Why Nigeria is reforming its pioneer status scheme, Yewande Sadiku
Nigeria has refined eligibility criteria for granting pioneer status on industries and would subject the scheme to a biennial review, according to Yewande Sadiku, Executive Secretary of the government’s investment and promotion council, NIPC.
The reform has been given seal of approval by the Federal Executive Council (FEC) which has also to add 27 new industries to the existing club of eligible sectors, while removing two – petroleum, as well as cement from the existing list.
The deletion of petroleum will take immediate effect, while in the case of cement, this will become operational in three years.
Sadiku said in an interview in Abuja, that companies that would enjoy pioneer status were only those that ventured to invest in industries that were either non-existent at all, or in which the country did not have sufficient presence for its economic development.
“Pioneer status does not relate to only new industries or entrants to the economy,” Sadiku noted.
In trying to encourage the establishment or growth of the industry and the economy, she said government decided to look at its priority sectors in the Nigerian Industrial Revolution Plan (NIRP) and the Economic Recovery and Growth Plan (ERGP) by promoting the 27 industries and products in the approved status document.
Sadiku said businesses that have existed for several years in a particular sector may not enjoy the pioneer status, except such companies ventured into a brand-new line of business covered under the list of 27 new industries and products.
“For instances, big companies, like JUMIA, who have established themselves in the e-commerce business sector, as well as those in the music industry, would not enjoy tax exemption by the government under the new regime.
“The pioneer status actually applies to those involved in their first year of business or operations. Clearly, those older than that would not benefit,” she explained.
An existing company will only benefit if they are starting a new line of business included in the list of 27,” she said.
The objective of government, she pointed out, was to attract fresh investment in critical sectors capable of driving economic growth and employment generation.
“In the music industry, those that have already been there for a while, would not enjoy the pioneer status.” Government is just trying to encourage new people to invest in those industries. The list of 27 industries and products published on Monday by the Federal Ministry of Industry, Trade and Investment in Abuja, include mining and processing of coal; processing and preservation of meat/poultry and production of meat/poultry products; manufacture of starches and starch products; processing of cocoa; manufacture of animal feeds; tanning and dressing of leather, manufacture of leather footwear, luggage and handbags; manufacture of household and personal hygiene paper products and manufacture of paints, varnishes and printing ink.
Others include manufacture of plastic products (builders’ plastic ware) and moulds; manufacture of batteries and accumulators; manufacture of steam generators; manufacture of railway locomotives, wagons and rolling stock; manufacture of metal-forming machinery and machine tools, manufacture of machinery for metallurgy, manufacture of machinery for food and beverage processing; manufacture of machinery for textile, apparel and leather production; and manufacture of machinery for paper paperboard production.
Further included are, manufacture of plastics and rubber machinery; waste treatment, disposal and material recovery; e-commerce services; software development and publishing; motion picture, video and television programme production, distribution, exhibition and photography; music production, publishing and distribution; real estate investment vehicles under the Investments and Securities Act; mortgage backed securities under the Investments and Securities Act; and business process outsourcing.
The scheme has won broad applause from leading economist who say the granting of tax break to additional 27 industries and products in Nigeria is a right step towards economic recovery.
They also described the move as an indication that Nigeria is on course out of economic recession and firmly towards growth.
These were the views of some notable economists and analysts, including Chief Consultant, B. Adedipe Associates Limited, Biodun Adedipe; and Chief Executive Officer, Economic Associates, Ayo Teriba, who spoke to PREMIUM TIMES.
“The approval by the Executive Council of the Federation, FEC, of 27 additional industries and products to enjoy pioneer status is a step in the right direction,” Adedipe said.
“The decision is showing two things – that there are thinkers in the present government and that they are doing the right things at the right time,” he added.
He said if the system and its processes are not abused, Nigeria would experience a strong recovery towards sustained growth.
“Malaysia and several other enviable economies have used the same instrument to good effect. Rather than reduce government revenue, it has huge potential to leverage revenue and enable rapid job creation,” Adedipe said.
For Teriba, government’s move by giving incentives to prospective investors means it was determined to attract investors to do business under the atmosphere created with the National Economic Recovery and Growth Plan.
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