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FG Grants Tax Holiday to 27 Industries

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tax relief
  • FG Grants Tax Holiday to 27 Industries

The Federal Executive Council on Wednesday approved the inclusion of 27 enterprises to the list of pioneer industries and products that would enjoy pioneer status under the Industrial Development Income Tax Relief Act.

The pioneer status incentive is a tax holiday given to companies for a period of time to encourage the growth and development of the Nigerian economy. A new company or an existing one with an expansion plan may apply for a certificate of pioneer status, which lasts for three years and is renewable upon application for two years.

It may also be a seven-year tax holiday in respect of industries located in economically disadvantaged local government areas of the country.

The Minister of Industry, Trade and Investment, Okechukwu Enelamah, disclosed this to State House correspondents at the end of a meeting of the council presided over by Acting President Yemi Osinbajo.

Enelamah said the council also resolved that that oil prospecting companies governed by the Petroleum Profit Tax should not be included in the pioneer industries’ list.

The minister, however, did not reveal the 27 industries added to the list.

He said firms covered by the pioneer industries’ list would enjoy tax holidays ranging from three to five years.

While recalling that the last review of the list was done in 2006, Enelamah stated that the latest review was done by paying special attention to the Economic Recovery and Growth Plan to capture the current realities.

He said the review would help the government to implement and realise the objectives of the ERGP.

The minister stated, “Against this backdrop, we then approved 27 industries that were recommended for addition to the pioneer list today.

“We also recommended and it was accepted by the council that mineral oil prospecting, which is governed by the Petroleum Profit Tax, should not be part of the pioneer industries’ list, which is meant for industries governed by the Companies Income Tax.”

The Minister of Power, Works and Housing, Babatunde Fashola, said the council approved two major road projects totalling over N20bn.

Fashola explained that the first project was the construction of the Pankshin-Ballang-Yelleng-Salla-Gindiri road in Plateau State for N10.461bn, while the second was the Share-Pategi road in Kwara State for N10.29bn.

The minister said the council also approved a memorandum with respect to an inherited liability from the old Ministry of Power, where a judgment of N119bn had been signed against the Federal Government as a result of the acts of its officials who varied a presidential approval without seeking further directive and then awarded a contract on that basis.

“The happy news is that council approved the memo to give effect to the negotiations that we were able to put together to compromise that judgement entirely and to convert the old N37bn now to a loan to that contractor so that they can use it to supply meters through the Discos,” he said.

The Minister of Science and Technology, Ogbonaya Onu, announced that the council approved a science policy to help to change the direction that nation would take.

One of the highlights of the policy, according to him, is that where there is bulk purchase of major items that will be brought into the country, those who normally would have supplied from outside the country will now come to Nigeria and establish their factories to produce locally.

By doing so, he said the firms would offer job opportunities to Nigerians and pay taxes to the government, among other benefits.

Onu stated, “We also agreed that from now on, any person who wants to practise any profession that has anything to do with science, engineering and technology like medical doctors, accountants, quantity surveyors, just to mention but a few, that first they have to be certified by appropriate regulatory bodies in Nigeria.

“This is very important in building our local capacity. There are so many areas that this new policy has covered, because the aim of this new policy is to make sure that in the next 10 years, Nigerian firms will be in a position to carry out very complex jobs; the sort of jobs that we don’t currently have the expertise to do in the country.”

The minister added that the council accepted to declare a state of emergency in science and technology.

According to him, this is important because the ERGP recognises the cardinal place of science and technology in driving the recovery of the economy and growth plan of the government.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Economy

MPC Meeting on July 22-23 to Tackle Inflation as Rates Set to Rise Again

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Interbank rate

The Monetary Policy Committee (MPC) is set to convene on July 22-23, 2024, amid soaring inflation and economic challenges in Nigeria.

Led by Olayemi Cardoso, the committee has already increased interest rates three times this year, raising them by 750 basis points to 26.25 percent.

Nigeria’s annual inflation rate climbed to 34.19 percent in June, driven by rising food prices. Despite these pressures, the Central Bank of Nigeria (CBN) projects that inflation will moderate to around 21.40 percent by year-end.

Market analysts expect a further rate hike as the committee seeks to rein in inflation. Nabila Mohammed from Chapel Hill Denham anticipates a 50–75 basis point increase.

Similarly, Coronation Research forecasts a potential rise of 50 to 100 basis points, given the recent uptick in inflation.

The food inflation rate reached 40.87 percent in June, exacerbated by security issues in key agricultural regions.

Essential commodities such as millet, garri, and yams have seen significant price hikes, impacting household budgets and savings.

As the MPC meets, the National Bureau of Statistics is set to release data on selected food prices for June, providing further insights into the inflationary trends affecting Nigerians.

The upcoming MPC meeting will be crucial in determining the trajectory of Nigeria’s monetary policy as the government grapples with economic instability.

The focus remains on balancing inflation control with economic growth to ensure stability in Africa’s largest economy.

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Economy

Nigeria’s Growth Forecast Lowered to 3% for 2025, Higher than Most Emerging Markets

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IMF global - Investors King

The International Monetary Fund (IMF) has projected a 3% growth rate for Nigeria in 2025, slightly down from the 3.1% forecasted for 2024.

Despite this slight decline, Nigeria’s projected growth remains higher than that of many emerging markets as detailed in the IMF’s latest World Economic Outlook released on Tuesday.

In comparison, South Africa’s economy is expected to grow by 1.2% in 2025, up from 0.9% this year. Brazil’s growth is projected at 2.4% from 2.1% in 2024, and Mexico’s growth forecast stands at 1.6% for 2025, down from 2.2% in 2024.

However, India is anticipated to see a robust growth of 6.5% in 2025, although this is slightly lower than the 7% forecast for 2024.

The IMF’s projections come as Nigeria undertakes significant monetary reforms. The Central Bank of Nigeria has been working on clearing the foreign exchange backlog, and the federal government recently removed petrol subsidies.

These reforms aim to stabilize the economy, but the country continues to grapple with high inflation and increasing poverty levels, which pose challenges to sustained economic growth.

Sub-Saharan Africa as a whole is expected to see an improvement in growth, with projections of 4.1% in 2025, up from 3.7% in 2024. This regional outlook indicates a modest recovery as economies adjust to global economic conditions.

The IMF report underscores the need for cautious monetary policy. It recommends that central banks in emerging markets avoid easing their monetary stances too early to manage inflation risks and sustain economic growth.

In cases where inflation risks have materialized, central banks are advised to remain open to further tightening of monetary policy.

“Central banks should refrain from easing too early and should be prepared for further tightening if necessary,” the report stated. “Where inflation data encouragingly signal a durable return to price stability, monetary policy easing should proceed gradually to allow for necessary fiscal consolidation.”

The IMF also highlighted the importance of avoiding fiscal slippages, noting that fiscal policies may need to be significantly tighter than previously anticipated in some countries to ensure economic stability.

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Economy

Nigeria’s Inflation Rises to 34.19% in June Amid Rising Costs

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Food Inflation - Investors King

Nigeria’s headline inflation rate surged to 34.19% in June 2024, a significant increase from the 33.95% recorded in May.

This rise highlights the continuing pressures on the nation’s economy as the cost of living continues to climb.

On a year-on-year basis, the June 2024 inflation rate was 11.40 percentage points higher than the 22.79% recorded in June 2023.

This substantial increase shows the persistent challenges faced by consumers and businesses alike in coping with escalating prices.

The month-on-month inflation rate for June 2024 was 2.31%, slightly up from 2.14% in May 2024. This indicates that the pace at which prices are rising continues to accelerate, compounding the economic strain on households and enterprises.

A closer examination of the divisional contributions to the inflation index reveals that food and non-alcoholic beverages were the primary drivers, contributing 17.71% to the year-on-year increase.

Housing, water, electricity, gas, and other fuels followed, adding 5.72% to the inflationary pressures.

Other significant contributors included clothing and footwear (2.62%), transport (2.23%), and furnishings, household equipment, and maintenance (1.72%).

Sectors such as education, health, and miscellaneous goods and services also played notable roles, contributing 1.35%, 1.03%, and 0.57% respectively.

The rural and urban inflation rates also exhibited marked increases. Urban inflation reached 36.55% in June 2024, a rise of 12.23 percentage points from the 24.33% recorded in June 2023.

On a month-on-month basis, urban inflation was 2.46% in June, slightly higher than the 2.35% in May 2024. The twelve-month average for urban inflation stood at 32.08%, up 9.70 percentage points from June 2023’s 22.38%.

Rural inflation was similarly impacted, with a year-on-year rate of 32.09% in June 2024, an increase of 10.71 percentage points from June 2023’s 21.37%.

The month-on-month rural inflation rate rose to 2.17% in June, up from 1.94% in May 2024. The twelve-month average for rural inflation reached 28.15%, compared to 20.76% in June 2023.

The rising inflation rates pose significant challenges for the Central Bank of Nigeria (CBN) as it grapples with balancing monetary policy to rein in inflation while supporting economic growth.

The ongoing pressures from high food prices and energy costs necessitate urgent policy interventions to stabilize the economy and protect the purchasing power of Nigerians.

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