As Nigeria prepares to implement a sweeping overhaul of its fiscal system in January 2026, the Federal Government has moved to reassure current investors. The 149 companies presently benefiting from the Pioneer Status Incentive (PSI)—which grants total exemption from corporate income tax—will be permitted to maintain their tax holidays for at least another two years.
Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee, announced this grace period during a briefing at the Nigerian Investment Promotion Commission (NIPC). The extension is designed to act as a buffer, preventing market shocks and maintaining investor trust while the country transitions to a new incentive model.
From Tax Holidays to Tax Credits: The Rise of EDI
The traditional PSI model is set to be phased out and replaced by the Economic Development Incentive (EDI) under the Nigeria Tax Act (NTA) 2025. This represents a fundamental shift in how the government encourages industrial growth:
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PSI (Old Model): Offered a complete waiver on Company Income Tax (CIT) for a set period, effectively allowing companies to operate tax-free.
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EDI (New Model): Requires companies to pay CIT but allows them to earn tax credits based on their capital investments.
How the New EDI Framework Works
Uchenna Okonkwo of the NIPC’s Incentives Administration Department detailed the mechanics of the incoming system, highlighting its focus on long-term reinvestment:
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5% Investment Credit: Eligible companies will receive a tax credit equal to 5% of their qualifying capital expenditure. This credit is then used to reduce their overall tax bill.
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Sector-Specific Thresholds: Unlike the blanket application of the PSI, the EDI requires companies to meet specific investment minimums tailored to their industry (as defined in the Tenth Schedule of the NTA 2025).
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Extended Longevity: While the initial EDI period is five years (with a possible five-year extension), companies with significant tax obligations can potentially carry forward unused credits, enjoying benefits for up to 15 years.
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Sunset Provisions: The new law introduces clearer “sunset” clauses, ensuring that incentives are tied to performance and specific timeframes rather than remaining open-ended.
Strategy for Sustainable Growth
The shift to a credit-based system is intended to address the gaps in the previous pioneer status regime. By linking tax benefits directly to actual expenditure and sector-specific goals, the government aims to stimulate genuine infrastructure development and job creation.
The two-year “grandfathering” of existing PSI beneficiaries ensures that those who made investment decisions based on the old rules aren’t unfairly penalized, providing an orderly path toward the more rigorous, growth-focused EDI framework.
