A new bill, the Industrial Development (Income Tax Relief) Act (Amendment) Bill, is in the process of legalising a N100 million minimum capital as the requirement for indigenous companies to enjoy pioneer status, which comes several incentives. The bill, if passed, will cut off SMEs from enjoying the perks that come with being recognised as a pioneer in the eligible sectors of the economy.
In a set of new guidelines for the formalisation of the pioneer status in the country, the Ministry of Industry, Trade and Investment, last year reviewed the minimum Qualifying Capital Expenditure (QCE) 200 percent from N50, 000 to N100 million, and had it later approved by the Federal Executive Council (FEC). However, this review is about to be codified in a proposed bill seen by BusinessDay, which also seeks to amend Section 6 of the Principal Act by increasing the capital expenditure for other companies applying for Pioneer Status Certificate from N150,000 to N120 million.
But some members of the Organised Private sector (OPS) are concerned that raising the QCE could deny most of the 37 million Micro Small and Medium Enterprises (MSMEs) the necessary pioneer status benefits and discourage the much needed investments. The bill, which is sponsored by Sabo Mohammed (APC, Jigawa State) has passed First Reading in the upper legislative chamber, even though it has been passed at the lower house. According to the explanatory memorandum, “The Bill further recognises the need to provide the necessary incentives for additional investments by companies. Fundamentally, all proposed amendment is meant to ensure smooth implementation of the Pioneer Status Incentive Scheme by the Nigerian Investment Promotion Council (NIPC)”.
The bill retains the powers of the President to amend the list of Pioneer Industries and Product (Pioneer Status List). It also mandates the President to issue a notice of approval or disapproval within one year of the application for Pioneer Status Certificate. “All application for pioneer status certificate made pursuant to the provisions of this Bill shall be processed by the Minister and forwarded to the President and a Notice of disapproval or approval shall be issued within one (1) year from the date of submission of application,” the proposal reads.
The Small and Medium Enterprises Development Agency of Nigeria defines Micro Enterprises as those whose total assets (excluding land and buildings) are less than N5 million with a workforce not exceeding nine employees. Medium Enterprises, according to the agency are those enterprises whose total assets (excluding land and building) are above N50miilon, but not exceeding N500 million Naira with a total workforce of between 50 and 199 employees. The proposal contradicts Wednesday’s announcement of the Federal Executive Council (FEC), which approved two Executive Orders and five amendment bills to the country’s tax policies aimed at reducing tax burden on Nigerians and boosting ease of doing business.
Tony Ejinkonye, the immediate past President of Abuja Chamber of Commerce told BusinessDay “A lot of micro enterprises stand the risk of exclusion if this bill scales through, and it goes contrary the ease of doing business being championed by the Federal Government” Ejinkonye pointed out that the legal framework must seek inputs from stakeholders and civil society organisations before drafting it. “When you want to do good for someone, you must also seek his consent,” he stated. He suggested that the promoter of the bill must take more inputs from the organised private sector before proceeding with the bill.Reacting, the Nigeria Investment Promotion Council (NIPC) affirmed its willingness to work with Small and Medium Development Agency of Nigeria, SMEDAN to pull together incentives that could support micro businesses.
“There is a need to articulate a different incentive regime for MSMES in the country. The NIPC would be more than willing to work with the SMEDAN to work out a regime of incentives for SMEs. It is in the purview of SMEDAN to push for this bill, while working with us,” Emeka Offor, Director of strategic communications at the NIPC said. Traditionally, you do not just wake up and say you are giving incentives, you must work with sector leaders in Agriculture, Trade and Investments to ensure industry regulators come up with an acceptable standard,” Offor stated.Also, Celestine Okeke, Lead Partner of Micro, small and medium enterprises advocacy and support initiative (MSME -ASI) said any initiative that does not reflect the desires of the small scale businesses in the country is working against Federal Government’s ease of doing business and affecting over 37 million small scale businesses across the country.