NCDMB, FIRS offer tax incentives for oil firms investing in R&D
From left: 2nd left – General Manager Planning, Research and Development, Nigerian Content Development and Monitoring Board (NCDMB), Alhaji Abdulmalik Halilu; Director, Planning, Research and Statistics, NCDMB, Mr. Daziba Patrick Obah; Executive Secretary, NCDMB, Engr. Simbi Kesiye Wabote and (6th left); member NCDMB Governing Council, Mr. Mina Oforiokuma and other speakers at the one-day Nigerian Oil and Gas Industry Suppliers’ Tax Awareness Workshop jointly organized by NCDMB and Federal Inland Revenue Service (FIRS) on Tuesday in Yenagoa, Bayelsa State.
Lagos — The Nigerian Content Development and Monitoring Board, NCDMB, and the Federal Inland Revenue Service, FIRS, have created a platform aimed at providing tax incentives for oil and gas industry stakeholders investing in research and development, R&D.
Oil and gas companies desiring to reduce their tax burden and grow profitability should consider increasing investments in Research and Development, to take advantage of the incentives provided in existing fiscal laws.
The Executive Secretary of the NCDMB, Engr. Simbi
Kesiye Wabote, and the Executive Chairman, FIRS. Mr. Muhammad Nami, stated this in Yenagoa, the Bayelsa State
capital, at the one-day Nigerian Oil and Gas Industry Suppliers’ Tax Awareness Workshop jointly organised by the two organisations at the NCDMB head-office.
Delivering the keynote address at the event, Wabote stated that the Finance Act 2021 and other extant tax codes relating to Research and Development provide attractive tax incentives for oil and gas firms that invest in R&D.
He hinted that many oil and gas companies were oblivious to the opportunities that exist within Nigerian tax laws for the oil industry to harness from investing in Research and Development. He reiterated that such workshops provide the necessary education and enlightenment that enable businesses to position themselves appropriately to benefit from making R&D an integral part of their business model.
He observed that the low level of R&D funding by private companies is partly linked to inadequate information as he expressed regrets that “the consequence is not only
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significant capital flight in the acquisition of technology required for oil and gas projects and operations, but also players in the sector are tied to the apron and direct control of the foreign supply chain who control the technological advances arising from their R&D activities.”
Wabote cited examples of leading Fortune 500 companies that commit between 5 to 10% of their annual budgets to R&D, saying this enables them to produce innovative products and make significant tax returns to the government as well as create huge employment opportunities.
Speaking further, the NCDMB boss expressed hope that the workshop will change the gross underfunding of research in Nigeria, which is currently estimated at less than 0.2% of the national budget.
He insisted that operators can no longer neglect R&D, maintaining that it is key to local content development, enhancement of future tax revenue to the government, development of home-grown solutions, and retention of industry spending within Nigerian financial institutions.
He remarked that “access to the Nigerian Content Intervention Fund by the local supply chain has been one of the major contributors to the growth in local content level from less than 5% in 2010 to 54% in 2022.”
He hinted that the Board is “pushing for similar performance in Research and Development by sharpening our focus on the various elements that will enable the growth and appreciable impact of research and development in our economy.”
In his remarks, the Executive Chairman of the Federal Inland Revenue Service, Mr. Mami, who was represented by his Senior Special Assistant, Mr. Gabriel Ogunjemilusi, reiterated that “Research and Development (R&D) has been identified as a veritable means for companies that want to remain competitive and profitable in today’s rapidly changing business environment.”
He provided details on Federal Government’s tax regime, incentives, and related facts. “Allowable deduction of up to 10% of the amount of reserve made out of the profits of a period by a company for research and development; claim of capital allowance on capital expenditure on plant and machinery used for R&D activities; pioneer status tax holiday for R&D companies; companies and other organisations that invest in R&D facilities for commercialisation can claim a tax credit of up to 20% of the cost of their qualifying expenditures,” he stated.
He assured participants at the workshop that the FIRS will continue to support all companies in Nigeria to take advantage of available fiscal incentives provided by the Nigerian tax laws.
The workshop attracted renowned finance and legal experts, who spoke on “Provisions of the NOGIC Act on R&D, R&D Operating Model and Imperatives on Success,” “Royalty Potentials from R&D Investments,” and “Constraints of Investing and Way Forward.”