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The Pioneer Status Incentive (PSI) was set up by the Industrial Development (Income Tax Relief) Act, No 22 of 1971, and it grants tax holiday to qualifying industries and products for three years, extendable for one or two additional years, according to the Nigerian Investment Promotion Commission (NIPC).
Some of the firms that had their applications for pioneer status declined by the Federal Government included: Flutterwave, Flour Mills of Nigeria (FMN), Envoy Hotels, Fountain Manufacturing Company Limited, Al-Hamsad Rice Mill Limited, Benchmark Constructions Limited, and Super Packaging Limited.
Others were: Royal Foam Products Nigeria Limited, ENGIE Fenix Nigeria Limited, Technology Solutions Limited and Echostone Development Nigeria Limited, among others.
Director of Strategic Communication Office of the NIPC Emeka Offor told The ICIR that some of the firms who had their tax relief applications declined by the Federal Government could have avoided the situation if they had followed the directives of the Industrial Development Act.
“Pioneer status is granted based on the list of qualified pioneer industries and pioneer activities approved by the Federal Executive Council (FEC). The implication is that FEC has a list that they approve. In terms of the list already approved by FEC, there is a guideline for issuing the pioneer status to companies based on the Industrial Development Act.
“The Industrial Development Act clearly gives the guideline and one of the requirements is that an applicant for the pioneer status or tax relief must make an application in the first year of production or service delivery, which most of them failed to do.”
Offor said, ”In the case of Flutterwave, for instance, they applied within the third year of operations. Therefore, it is time-bound, according to the Industrial Development Act. Some other firms who had their applications for tax reliefs declined had a similar concern.”
Further analysis of the first quarter Pioneer Status Incentive report obtained from the NIPC showed that while the requests of the aforementioned firms were denied, three companies had their applications approved-in-principle, while six firms were granted PSI for a three-year period.
The report also revealed that 33 firms were currently benefitting from the tax incentive scheme, while the requests of 132 companies were still pending.
The six companies that were granted tax holiday between January and March were Pan African Towers Ltd, African Foundries Ltd, Aarti Rolling Mills Limited, Princess Medi-Clinics Nigeria Ltd, Medlog Logistics Ltd and Tiamin Rice Ltd.
As at March 31 this year, these companies had invested N45.5m into the Nigerian economy.
Flutterwave, a fintech firm, based in Lagos and San Francisco, launched in 2016 to help merchants, banks and other businesses handle digital payments across borders, payment platforms and currencies. It now has nearly 300,000 business users in 20 African countries.
Industry analysts say the government should lend every demanding support to investments that would bolster the economy amid fragile growth recorded by Nigeria’s economy just reeling from the impact of the coronavirus pandemic.
“The government must ensure that it pays close attention to sectors that grow the economy and create wealth for our people and make the law a bit flexible to ensure increased opportunities for wealth creation,” an associate consultant to the British Department of International Development (DFID) Celestine Okeke told THE ICIR.
After a massive drop during the COVID-19-induced lockdown, the volume and value of online transactions in Nigeria hit new heights in the third quarter (Q3) of 2020, pointing to improved economic activities following the relaxation of the lockdown.