Analysing the Investments Incentives in Nigeria's Consumer Goods Industry

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Friday, December 06, 2019   /09:46 AM  / By Taiwo Oyedele* / Header Image Credit:Wall Street

 

Background and context

  • Consumer Goods Industry affects the lives of all Nigerians in a significant way on a daily basis.

  • The sector is a major employer and contributor to GDP as well as government revenue.

  • The need to diversify Nigeria's economy has led to a drive by the government to boost the consumer and industrial products industry by creating an enabling environment for investors.

  • The industry is hampered by low capacity utilisation induced by erratic power supply and other infrastructure deficits.

  • Other challenges include multiplicity of taxes, inconsistent trade policies, low aggregate demand, high cost of importing raw materials for production, among others.

  • Opportunities in this industry could be spurred by the recent border closure, which is expected to encourage domestic production and reduce the competition from imported products.

  • Also, the restriction of FX for certain products offers another potential opportunity for investment in the industry. Government initiatives at boosting the manufacturing sector include the Economic Recovery and Growth Plan (ERGP), which includes plans to grow small and medium scale manufacturing activities.

 

Incentives and Opportunities

 

Incentives

  • Pioneer status
  • Free Trade Zones
  • 15% investment tax credit for replacement of obsolete plant and machinery
  • 10% investment allowance
  • Export incentives / EEG
  • Small businesses with turnover less than N25m to be exempted from Companies Income Tax
  • A lower CIT rate of 20% to apply to medium-sized companies with turnover between N25m and N100m

 

Opportunities

  • Large population
  • High propensity to consume
  • Excise duties on imported goods
  • ECOWAS
  • AfCFTA
  • Technology and digital economy
  • Expansion/clarification of VAT exempt items
  • Introduction of VAT registration threshold
  • Cash basis for VAT remittance to FIRS

 

Disincentives and Challenges

 

Disincentives

  • High effective corporate income tax rates
  • Multiplicity of taxes and taxing agencies
  • Excess dividend tax
  • Commencement and cessation rules
  • Minimum tax
  • Restriction of input VAT on assets
  • Stamp duties on electronic transactions
  • Expanded definition of "Goods" and "Services"
  • Increase in VAT rate to 7.5%

 

Other challenges

  • Poverty - generally low purchasing power
  • Poor infrastructure
  • Low level of tax compliance & competitiveness
  • Ease of doing business
  • Inconsistent trade regulations and investment policies
  • VAT registration threshold (input VAT problem)
  • Taxes on rebates, discounts etc
  • Introduction of Thin Capitalisation Rules

 

Nigerians Are Dissatisfied With Public Services

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And Frustrated With The Complex And Corrupt Tax Collection Process

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The Top 3 Changes You Are Most Excited About

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The Top 3 Changes You Most Disagree With

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Given the need for government to raise revenue to cater for the various proposed reliefs, which 3 tax increase proposals do you support?

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About The Author


Taiwo Oyedele is the Head of Tax and Corporate Advisory Services at PwC Nigeria. He has been in the forefront as a thought leader and prominent speaker on key accounting and tax issues including the tax implications of IFRS Adoption and Transfer Pricing. Taiwo writes articles in leading national newspapers, professional journals, international magazines and newsletters. He is a regular presenter and a highly sought after public speaker delivering over 200 speeches and presentations around the world in the past 3 years alone. Taiwo is the Head of PwC Tax Academy, Dean of the Direct Taxation Faculty of the Chartered Institute of Taxation of Nigeria, member of the Nigerian Taxation Standards Board and a member of the Taxation and Fiscal Policy Management Faculty Board of ICAN. He can be reached via   @taiwoyedele 

 

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