In a bid to foster economic growth and improve the nation’s tax system, Nigeria is recalibrating its approach to tax incentives, moving away from the old Profit Sharing Incentive (PSI) model to a more refined and strategic Export Development and Tax Incentive (EDTI) framework. This shift aims to streamline the country’s tax policies, encourage investment, and ensure that tax benefits align more effectively with Nigeria’s long-term economic goals.
The PSI model, which has been a cornerstone of Nigeria’s tax incentive strategy for several years, has often been criticized for its lack of effectiveness in spurring real growth and economic diversification. While it was designed to encourage foreign direct investment and stimulate the manufacturing sector, experts argue that it has not sufficiently boosted key industries or attracted the level of investment expected. As a result, Nigeria’s policymakers have decided to rethink the framework, seeking to create a more impactful tax incentive system that aligns with the country’s aspirations for sustainable development.
The introduction of the EDTI system represents a major shift in the country’s economic strategy. The new framework seeks to incentivize export-oriented industries and businesses that contribute to the diversification of Nigeria’s economic base. It also aims to provide better-targeted benefits for sectors that can drive substantial growth, such as agriculture, technology, and renewable energy. By focusing on export-led growth, the EDTI framework is expected to enhance Nigeria’s competitiveness in the global market and create more jobs, particularly in industries with high potential for international trade.
Key features of the EDTI include more transparent processes for businesses to access tax breaks, clearer criteria for eligibility, and a focus on measurable outcomes. The government is also putting in place stronger monitoring and compliance mechanisms to ensure that tax incentives reach the right businesses and deliver the intended results. Under the new framework, companies will be encouraged to invest in innovation, infrastructure, and capacity building, thereby contributing to the country’s long-term development.
Experts view this recalibration as a positive step towards optimizing Nigeria’s tax incentives to meet the demands of a rapidly changing global economy. The shift to the EDTI model is seen as a necessary response to the challenges facing Nigeria’s economy, including the need for diversification away from oil dependency and the pressing need to create sustainable jobs for the growing population. While challenges remain in ensuring effective implementation, the move towards a more targeted and export-focused tax incentive regime could be a game-changer for Nigeria’s economic future.