INVESTMENT INCENTIVES IN NIGERIA ◼ NIGERIA – CANADA INVESTMENT SUMMIT 2019 YEWANDE SADIKU EXECUTIVE SECRETARY/CEO NIGERIAN INVESTMENT PROMOTION COMMISSION ABUJA | 05 NOVEMBER 2019 Private and Confidential
What investors look for: typical steps in location strategy development 1a. Define project assumptions and long- Strategic Macro list of location options Stability/risk De-select less Market attractive options costs 1b. Analyse long-list of candidate locations (identify shortlist) Workforce/Skills 2a. Evaluate shortlisted locations Infrastructure (Select preferred location) costs Select best location solutions 2b. Site search and negotiations (Select preferred sites and start negotiations) Real Estate Tactical Incentives Incentives only become Quality of life important towards the end Implementation of the appraisal process Micro Source: IBM Global Business Services: Plant Location International 1
Africa’s investment attractiveness Biggest draws: natural resources, high growth rates and large domestic markets… Nigeria has 4 of the 5 key factors investors …yet concerns about business look for in its favour environment persist Source: EY’s 2015 Africa Attractiveness Survey 2
Africa’s perceived barriers to investment… Business environment is most important barrier… … incentives are least important barrier Source: EY’s 2015 Africa Attractiveness Survey 3
Investment Incentives 4
Biggest incentive: high level commitment to ease of doing business reforms Presidential Enabling Business Environment Council (PEBEC) inaugurated in July 2016 <70 Remove criticalbottlenecks and bureaucratic constraints Ranked 70th by 2023 President Muhammadu Vice President Yemi Osinbajo to doing business in Nigeria Buhari , GCFR SAN, GCON Participating No of announced Success rate No of initiatives agencies Latest initiative reforms Launch NAP 1.0 February 2017 8 22 12 72% May 2017 transparency and improving the business environment EO 1 October 2017 11 22 29 52% NAP 2.0 NAP 3.0 February 2018 9 28 26 68% NAP 4.0 March 2019 deepen reforms and drive sustainability and institutionalization NAP: National Action Plan, EO: Executive Order Source: Enabling Business Environment Secretariat Reports 5
Compendium of Investment Incentives in Nigeria ◼ Compilation of fiscal incentives in Nigerian tax laws and duly approved sector-specific incentives ◼ 6 principal sections – Investment policies and protections – General tax-based incentives – Sector-specific incentives – Tariff-based incentives – Export incentives – Special Economic Zones ◼ First step in understanding impact of incentives in achieving Government’s economic objectives and considering incentive reforms ◼ Available at www.nipc.gov.ng 6
Selection of investment incentives in Nigeria Pioneer status incentive Deduction for research and Rural investment allowance development • For companies in industries • For companies >20km from recognised as “pioneer” government facilities who incur • For companies undertaking R&D capex for providing electricity, water, • Allows a company income tax holiday activities for commercialization tarred roads, etc for the purpose of a for 3-5 years • Allows 20% investment tax credit on trade or business • Dividends also exempt from tax qualifying expenditures • Allowance rates: • 100%: no facilities, 50%: no electricity, 30%: no water, 15%: no tarred road Investment tax relief Export expansion grant Export processing zones incentives • Similar to rural investment • Post-shipment incentive for non-oil allowance, but only available for 3 exports • 100% capital allowance years max for companies who have • Qualifying exports must fully • Rent-free land during construction not enjoyed pioneer status repatriate proceeds within 300 days • Full holiday from federal, state and local government taxes Source: Compendium of Investment Incentives in Nigeria 7
Sector-specific incentives Tourism/ Incentives Agriculture Solid Minerals Manufacturing Oil & Gas Power Hospitality ✓ ✓ ✓ ✓ ✓ ✓ Pioneer Status ✓ Enhanced capital allowance ✓ Exemption from minimum CIT ✓ Indefinite carryover of losses ✓ Interest drawback scheme (Cassava processing) ✓ ✓ Tax holiday ✓ Investment allowance (Gas utilization) ✓ ✓ Accelerated capital allowance (Gas utilization) ✓ Tax-free dividend (Gas utilization) ✓ Exemption of income earned in convertible currencies (25%) Source: Compendium of Investment Incentives in Nigeria 8
Pioneer Status Incentive (PSI) 9
Government agencies involved with PSI issuance Federal Minister of Nigerian Industrial Federal Inland Executive Industry, Trade Investment Inspectorate Revenue Service Council and Investment Promotion Department • implements PSI Commission (IID) • amends the list • specifies the and issues of pioneer mode of • processes PSI • certifies the certificates of industries and application for applications date of qualifying pioneer PSI and cancels production / capital products pioneer date from expenditure (“Pioneer List”) certificates if which the PSI from time to legal and will take effect time regulatory provisions are contravened • approves and extends PSI, and issues pioneer certificates 10
More streamlined PSI application process New application process 11
Key features of recent PSI reforms Post-Approval Update of Pioneer List* Biennial Review Impact Assessment Obligations • Biennial impact study • Submission of annual • Addition of 27 new • To ensure list always industries relevant to economic to determine performance report aspirations contribution to • Payment of annual • Removal of 2 sectors: industrial aspirations • To define maturity by service fee based on • cement , based on sector actual tax savings maturity and recommendation of • Determine additions MOF-led inter- and deletions ministerial • Additions to be committees immediate, deletions • oil production and to take effect after 3 prospecting (subject years to PPT not CIT) • Review Committee to • Reclassification based include relevant MDAs on international and MITI, with input standard (ISIC) from economists in the public and private sectors Still outstanding: e-processing of PSI applications and an even less burdensome PSI process * Last undertaken in 2006 12
Recent reforms in PSI New List Guidelines modernised; issued, new sectors August added 2017 PSI List arranged in ISIC* format and gazetted Next revision in progress. All inputs welcome *ISIC = International Standard Industrial Classification of All Economic Activities, Revision 4 13
Plans for incentive reforms Step 1: Nov 2017 Step 2: H2 2019 Existing incentives compiled Step 3: 2020 Undertake Incentives Impact/Performance Recommend reforms in Assessment to measure the Nigeria’s incentives regime effect of existing incentives based on Impact in Assessment and feedback - generating the required from stakeholder investments; and engagements - achieving the desired economic impact Conduct peer review with other economies 14
Nigeria-Canada relations 15
Nigeria – Canada Comparative statistics GDP ($’ bn) Nigeria Canada 1,799 1,709 1,653 NIGERIA CANADA 1,560 1,536 Capital Abuja, FCT Ottawa Official language English English & French Land Area 910,770 km² 9,093,510 km² People (2018) 568 Population 196m 37m 481 404 397 376 Economically active pop. (15-64) 105m 25m Population growth rate (%) 2.6 1.4 Median age 18.4 42.2 Economy (2018) 2014 2015 2016 2017 2018 GDP nominal ($’ bn) 397 1,709 Agriculture (% GDP) 21.1 1.6 Population (m) Industries (% GDP) 22.5 282 Services (% GDP) 56.4 70.2 GDP growth rate (%) 1.9 1.9 Nigeria Canada GDP per capital ($) 2,028 46,125 411 Inflation (%) 12.1 2.3 61% Labour (2018) Labour force (% of pop.) 61m (31) 20m (53) Trade (2018) 181 Age 15-64 Import $’ bn, (% of GDP) 37 (11) 460 (27) Export $’ bn, (% of GDP ) 53 (13) 451 (26) 0.006 % 45 60% 36 Trade balance $’ bn (% of GDP) 17 (1) 11 (0.6) Investment Climate (2018) EoDB 146 22 2015 2020 2025 2030 2035 2040 2045 2050 GCI 115 12 Sources: United Nations World Population Prospects; World Development Indicators, World Bank Doing 16 Business (EoDB) Report 2018; Global Competitiveness Index (GCI) 2018-2019; CIA World Factbook, Trade Map
Why Canada? #4 Top 10 Top 10 investor in solid investor in oil refining investor in services minerals Nigeria’s strategic partner Source: NIPC Intelligence 17
About NIPC 18
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