“The success of any country lies in the strength of the industrial sector of the economy which is the heartbeat of economic development” – Anonymous
According to a recent report by Renaissance Capital the Nigerian manufacturing sector is fast becoming the major driver of economic growth in the country. The sector is growing faster than the telecommunication, oil and gas and agricultural sectors.
Manufacturers in Nigeria have attributed the remarkable increase recorded in capacity utilization within the last year to favourable government policies, especially with respect to industry, trade and investment.
The Nigerian Manufacturing sector as at 2013 accounted for 1/3 of the country’s GDP. The sector experienced an increase in manufacturing capacity utilization from 46.3 per cent recorded in the first half of 2013 to 52.7 per cent in the 2nd half of 2013 a growth that was largely driven by the textile, cement and food sub-sectors, among others.
Based on all this statistics it is no longer news why new factories are being set up in the country day-by-day and why foreigners are looking into setting up manufacturing companies in a country that is creating an enabling environment for them to thrive and for their business to succeed.
From the bustling Illupeju Industrial Estate which is home to some of the major manufacturing plants belonging to multinationals such as Nestle, Glaxosmithkline, PZ, to the busy Oba Akran area in Ikeja which houses paint manufacturing companies, chemical manufacturing companies etc. one is left to wonder why manufacturing comapnies are now being set up in the country by individuals and why the government has developed a sudden interest in the Manufacturing sector.
It is no doubt that the Manufacturing sector is one of the largest employers of labour, a proof of this can be seen in areas like Apapa, Agbara, Illupeju Industrial area and even Ikorodu were most of Nigeria’s manufacturing plants are located. The influx of factory workers is just a proof that this sector has helped reduced unemployment rate in the country
The Nigerian government is aware of the fact that the private sector and foreign investment is the engine of growth and creator of wealth in the country hence our government is always looking for ways to ensure that they provide an enabling environment for mostly foreign investors to operate smoothly.
In the last few years laws and policies which before now had hindered foreign investment or the private sector investment have either being removed or amended while new polices to ensure that new opportunities are created for investors wishing to invest in this sector has been put in place.
The government policies towards foreign investors have become more favourable and investing in this sector has never looked more attractive to foreign investors. Gone are the days when poor infrastructures, high cost of production, less access to man-power, high tax rate etc. in Nigeria left most manufacturing companies with the option of either closing down business or relocating to neighbouring countries with an enabling environment for their business.
Below are few of the reasons why any foreign investor looking to invest in the manufacturing sector should consider investing in Nigeria at a time like this
- TAX HOLIDAY – The Nigerian government has provided a tax holiday period of 5-7 years for foreign investors in the manufacturing sector, especially when such investors company is located in an economically disadvantaged area. Foreign investor’s whose companies have been considered to be economically beneficial, are in the interest of the Nigerian economy and most importantly make use of local raw material can also qualify for this Tax holiday.
- TAX RELIEF FOR RESEARCH – There is a government policy that allows for foreign investors in the manufacturing sector to enjoy up to 120% tax concession when carrying out a research and development for their company in Nigeria.
- TAX RELIEF FOR USE OF LOCAL RAW MATERIALS – Foreign investors who utilize local raw materials in producing their products have the priviledge of enjoying atleast 30% tax concession
- TAX RELIEF FOR USE OF LOCAL LABOUR- Nigerian has a population of over 160 million people meaning it has a large labour force for any employer to tap into. Hence labour is cheap and easily accessible in the country. In addition to having access to large man power in their companies, foreign manufacturing companies also have the opportunity to enjoy a 15% tax concession for employing Nigerians to work in their companies.
- Foreign investors would enjoy 20% for the cost of providing infrastructures if located in areas where these infrastructures do not exist. Hence companies located in areas where their cost of production is high due to lack of infrastructures such as light, road, water etc. would enjoy atleast 20% tax concession
- For every foreign investor with a plant in an economically disadvantaged area there would be a 100% tax holiday for 7years
- All foreign investors are not entitled to pay excise duties
- RE-INVESTMENT ALLOWANCE – Manufacturing companies that incur capital expenditure for purposes of approved production expansion, diversification into related products, etc. are entitled to an incentive which is aimed at encouraging such companies to reinvest their profit
- INVESTMENT TAX ALLOWANCE – Certain manufacturing companies can enjoy generous tax allowance in respect to qualifying capital expenditure incurred within 5 years from the date they commenced operation.
- Dividend derived from manufacturing companies in petro-chemical and liquified gas sub-sectors are exempted from tax.
- Companies with turn over less than 1 million are taxed at a low rate of 20% for the first 5 years of operation
- Dividends from companies in manufacturing sector with a turn over less than 100 million is tax free for the first 5 years
- ACCESS TO LAND – Any company incorporated in Nigeria is allowed to have access to land rights for the purpose of any activity in the country
- Engineering manufacturing sectors who own an assembling plant in the country cab enjoy up to 10% tax concession for 5 years, to encourage local fabrication in the country.
It has never being a better time for foreigners to invest in this now thriving sector which seems to have become the new haven for wealth creation in the nation.
The Nigerian government has put in place policies aimed at ensuring that foreign businesses in the manufacturing sector succeed and experience a minimal level of discomfort for investing in Nigeria.
The Nigerian-Turkish Investors Forum 