Explain Government Policy Measures at Promoting Industry and Entrepreneurship in Nigeria

Explain Government Policy Measures at Promoting Industry and Entrepreneurship in Nigeria




In order to promote a dynamic, efficient and balanced manufacturing sector, a package of incentives should be designed to promote investment, employment, product mix and various other aspect of industry. In general, the package of incentives can be grouped into five; these are: 

1.Fiscal measures of taxation and interest rates. 

2.Effective protection with import tariff 

3.Export promotion of Nigerian products. 

4.Foreign currency facility for international trade. 

5.Development Banking. 

TAXATION 

Fiscal measure has been fashioned out to provide for deduction and allowances in the determination of taxes payable by manufacturing enterprises. The fiscal measures targeted at aspect of industrial activities are as follows: 

a) Pioneer Status 

By the provision of income tax relief Act 1958 (Amended by Decree No. 22 of 1971) Public companies are granted specific tax holiday on corporate income. This is to encourage such industries that government consider beneficial to Nigeria. During the period of exemption, the companies are expected to achieve a reasonable level of profitability. The relevant company or product is declared a pioneer industry or pioneer product. This Act is applicable to both public and private limited liability companies. 

The relief covers non renewable period of five years for pioneer industry and seven years for such industries located in economically disadvantaged areas. Pioneer status relief as well as additional tax concessions is available to industrialists who take initiative in the following areas: 

i.Local raw material development 

ii. Local value added activity 

iii.Labour intensive processes 

iv.Export oriented activities 

v.In-plant training 

vi.Investment in economically disadvantaged areas. 

b) Tax Relief for Research and Development 

Industrial establishments are expected to engage in research and development (R&D) for the improvement of their processes and products. Up to 120% of expenses on R&D are tax deductible provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profit is derived for the purposes of R&D on local raw material 14% of expenses are allowed.' Where the research is long term, it will be regarded as a capital expenditure and it will be written off against profit in administering this tax relief the Federal ministry of finance consults the federal ministry of science and Technology to determine the genuineness of such R&D activities. 

c) Companies Income Tax Act 

This Act has been amended in order to encourage potential and existing investors and entrepreneurs. 

d) Tax Free Dividends 

An individual or a company deriving dividend from any company as from 1987 shall  enjoy tax free dividends for a period of three years if: 

i.The company paying the dividend is incorporated in Nigeria.

ii.The equity participation is imported into the country. 

iii.The recipient's equity in the company constitutes at least, 10% of the share capital of the company. 

In addition to the above, if the company paying the dividends is engaged in Agricultural production in Nigeria or the production of petrochemicals or liquefied natural gas, the tax free period shall be five years. 

e) Tax Relief for Investments for Economically Disadvantaged Local Governmental

Areas 

Enterprises who invest in economically disadvantaged local government areas are entitled to special income and other concessions. 

These include: 

i.Seven years income tax concession under the pioneer status 

ii.Special concession by relevant state government. 

iii.Additional 5% and above the initial capital depreciation allowance under the company income tax. 

For the purpose of administering these incentives, the country has been grouped into the following zones; 

i.Industrially and economically developed local government areas 

ii.Less industrially and economically developed local government areas 

iii.Least industrially and economically' developed local government areas. 

f) Double taxation (Income tax 19791 

By Decree No 41985 (miscellaneous taxation provision) the income tax Act of 1979 was amended. The effect of the amendment was to eliminate double taxation on investment income. 

g) Group of company taxation. 

Companies can now pay interim company dividends without any double taxation since the amendment on franked investment income came into effect on 1st January, 1985. 

EFFECTIVE PROTECTION 

Tariff level provides a simple and straight forward .measure of protection against imports but may not provide the total effect anticipated. Government therefore put in place other measures to ensure that locally made goods are competitive in both domestic and export market. 

a) Pursuant of the trade liberalization policies of the government, a new Customs, Excise Tariff etc decree was published. It makes provisions for the imposition of ad valorem custom and excise duties payable on goods imported and manufactures in Nigeria basing it on a new harmonized system of custom tariff. The essence of this review is to give effective protection to local industries and to promote further investment. 

b) Dumped and subsidized goods, the custom Duties dumped and subsidized 

Goods Act of 1958 permit when necessary the imposition of a special duty on any goods which are dumped in Nigeria or subsidized by any government or authorized outside Nigeria. 

EXPORT PROMOTION 

A variety of measures ranging from export insurance to outright grant to export oriented industries are applicable to manufacturers producing for export. These have been articulated in Decree No. 18 1986. 

Import Duty Draw Back 

Importers can claim repayment of import duty paid for materials used in producing export goods. Repayment will be made in full if materials are imported for use in the production of goods which are exported. The objective of the duty draw back is to encourage the production of various export goods as a way of diversifying the economy away from it. 

Export License waiver 

No export license is required for the export of manufactured or processed products. Also, export products are exempted from excise tax 

 Export Credit Guarantee and Insurance Scheme 

In order to make Nigerian products compete effectively in the international market as well as to insure genuine -exporter against some political and other risk including default in payment, the government has approved the establishment of an export credit guarantee and insurance scheme. 

Export Development Fund. 

This should be used to provide financial assistance to private exporting companies to cover part of their initial expenses in respect of export promotion activities. 

Export  Expansion Fund; 

This shall be used to provide cash inducement for exporters who have exported a minimum of N5O, 000 worth of semi manufactured or manufactured products. 

Export' Adjustment Scheme Fund 

This has been established to serve as a supplementary export subsidy. 

Rediscounting Of Short Term Bill For Export 

This facility will enable all exporters to rediscount their snort term bills under the scheme in the central bank of Nigeria. 

Capital Allowance 

Additional annual capital allowance of 5% on plant and machinery is granted to manufacturing exporters provided that the product has at least 40% local raw materials content or 35% value added. 

Tax Relief on Interest Income 

Company income tax Act has also been amended to grant tax relief on interest accruing from any loans granted to and investment in export oriented industries. 

FOREIGN CURRENCY FACILITY 

A new trade and exchange rate regime has been adopted by government to ensure efficient and competitive local production. The facility also provides for easier measurement of investible funds for goods and services in and out of Nigeria. 

Foreign Exchange Market 

The foreign exchange market came into operation after abrogating of import levy and export license. The market also provides manufacturers easy access to foreign exchange. 

Repatriation of Imported Capital 

An approved status permit for imported capital investment is conferred on companies with non-resident investment cases where the original investment was imported in the form of equity either by way of cash or plant and machinery. The purchase of this status is to facilitate timely repatriation of remittance or other capital claims. 

Payment of Technology Fees 

In order to ensure effective assimilation and diffusion of foreign technology within a specific time frame at a fair. and equitable contractual and payment terms, fees for technical services are based on net sales (rather than profit and tax). 

Foreign Currency Domiciliary Account 

Banking regulation in Nigeria makes it possible for exporters of non oil product to retain the proceeds of export in bank account denominated in foreign currency. Such accounts are operated at the owner's discretion. 

DEVELOPMENT BANKING 

Industrial development banks have been set up at both federal and state levels to offer specialized services to industry. Paramount among these services is the provision of soft loans and advances to large, medium and small scale, and cottage type industries on concessionary terms. These concessions are reviewed - regularly in line with policy objective of government. These banks include Bank of Industry (BOI) and Nigeria . Agricultural Cooperative and Rural Development Bank (NACRDB).