•As tax credits replace tax exemptions
By Yinka Kolawole
As Nigeria transitions to a new tax regime with effect from January 2026, the 149 companies currently enjoying pioneer status incentives (PSI) have been assured of retaining their tax holidays for at least two more years.
Chairman of the presidential tax reform committee, Taiwo Oyedele, disclosed this at a media parley organised by the Nigerian Investment Promotion Commission (NIPC.
PSI is a tax incentive provided by the federal government that allows eligible companies to be exempted from paying company income tax for a specific period. Oyedele said that the decision was aimed at protecting investor confidence and ensuring a smooth transition to the new tax regime.
He explained that the decision to maintain tax holidays for the existing firms is aimed at protecting investor confidence and facilitating an orderly transition to the Economic Development Incentive (EDI) under the new tax law.
With the retention of the existing beneficiaries, the companies will continue to enjoy tax exemptions for a minimum period of two years, following a directive not to scrap the incentive for firms already granted pioneer status.
Meanwhile, Uchenna Okonkwo, an official of the Incentives Administration Department, NIPC, said the PSI will be replaced with the EDI, which emphasizes tax credits rather than outright tax exemptions and is aimed at encouraging long-term investment, capital reinvestment and growth in key sectors.
According to Okonkwo, while the PSI provides full tax relief during the incentive period, while the EDI represents a shift toward a tax credit–based framework under the Nigeria Tax Act (NTA) 2025.
Under the EDI, qualifying companies receive a 5 per cent tax credit on eligible capital expenditure, which is used to offset their corporate income tax liabilities over an initial five-year period, with an option for a further five-year extension subject to reinvestment conditions.
“The EDI addresses some of the gaps under the PSI, including clearer sunset provisions and sector-specific investment thresholds
“Under the EDI, beneficiaries are granted a tax credit linked to sector-specific investment thresholds. These thresholds are outlined in the Tenth Schedule of the Nigeria Tax Act (NTA) 2025.
“Each sector has a defined minimum investment threshold, and once a company meets this threshold, it is entitled to a tax credit equivalent to five per cent of the qualifying amount. Unlike the PSI, the EDI does not provide full tax relief.
“Companies operating under the EDI are required to pay corporate income tax; however, their tax liability is offset using the tax credits earned based on qualifying capital expenditure that meets the prescribed threshold,” Okonkwo said.
He added that companies with high tax obligations could effectively enjoy incentive benefits for up to 15 years through unutilised tax credits.
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