Agriculture sector in Nigeria enjoys Pioneer Status with attendant tax exemption to all companies operating therein.
The following incentives are available in the agriculture sector:
- All agricultural and agro-industrial machines and equipment enjoy zero percent (0%) duty.
- Companies in the agro-allied business do not have their capital allowance restricted. It is granted in full i.e. 100%.
- Agribusiness is tax free. The payments of minimum tax by companies that make small or no profits at all do not apply to agro-allied business.
- Agro-allied plant and equipment enjoy enhanced capital allowances of up to 50%.
- Processing of agricultural produce is a pioneer industry; consequently, there is 100% tax-free period for 5 years or projects into processing of agricultural produce.
- Tax relief for Research & Development: Agro-allied industries that attained minimum levels of local materials sourcing & utilization enjoy tax credit.
- Up to 75% guarantee for all loans granted by commercial banks for agricultural production and processing under the Agricultural Credit Guarantee Scheme Fund (ACGSF) administered by the Central Bank of Nigeria.
- Interest Drawback Program Fund:
60% repayment of interest paid by those who borrow from banks under the ACGS, for the purpose of cassava production and processing provided such borrowers repay their loans on schedule.
- Expatriate quota and resident permits in respect of expatriate personnel engaged by agro-allied companies.
- Corporate tax incentives rebate of 12% shall be enjoyed by Bakers on attainment of 40% cassava blend within a period of 18 months.
- Personal remittance quota for expatriate personnel, free from any tax imposed by any enactment for the transfer of external currency out of Nigeria.
- The Nigerian Investment Promotion Commission Act allows 100% ownership of companies by foreigners, while the Foreign Exchange Miscellaneous Act, guarantees 100% Repatriation of Capital, Profit, & Dividends through authorized means.
KEY INCENTIVES, BENEFITS AND GUARANTEES
- Trade Liberalization Scheme (TLS) of Economic Community of West African States (ECOWAS)
This is an export liberalization incentive that focuses on the ECOWAS sub-region. The Scheme is an incentive primarily geared towards export activities within the ECOWAS sub-region. The objective is to significantly expand the volume of intra-community trade in the sub-region via the removal of both tariff and non-tariff barriers to trade in goods originating from ECOWAS countries. This affords preferential access to the ECOWAS market from Nigeria.
- LIBERALIZATION OF COMPANY OWNERSHIP STRUCTURE
The Nigerian Investment Promotion Commission Act has liberalized the ownership structure of businesses in Nigeria. The implication of this is that foreigners can own 100% shares in any company without having Nigerian shareholders.
- REPATRIATION OF PROFITS
Under the provisions of the Foreign Exchange (Monitoring & Miscellaneous Provision Act No. 17 of 1995), foreign investors are free to repatriate all their profits and dividends net of taxes through an authorized dealer in freely convertible currency.
- GUARANTEES AGAINST EXPROPRIATION
The Nigerian Investment Promotion Commission Act Cap. N117 Laws of the Federation 2004 guarantees the none nationalization or expropriation of any enterprise or foreign-owned investment by any government in Nigeria.
- INCENTIVES FOR SPECIAL INVESTMENT
For the purpose of promoting identified strategic or major investment, the Nigerian Investment Promotion Commission shall, in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment as the Commission may specify.
- INVESTMENT PROMOTION AND PROTECTION AGREEMENT (IPPA)
As part of additional effort to foster foreign investors’ confidence in the Nigeria economy, Government continues to enter into bilateral investment promotion and protection agreements (IPPAs) with countries that do business with Nigeria.
The IPPA helps to guarantee the safety of the investment of the contracting parties in the event of war, revolution, expropriation or nationalization. It also guarantees investors the transfer of interests, dividends, profits and other incomes as well as compensation for dispossession or loss.
- MINIMUM LOCAL RAW MATERIALS UTILIZATION
A tax credit of 20% is granted for five years to industries that attain the minimum level of local raw material sourcing and utilization. The minimum levels of local raw materials sourcing and utilization in the Agro-allied sector is seventy (70) percent.
- IN-PLANT TRAINING
This is applicable to industrial establishments that have set up in-plant training facilities. Such industries enjoy a two (2) percent tax concession for a period of five (5) years.
- INVESTMENT IN INFRASTRUCTURE
This is a form of incentive granted to industries that provide facilities that ordinarily, should have been provided by government. Such facilities include access roads, pipe borne water and electricity. Twenty percent (20%) of the cost of providing these infrastructural facilities, where they do not exist, is tax deductible.
The Federal government has introduced various funding mechanism that will stimulate investments into the sector. The Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) of the Central Bank of Nigeria (CBN) has reduced the risk in banks’ lending for farmers and reduced the lending rate to farmers. Banks are lending to agriculture today more than ever before. The share of lending to agriculture as a share of total bank lending expanded from about 2 per cent in 2011 to 5 per cent by 2013 and 9% in 2014.
Bank lending to seed companies and agro-input dealers expanded from $10 million in 2012 to $53 million in 2013 while bank lending to fertilizer companies expanded from $100 million in 2012 to $500 million by 2014.
₦787 million World Bank intervention funds to farmers
₦50 billion mechanization support fund for agricultural equipment hiring enterprises;
₦14 billion for the expansion of 2014 dry season farming.;
₦10 billion rice processing fund
₦500 million fund for cotton farmers etc.
TOTAL INVESTMENT UNDER THE SECTOR
Agriculture is now an exciting sector. Today major local and foreign investors are investing in this new agriculture sector, with $5.6 billion in investments. The number of seed companies alone has risen from 5 to 80 within three years.
Presently, the agricultural sector grew by 9.19% (year-on-year) in Q 3 of 2014, up by 2.7% points from Q3 of 2013. The agricultural sector grew by 38.53% between 3rd and 4th quarters of 2014, with crop production being the main driver, with a growth of 43.5%.
CONTRIBUTION TO GDP
At the moment, agricultural sector contributes 47 per cent to the country’s Gross Domestic Product (GDP) and is responsible for 10 per cent of its export earnings.
Foreign direct investment inflows are currently at $6.1 billion and the GDP is growing at a rate of 7.71 per cent, making Nigeria the fastest growing economy in Sub-Saharan Africa.
RECENT & PROPOSED INVESTMENT
- $5 Billion worth of investments in fertilizer manufacturing currently ongoing by Dangote Group, Indorama, Notore Chemicals, and others.
- Olam has invested $70 million in mechanized rice farm.
- Dangote to Invest $1 Billion for large scale rice production
- Teragro (a subsidiary of Transcorp Group) has established a $6 million plant to process oranges into concentrates.