  6. Full payment of fees promptly, when due.
  7. During the pioneer period (if granted), a performance report must be submitted to NIPC annually for monitoring and evaluation purposes.

We will continue this article tomorrow, to give guidance on how to apply (or extend the tax relief period) and to highlight the major changes effected in the new application guidelines.

[1] First time application.

[2] Application for extension of pioneer period for an additional two years, after the initial 3-year period.

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