Nigeria: Companies to Retain Tax Holidays for Two Years Under New Tax Law

As Nigeria prepares to transition to a new tax regime effective January 2026, companies currently benefiting from pioneer status incentives (PSI) have been assured that their tax holidays will remain in place for at least two additional years.

The Chairman of the Presidential Committee on Tax Reforms, Taiwo Oyedele, gave the assurance at a media engagement organised by the Nigerian Investment Promotion Commission (NIPC). He explained that the decision covers the 149 companies presently enjoying pioneer status and is intended to preserve investor confidence while ensuring a smooth shift to the new tax framework.

The PSI is a federal government incentive that grants eligible companies exemption from company income tax for a defined period. Oyedele noted that maintaining the incentive for existing beneficiaries would support an orderly transition to the Economic Development Incentive (EDI) introduced under the new tax law, rather than abruptly withdrawing benefits already granted.

Under the arrangement, firms that have been approved for pioneer status will continue to enjoy tax exemptions for a minimum of two years, following a directive not to discontinue the incentive for companies already operating under the scheme.

Providing further clarification, Uchenna Okonkwo of the Incentives Administration Department at the NIPC said the PSI will eventually be replaced by the EDI, a framework that prioritises tax credits over outright tax exemptions. The new incentive structure is designed to promote long-term investment, capital reinvestment, and sustainable growth across priority sectors of the economy.

Okonkwo explained that while the PSI offers full corporate tax relief during the incentive period, the EDI represents a shift to a tax credit–based system under the Nigeria Tax Act (NTA) 2025. Under the EDI, eligible companies can earn a five per cent tax credit on qualifying capital expenditure, which can be used to offset corporate income tax obligations over an initial five-year period, with the possibility of a further five-year extension subject to reinvestment conditions.

He noted that the EDI addresses some of the limitations of the PSI by introducing clearer sunset provisions and sector-specific investment thresholds. Each sector will have a defined minimum investment requirement, and once this threshold is met, companies become eligible for tax credits equivalent to five per cent of the qualifying investment.

Unlike the PSI, companies under the EDI will continue to pay corporate income tax, but their liabilities will be reduced through the application of accumulated tax credits. According to Okonkwo, firms with significant tax obligations could effectively benefit from the incentive for up to 15 years through the utilisation of unclaimed tax credits.