Conference Paper

TAX INCENTIVES AND FOREIGN DIRECT INVESTMENT IN NIGERIA

ABSTRACT This study examines the impact of tax incentives on Foreign Direct Investment in Nigeria, focusing on tax holidays, reduction in company income tax CIT) rates, and capital allowances. Despite the Nigerian government’s efforts to attract FDI through fiscal measures, the desired level of foreign investment has yet to be fully realized. The study addresses gaps in existing literature by empirically analyzing the effectiveness of specific tax incentives in influencing foreign investment decisions. Data were collected from 150 respondents and analyzed using chi-square test to determine the relationship between tax incentives and FDI. Findings indicate that tax holidays and CIT rate reductions significantly influence FDI inflows, with investors viewing these incentives as critical in reducing operational costs and enhancing profitability. Although, capital allowances also showed a positive impact, responses were mixed, suggesting that other factors may play a role in investment decisions. The study concludes that while tax incentives are effective, holistic approaches which include improvements in infrastructure, business climate and regulatory frameworks would further enhance Nigeria attractiveness for FDI. The study recommends for policy improvements broadening of incentives and robust evaluation framework are provided to optimize the role of tax incentives in fostering economic growth. Keywords: Tax Incentives, Foreign Direct Investment, Tax Holidays, Company income tax reduction, capital allowances.