The Federal Government has officially ceased accepting new applications for the Pioneer Status Incentive (PSI), effectively ending the three-year tax-free holiday for new corporate organizations, with the stoppage taking effect from November 10, 2025.
The move, announced by the Nigerian Investment Promotion Commission (NIPC), marks a crucial preparatory step for the full transition to the Economic Development Tax Incentive (EDTI) scheme, which is set to become the country’s primary investment incentive framework beginning January 1, 2026.
According to the NIPC, the transition represents a significant shift in Nigeria’s fiscal policy towards investment, moving away from blanket income tax relief to a more targeted and deployment-linked tax credit system. The Commission urged corporate organizations and investors, particularly those currently benefiting from or intending to apply for incentives, to consult with the NIPC promptly to ensure seamless transition and compliance with the requirements of the new EDTI scheme.
The Outgoing Pioneer Status Incentive (PSI)
The Pioneer Status Incentive, administered by the NIPC under the Industrial Development (Income Tax Relief) Act, Cap I7, Laws of the Federation of Nigeria 2004, provided a vital boost for industries critical to national growth.
The PSI offered eligible companies a 100 percent exemption from Company Income Tax for an initial period of three years, which could be extended for up to an additional two years, making a total potential exemption of five years. It targeted essential sectors such as manufacturing, agriculture, infrastructure, and technology, promoting industrialization and economic diversification.
Introducing the Economic Development Tax Incentive (EDTI)
The new EDTI framework represents a fundamental departure from its predecessor. It is designed to be time-bound, sector-targeted, and closely linked to the actual capital deployed by investors, focusing on scalability and impact.
The EDTI is structured primarily around priority sectors identified as having strong multiplier effects on the economy, including:
- Manufacturing
- Services
- Infrastructure
Key Features of the New Scheme
- Minimum Investment Thresholds: A central design feature of the EDTI is the introduction of minimum investment thresholds to ensure that only impactful and scalable projects qualify. For instance, companies operating in capital-intensive sectors like utilities would need to demonstrate a substantial investment of at least N200 billion to be eligible for the credit.
- Tax Credit Structure: Instead of a full income tax exemption, the EDTI grants companies a 5 percent annual tax credit over five years. This structure means qualifying companies receive a total of 25 percent of the value of their qualifying investment as a tax credit over the scheme’s lifetime.
- Enhanced Investor Value: Importantly, the NIPC confirmed that this 5% annual tax credit is granted in addition to existing capital allowances, making the scheme particularly attractive to long-term investors committed to significant capital deployment in Nigeria.
The transition underscores the Federal Government’s commitment to creating a more disciplined and economically impactful incentive structure, ensuring tax incentives contribute directly to the nation’s diversification and industrial goals.
