Experts Say Policy Alone Won’t Attract Lasting Investment Without Structural Reforms
By Xamblog.com

In a bid to revive its flagging economy and lure global capital, the Nigerian government has rolled out long-term tax incentives aimed at attracting foreign direct investment (FDI). The move is part of a broader economic strategy to deepen industrialization, stimulate job creation, and bridge Nigeria’s infrastructure gaps.

While these tax credits have sparked interest across some sectors, economic experts warn that incentives alone may not deliver lasting results without complementary reforms in infrastructure, security, and governance transparency.

The New Incentive Framework

The government’s new policy provides tax holidays, capital allowances, and exemptions from certain levies for foreign investors entering priority sectors such as manufacturing, renewable energy, technology, and agriculture.

Key highlights include:

• 10+ year tax holidays for pioneer industries

• Accelerated depreciation for imported capital equipment

• Customs duty exemptions on specific project-related imports

• Tax rebates for companies that reinvest profits in Nigeria

These incentives, according to the Ministry of Finance, are designed to reduce investment risk and operational costs, especially for companies looking to establish long-term presence in Nigeria.

Investor Confidence Still Unsteady

However, economists and global investment analysts have voiced caution. FDI inflows into Nigeria have fallen sharply in recent years, dropping from over $8 billion in 2011 to less than $500 million in 2023, according to data from the National Bureau of Statistics (NBS).

Dr. Ngozi Oyekanmi, a policy analyst at the Nigerian Economic Summit Group (NESG), notes:

“While tax incentives are helpful, they cannot substitute for the fundamental enablers of investment, stable power supply, good roads, security, and transparent regulation.”

Multinational corporations, especially those in mining, logistics, and ICT, continue to face frequent power outages, unreliable internet, bureaucratic bottlenecks, and the ever-present risks of insecurity and policy reversals.

Learning from Past Failures

This isn’t Nigeria’s first attempt at using tax incentives to attract capital. Past efforts under the Pioneer Status Incentive (PSI) and Export Expansion Grant (EEG) were criticized for being opaque, poorly monitored, and disproportionately favoring a few large corporations without measurable impact on job creation or exports.

The World Bank has consistently urged Nigeria to focus on creating a predictable investment environment, including:

• Stronger enforcement of contracts

• Streamlined business registration processes

• A crackdown on corruption and policy inconsistency

Balancing Hope with Realism

The renewed push for FDI through tax breaks comes at a time when the naira remains volatile, inflation is above 30%, and capital flight continues to threaten macroeconomic stability.

Still, industry leaders say there is room for optimism.

“If Nigeria can back these incentives with practical reforms, especially on energy and security, then we may start to see meaningful FDI return,” said Aisha Yakubu, an investment strategist with a Lagos-based advisory firm.

Conclusion

Nigeria’s new tax incentive framework is a step in the right direction, but its success will hinge on whether it’s paired with deep-rooted structural improvements. For now, potential investors are watching not just what the government promises, but how quickly it can translate policy into action.

For more economic insights, visit Xamblog.com — Nigeria’s trusted source for real-time analysis and business trends.

Last Updated on July 21, 2025 by kingstar