Nigerian Gov’t Launches Charm Offensive to Attract Greater Investments from Africa’s Diaspora
Nigeria has promised to pass a new law that would significantly reduce taxes and provide for government investments to attract foreign direct investments.
Vice President Yemi Osinbajo stated at the third edition of the Nigeria diaspora investment summit, which was held virtually, that the government would among other things improve the business environment by offering different tax incentives.
According to the Vice President, the government has already proposed the new tax incentives to the National Parliament in the 2021 finance bill.
Highlights of the incentives in the proposed 2021 Finance Bill include a reduction in duties on tractors from 35 to 10 per cent, as the government looks to attract investments into the agricultural sector.
The government is also looking to attract investors into the freight business and has, as a result, proposed a reduction in duties on motor vehicles for the transportation of goods from 35 to 10 per cent.
Motor vehicles for the transportation of persons will also benefit, as the government promises to reduce duty from 35 per cent to 5 per cent, while small companies will not be required to pay the education tax under the Tertiary Education Trust Fund (TETFUND). The education tax exemption applies to companies with turnover of less than N25 million ($65,155).
Improving the business climate can potentially boost the economy of Nigeria exponentially (C) ThisDayLive
Companies will also receive 50 per cent reduction to pay 0.25 per cent of their gross turnover instead of 0.5 per cent they have been paying. The 2021 finance bill is also granting tax relief to companies that donated to the Covid-19 relief fund under the private sector coalition (CACOVID). Under this same law software acquisition will qualify as a capital allowance.
With regards to the provision for software acquisitions, the Vice President says; “When companies acquire software for their company operations, in the past, that was treated as an overhead. Now we are going to treat it as a qualifying expenditure for tax deduction to improve the ease of doing business.”
To show that these are not just promising Prof. Osinbajo points to the government undertaking similar initiatives when it passed the 2019 finance act.
“Last year, we passed a legislation giving small companies with a turnover of less than N25 million a year, tax exemption from the companies income tax,” he says, adding that medium-sized company with a turnover of between N25 million ($65,155) to a N100 million ($260,620) pay income tax at the lower rate of 20 per cent.
“And then, services provided by microfinance banks are completely exempted from Value Added Tax (VAT). Withholding tax rates, on roads, on bridges, on buildings and power plant construction contracts have also been reduced from 5 to 2.5 per cent,” he says.
On government’s efforts to generate jobs and create opportunities for income generation and increase the size of Nigeria’s market, the government designed the Economic Sustainability Plan (ESP), where agriculture is one of the main pillars.
As part of the investment in formalizing agriculture, the government has enumerated five million farmers and geo-tagged them to their farmlands.
The government is also investing in a housing programme and the connection of five million homes to solar energy. This too will improve the productivity of Nigerian households.
“We are building 300,000 homes in all states of the federation using local materials and small to medium-sized construction companies,” he says.
All these are investments that Prof. Osinbajo says the Nigerian diaspora which has a reservoir of resources and talent can benefit from.