Since independence, Nigeria has introduced a range of policies and laws to define its industrialisation aspirations.
More recently, the Federal Government has articulated an ambition of positioning the country among the world’s top 20 industrialised economies and achieving a one-trillion-dollar GDP.
To realise this vision, successive reforms have sought to transform Nigeria from a mono-product, import-dependent economy into a competitive contributor to global value chains.
One of the most consequential of these reforms is the overhaul of the tax administration framework, culminating in the enactment of the Nigeria Tax Act (NTA) 2025, a landmark legislation consolidating the country’s disparate tax laws.
Complementing this is the Nigeria Revenue Service Act, 2025, which provides a more coherent administrative framework for tax collection and management.
A principal component of this reform is the replacement of the Pioneer Status Incentive (PSI), previously governed by the Industrial Development (Income Tax Relief) Act (IDITRA), with the new Economic Development Tax Incentive (EDTI) under Sections 166–183 of the NTA 2025.
IDITRA is repealed with effect from January 1, 2026. This transition represents far more than a legal update; it is a strategic recalibration of Nigeria’s investment incentive regime.
While both PSI and EDTI, administered by the Nigerian Investment Promotion Commission (NIPC), share the overarching goal of stimulating investment in sectors critical to industrial and economic development, their frameworks diverge sharply in design, scope, and accountability.
Under IDITRA/PSI, companies designated as “pioneer” enjoyed a tax holiday exempting them from Companies Income Tax (CIT) for three years, extendable by two more years. Crucially, PSI was not open-ended; it applied only to qualifying industries and activities listed on the Pioneer List.
Although IDITRA did not mandate biennial updates of the list, in practice, the NIPC, subject to the approval of the Honourable Minister of Industry, Trade and Investment (FMITI), reviewed and updated it every two years through publication in the Federal Gazette.
Applications were required within the first year of production, and NIPC applied administrative thresholds to verify investment/Qualifying Capital Expenditure (QCE) upfront under minister-approved guidelines.
The historic weakness, however, lay in after-grant monitoring. Reporting and performance assessments were not consistently enforced, which meant some firms retained benefits without meeting clear post-approval obligations. As a result, questions persisted about whether PSI consistently delivered on its promise of stimulating sustainable, broad-based industrial development.
By contrast, the EDTI under the NTA 2025 introduces a performance-based system that moves away from tax holidays. Instead of exemptions, eligible companies will now receive tax credits equal to 5% of their Qualifying Capital Expenditure (QCE), granted annually for five years. Unused credits can be carried forward, with a possible extension of up to ten years, where profits are fully reinvested.
Unlike the administratively guided thresholds of PSI, QCE thresholds are now codified in law, typically ranging from ₦250 million to ₦200 billion by sector. Coverage is explicitly defined in the Tenth Schedule, encompassing priority areas such as manufacturing, agriculture, mining, renewables, and ICT.
The shift also redefines the role of the NIPC. The Commission moves from being primarily a process-stage administrator to becoming a regulatory enforcer. It must now:
Importantly, EDTI prohibits firms from combining the incentive with other tax holidays (e.g., Free Zone exemptions), a loophole previously managed only through administrative rules under PSI.
Importantly, EDTI prohibits firms from combining the incentive with other tax holidays (e.g., Free Zone exemptions), a loophole previously managed only through administrative rules under PSI.
In summary, while both PSI and EDTI share development-driven objectives, the EDTI represents a deliberate shift to a rules-based, transparent, and performance-driven regime. By embedding sector-specific thresholds into statute and introducing enforceable compliance mechanisms, the EDTI strengthens accountability and reduces administrative discretion.
This recalibration ensures that only genuine, growth-aligned investments benefit from incentives, while positioning the NIPC as an enforcer of compliance rather than merely a facilitator of approvals. Ultimately, the EDTI reflects Nigeria’s broader commitment to institutionalising accountability, enhancing business environment governance, and aligning incentives with measurable economic development outcomes.
Presented below is an analytical review contrasting the Pioneer Status Incentive (PSI) with the new Economic Development Tax Incentive (EDTI). The analysis underscores how the EDTI establishes a more transparent, rules-based, and performance-driven framework—designed not only to attract investment, but also to ensure that such investments deliver measurable and sustainable outcomes that strengthen and drive Nigeria’s industrial and economic development.
This review has provided an independent assessment of the PSI regime and its transition to the EDTI. The analysis highlights the structural and policy shifts introduced by the new framework, particularly in strengthening transparency, compliance, and investment accountability. While it does not make evaluative judgments on the NIPC’s administration of the PSI, it underscores how EDTI reflects Nigeria’s broader effort to institutionalise accountability and align investment incentives with measurable economic development outcomes. Overall, it contributes to understanding the evolution between both regimes as part of the government’s spirited effort to enhance business environment governance, strengthen competitiveness, and embed sustainability imperatives.