Nigeria

Tax Incentives for Mining &

Solid Minerals Development

WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Favourable Tax Incentives and

Investment Guarantees

CONTENTS

Solid Minerals in Nigeria ........................................3

Proven Reserves ....................................................3

Policy Thrust ..........................................................4

Overview of Incentives .........................................5

Other Tax Incentives .............................................7

Key Incentives, Investment Benefits and

Guarantees............................................................8

2 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Leverage the Benefits of Africa’s

Largest Economy

SOLID MINERALS IN NIGERIA • PRECIOUS STONES (such as sapphire, tour-

Nigeria offers proven potential
for mining investors. The coun-
try is richly endowed with a
variety of solid minerals of var-
ious categories ranging from
precious metals to precious
stones and industrial miner-
als. About 40 different kinds
of solid minerals and precious
metals buried in Nigerian soil
are waiting to be exploited.
SOURCE: Nigerian Extractive
Industries and Transparency
Initiative (NEITI)
Nigeria’s minerals and mining
sector is still largely under-
developed with abundance of
mineral resources for develop-
ment. These minerals can be
broadly categorized according
to use, into five groups:
• INDUSTRIAL MINERALS
(such as barite, kaolin, gyp-
sum, feldspar, limestone)
• ENERGY MINERALS (such
as bitumen, lignite, uranium)
• Security of tenure through mining lease
• METALLIC ORE MINERALS
• Transparent procedures for granting ac-
(such as gold, cassiterite,
columbite, iron ore, lead-
zinc, copper)
• CONSTRUCTION MIN-
ERALS (such as granite,
• Internationally competitive mining incen-
gravel, laterite, sand)
• Comprehensive Geoscience Data of min-
maline, emerald, topaz, amethyst, garnet,
etc.)
PROVEN RESERVES
These mineral assets are available across the
federation in varying mixes and proven reserves.
No corner of Nigeria today is lacking in solid
mineral assets.
It is significant to note that among the minerals
which occur in significant commercial quantities
in different parts of the country are Limestone
– for which annual national demand is 18 million
metric tons and which has driven the growth of
Nigeria’s cement industry; Talc – Over 40 million
metric tonnes of talc deposits have been iden-
tified; Gypsum – over a billion metric tonnes of
gypsum are spread across the country; Bitumen
– Nigeria has the second largest deposit of Bitu-
men in the world; Coal – there are over 1 trillion
metric tons of coal resources on Nigeria’s soil.
There are also significant quantities of several
other minerals in Nigeria’s natural resource port-
NIGERIAN MINERALS AND MINING
REGULATION 2011 guarantees:
cess to mining titles on a first come first
serve basis by Federal Ministry of Solid
Mineral Development
tives
eral deposits and their locations in Nigeria

3 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

100% Ownership of Company by

Foreigners Accepted

folio of at least 44 known mineral assets. Nigeria’s most

promising mineral assets however are gold, iron ore, barite,
bitumen, lead, zinc, tin, coal and limestone.
SOURCE: Ministry of Solid Minerals Development, Federal
Republic of Nigeria

Nigeria has a large domestic market. It is the largest

market in sub-Sahara Africa and the potential stretches
into the growing West African sub-region. The government
has created a favorable climate for business and industrial
ventures. Government has reviewed its mining policies and
laws. As a result, the government roles have been better
defined as one of administrator–regulator while allowing
the private sector to be owner–operator.
Source: Nigerian Geological Survey Agency

POLICY THRUST
The main objective of the National Policy on Solid Minerals
is to ensure an orderly development of the mineral resourc-
es of the country by providing clear rules for predictable
behavior by the authorities, unambiguous regulations for
the exploitation of the minerals and a clearly prescribed
pattern of developments with roles of the different actors
clearly defined.

In view of the dwindling government revenue from the oil

sector, the Nigerian government has made it a priority to
encourage investors to venture into this sector and others,
in order to diversify the economy. This has led to the in-
troduction of the Nigerian Minerals and Mining Regulation
2011 to streamline procedures for granting licenses to
investors (both local and foreign) and guaranteed access
to mining sites with minimal encumbrances.

The regulation provided for the right to search for, or ex-

ploit minerals in Nigeria, and is obtained through any of the
following mining titles:
• Reconnaissance Permit
• Exploration Licences
• Small Scale Mining Licence
• Mining Licence
• Quarrying Licence
• Water Policy

4 WWW.INDUSREN.COM
 NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT
Unconditional Repatriation of Profits
and Transfer of Capital
The sector’s legislation guarantees:
• Security of tenure through mining
lease
• Transparent procedures for grant-
ing access to mining titles on a
first come first serve basis by
Federal Ministry of Solid Mineral
Development
• Internationally competitive mining
incentives
• Comprehensive Geoscience Data
of mineral deposits and their loca-
tions in Nigeria
There are tremendous opportunities
for investments in the solid mineral
sector in Nigeria. Prospecting licens-
es for investors (both local and for-
eign) to participate in the exploitation
of the vast mineral resources in Nige-
ria is granted by the Federal Ministry
of Solid Minerals Development.
5 WWW.INDUSREN.COM
OVERVIEW OF INCENTIVES
The Nigeria government has ambi-
tious targets for the solid minerals
and mining sector and the sector
enjoys Pioneer Status with attendant
tax exemption to all operating com-
panies. There are large investment
incentives bagged by enabling laws
and supported through the Ministry
of Trade and Investments, Nigerian
Investment Promotion Commission
and the Ministry of Solid Minerals
Development.
The mining sector in Nigeria enjoys
Pioneer Status with attendant tax
holiday to all companies operat-
ing in the sector. A comprehensive
package of incentives has been put
in place to create a favorable envi-
ronment for investment in the solid
minerals and mining sector, some of
which are:
1. Deferred royalty payments.
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Security of Mining Tenure Through

Lease
2. Capital allowances of up to 95% of qualifying capital
expenditure.
3. Exemption from customs and import duties for plant,
machinery and equipment for mining operations.
4. Three (3) to five (5) years tax holiday as applicable;
and tax concessions.
5. Low corporate tax rate of between 20% and 30%.
6. Possible capitalization of expenditure on exploration
and surveys.
7. Extension of infrastructure such as roads and elec-
tricity to mining sites.
8. Expatriate quota and resident permits in respect of
expatriate personnel engaged by mining companies.
9. Personal remittance quota for expatriate personnel,
free from any tax imposed by any enactment for the
transfer of external currency out of Nigeria.
10. The Nigerian Investment Promotion Commission Act
allows 100% ownership of companies by foreign-
ers, while the Foreign Exchange Miscellaneous Act,
guarantees 100% Repatriation of Capital, Profit, &
Dividends through authorized means.

The holder of a mining lease shall be entitled to:

i) Depreciation or capital allowance of 75% of the cer-

tified true capital expenditure incurred in the year of
investment and 50% in subsequent years

ii) Investment allowance of 5%

iii) Exemption from payment of customs & import duties

iv) Expatriate quota & resident permit for expatriate

personnels

(g) In addition to roll-over relief under the capital gains

tax (CGT), companies replacing their plants and machin-
ery are to enjoy a once-and-for-all 95% capital allow-
ance in the first year with 5% retention value until the
assets is disposed, 15% will be granted for replacement
of an asset.

6 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Transparent Procedures for Granting

Access to Mining Titles
OTHER TAX INCENTIVES
• Exemption from tax of companies profits in respect of
goods exported from Nigeria provided the proceeds
are repatriated to Nigeria and used exclusively for
purchase of raw materials, plants equipment and spare
parts.

• Exclusion from taxes the profits of companies whose

supplies are exclusively from input to the manufactur-
ing of products for exports.

• All new industrial undertakings including foreign com-

panies and individual operating in an Export Processing
Zone (EPZ) are allowed full tax holidays for three con-
secutive years.

• As a means of encouraging industrial technology,

companies and other organizations that engage in
Research and Development activities for commercial-
ization enjoy 20% investment tax credit on their quali-
fying expenditure.

• Dividends distributed by Unit in Nigeria are free of tax

and no withholding tax is deducted therefrom since
such incomes have already suffered tax in the first
instance.

• All companies engaged wholly in fabrication of tools,

spare parts and simple machinery for local consump-
tion and export are to enjoy 25% investment tax credit
on their qualifying capital expenditure while any tax
payer who purchases locally manufactured plants and
machinery are similarly entitled to 15% investment tax
credit on such fixed assets bought for use.

USEFUL LINKS:
Lex Artifex, LLP. (www.LexArtifexLLP.com)
Nigerian Investment Promotion Commission (www.invest-nigeria.com)

Ministry of Mines and Steel Development (www.MinesAndSteel.gov.ng)

Nigeria Immigration Service (www.portal.immigration.gov.ng)

7 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Highly-Skilled Labour Force

KEY INCENTIVES, INVESTMENT BENE- 3. REPATRIATION OF PROFITS

FITS AND GUARANTEES
1. TRADE LIBERALIZATION SCHEME sion Act No. 17 of 1995), foreign investors
(TLS) OF ECONOMIC COMMUNITY OF are free to repatriate all their profits and
WEST AFRICAN STATES (ECOWAS)
This Scheme is an incentive primarily
geared towards export activities within the
ECOWAS sub-region and the removal of
both tariff and non-tariff barriers to trade
in goods originating from ECOWAS coun-
tries. This affords preferential access to the
ECOWAS market from Nigeria.
2. LIBERALIZATION OF COMPANY OWN-
ERSHIP STRUCTURE
The Nigerian Investment Promotion Com-
mission Act has liberalized the ownership
structure of businesses in Nigeria. The im-
plication of this is that foreigners can own
100% shares in any company without hav-
ing Nigerian shareholders.
Under the provisions of the Foreign Ex-
change (Monitoring & Miscellaneous Provi-
dividends net of taxes through an autho-
rized dealer in freely convertible currency.
4. GUARANTEES AGAINST EXPROPRIA-
TION
The Nigerian Investment Promotion Com-
mission Act Cap. N117 Laws of the Feder-
ation 2004 guarantees the none national-
ization or expropriation of any enterprise or
foreign-owned investment by any govern-
ment in Nigeria.
5. INCENTIVES FOR SPECIAL INVEST-
MENT
For the purpose of promoting identified
strategic or major investment, the Nigerian
Investment Promotion Commission shall, in

8 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Cheap Labour Cost

consultation with appropriate Government agencies, negotiate

specific incentive packages for the promotion of investment as
the Commission may specify.

6. INVESTMENT PROMOTION AND PROTECTION AGREE-

MENT (IPPA)
As part of additional effort to foster foreign investors’ confidence
in the Nigeria economy, Government continues to enter into bi-
lateral investment promotion and protection agreements (IPPAs)
with countries that do business with Nigeria.
The IPPA helps to guarantee the safety of the investment of the
contracting parties in the event of war, revolution, expropriation
or nationalization. It also guarantees investors the transfer of in-
terests, dividends, profits and other incomes as well as compen-
sation for dispossession or loss.

7. INVESTMENT IN ECONOMICALLY DISADVANTAGED AREAS

Without prejudice to the provision of the pioneer status enabling
law, a pioneer industry sited in economically disadvantaged Local
Government Area is entitled to 100% tax holiday for seven (7)
years and an additional 5% capital depreciation allowance over
and above the initial capital depreciation allowance.

8. LABOUR-INTENSIVE MODE OF PRODUCTION

Industries with high labour/capital ratio are entitled to tax con-
cessions. These are industries with plants, equipment and ma-
chinery, which essentially are operated with minimal automation.
Where there is automation, such automation should not be more
than one process in the course of production.

The rate is graduated in such a way that an industry employing

1,000 persons or more will enjoy 15 percent tax concession,
while an industry employing 200 will enjoy 7 percent and those
employing 100 will enjoy 6 percent and so on.

9. LOCAL VALUE ADDED

10% tax concession for five (5) years. This applies essentially to
engineering industries, where some finished imported products
serves as inputs. The concession is aimed at encouraging local
fabrication rather than the mere assembly of completely knocked
down parts.

9 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Seize the Investment Opportunities

Available in Nigeria

10. RE-INVESTMENT ALLOWANCE

This incentive is granted to companies engaged in manufacturing which incur qualifying capital
expenditure for the purposes of approved expansion, etc. the incentive is in the form of a gener-
alized allowance of capital expenditure incurred by companies for the following:
• Expansion of production capacity
• Modernization of production facilities
• Diversification into related products

12. IN-PLANT TRAINING

This is applicable to industrial establishments that have set up in-plant training facilities. Such
industries enjoy a two (2) percent tax concession for a period of five (5) years.

13. INVESTMENT IN INFRASTRUCTURE

This is a form of incentive granted to industries that provide facilities that ordinarily, should have
been provided by government. Such facilities include access roads, pipe borne water and elec-
tricity. Twenty percent (20%) of the cost of providing these infrastructural facilities, where they
do not exist, is tax deductible.

These are just a few of the leading companies that have discovered the benefits of
Nigeria’s unique essence in mining and solid minerals development:

10 WWW.INDUSREN.COM
NIGERIA: INVESTMENT INCENTIVES FOR MINING AND SOLID MINERALS DEVELOPMENT

Opening a Business in Nigeria?

Whether you are just starting up, expanding your activities, or looking to establish your
Africa regional headquarters in Nigeria, Industrial Renaissance can put you in fast-track
contact with the main national and sub-national stakeholders with a view to speeding up
your business launch or expansion project in Nigeria. As an integrated economic devel-
opment entity, we look at business solutions from the investor’s perspective, not from
the point of view of local business interests. Industrial Renaissance does much more
than promoting and attracting investment. In fulfilling its task of fostering company
growth, it offers overseas investors and foreign companies through its affiliate service
providers a full and varied slate of expertise and professional support. All of Industrial
Renaissance’s services are confidential.

We Look Forward to Hearing from You

Visit our website for more information at INDUSTRIAL RENAISSANCE LTD.
www.indusren.com and connect with us on Linke- (Advocacy Advisors House)
din at www.linkedin.com/in/indusren 34 Udo Otung Ubo Street
Call us on +234 818 701 9206 Uyo, Nigeria.
or email us at invest@indusren.com

Acknowledgement
We would like to thank Lex Artifex, LLP. for their contribution to this guide. Lex Artifex, LLP. is one of the lead-
ing service providers in Nigeria providing legal and advisory services. Lex Artifex, LLP. high performing people
use their expertise and insight to cut through the complexity of local and international issues and regulations.
Find out more about how Lex Artifex, LLP can serve your business needs by visiting their website at
www.LexArtifexLLP.com

DISCLAIMER: While every effort has been made to ensure the information given in this document is accurate, Industrial Renaissance Ltd. and our partners do
not provide warranty or accept liability for any loss arising from reliance on such information. Copyright © Industrial Renaissance Ltd. ALL RIGHTS RESERVED.