Nigeria Phases Out Blanket Tax Holidays, Moves to Performance Based Incentives for 149 Companies
By Aboki Forex —
The Federal Government has started transitioning to a new performance based tax incentive system. Under the new framework, 149 companies currently enjoying Pioneer Status Incentives (PSI) will keep their tax exemptions temporarily. The government is phasing out blanket tax holidays.
The new Nigeria Tax Act (NTA) 2025 allows qualifying firms to keep pioneer tax benefits for up to two years or until their current incentive period ends. The goal is to protect investor confidence while shifting to a stricter system that rewards measurable investments and economic impact.
Old PSI Scheme Replaced by Economic Development Incentive
The long running Pioneer Status Incentive scheme has been replaced with the Economic Development Incentive (EDI). The EDI links tax relief directly to verified capital expenditure and economic activity. Unlike the old system which granted broad tax holidays upfront, the EDI uses a certificate based tax credit structure. Only companies making genuine investments will benefit.
Tax and legal experts say the reform is a major shift in Nigeria’s investment policy. Resolution Law Firm explained that the new structure moves away from open ended tax waivers toward incentives tied to measurable contributions.
Under the new regime, companies in priority sectors like manufacturing, agriculture, infrastructure, mining, energy, technology services, and renewable energy can claim annual tax credits. The credit equals 5 per cent of qualifying capital expenditure for an initial five year period. Firms that reinvest profits into expansion may qualify for additional incentive periods.
NIPC Data Shows 149 Active Beneficiaries
Data from the Nigerian Investment Promotion Commission (NIPC) shows that between 2017 and the second quarter of 2025, 693 applications were received under the Pioneer Status scheme. Out of these, 304 were approved, 64 were rejected, and 149 companies remain active beneficiaries. These 149 firms will now enjoy transitional protection under the new law.
The NIPC disclosed that the PSI scheme attracted about N8.7 trillion in investment commitments and supported nearly 59,000 direct jobs, especially in manufacturing and industrial sectors.
Industry Experts React to the Reform
Tax advisory firms and industry experts say the reform could reshape investment decisions. Kehinde Folorunsho, partner and head of tax services at Kreston Pedabo Professional Services, said businesses must now structure operations strategically. They must focus on incentives tied to actual investments rather than relying on automatic tax holidays.
He noted that sectors like manufacturing, agro processing, mining, gas development, and renewable energy stand to gain significantly due to their high capital requirements.
Global consulting firm EY described the reform as a major step toward improving transparency and reducing abuse associated with the old pioneer system. EY added that the EDI aligns Nigeria’s tax incentive framework with international standards, including OECD Pillar Two rules on minimum taxation.
Government Defends Policy as Part of Broader Reforms
The Federal Government defended the policy as part of efforts to strengthen industrialisation, attract long term investment, and reduce revenue leakages. Former Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said the incentives are designed to boost local production and improve Nigeria’s competitiveness. He stressed that manufacturing remains critical to job creation and economic growth.
Meanwhile, the Nigeria Revenue Service will oversee compliance under the new system. The planned Rev360 digital platform will electronically track tax credits and incentive utilisation. Analysts believe the success of the policy will depend on transparency, efficient administration, and consistent implementation. Companies must adjust to stricter reporting obligations and investment thresholds under the new tax regime.