INCENTIVIZING FOREIGN DIRECT INVESTMENT IN NIGERIA: A LEGAL CRITIQUE OF EXTANT FISCAL AND TAX REGIMES

Abstract

Globally, taxation is seen as an avenue for economic development. Developing countries compete to attract multinational companies to promote their economic and domestic markets. Fiscal incentives and attractive tax policies have long been recognized as the instruments used by governments of developing countries to ensure economic growth and investment. Foreign investors are usually skeptical in investing in developing countries because of the presence of political, economic or social instability associated with such countries. Accordingly, developing countries strive to encourage investors by introducing beneficial tax policies to ameliorate these risks. This paper critically examines the different tax incentives used by mostly developing countries to attract foreign investors/ investment. A comprehensive review of the factors that are considered to impact the attraction of Foreign Direct Investment (FDI) and the identification of relevant FDI determinant will also be discussed. More light will be shed on factors that will promote foreign direct investment. The paper examines the legal regime for investment promotion in Nigeria such as the Nigerian Investment Promotion Commission Act (NIPC) and its key sections that affects foreign investors. The paper finds that though the NIPC Act 2004 has coordinated and established foreign businesses in Nigeria, there is a need to review this Act to create a balance with the present demands of investors and trends in developed countries.