INTRODUCTION
The Economic Development Tax Incentive (“EDTI”) regime, introduced under the Nigeria Tax Act 2025 (“NTA”) marks a significant evolution in the country’s fiscal incentive framework. It replaces the long-standing Pioneer Status Incentive (“PSI”) with a more transparent, performance-driven structure aligned with national development priorities. As previously examined in our briefing notes,[1]the EDTI framework is designed to encourage investment in priority sectors by granting eligible companies tax credits tied to qualifying capital expenditure and demonstrable economic impact.[2]
At its core, the EDTI is built around principles of fiscal prudence, accountability, and sectoral sustainability. Its provisions particularly those relating to qualifying expenditure, production day certification, and incentive duration reflect a conscious policy shift toward measurable value creation and local economic participation. The Nigerian Investment Promotion Commission (“NIPC”), as the central administrator, ensures that beneficiaries adhere to eligibility, reporting, and compliance standards to sustain the integrity of the incentive system.[3]
However, one of the most technically complex and commercially relevant aspects of the EDTI lies in its treatment of corporate restructurings specifically, mergers and acquisitions. Section 170(6) of the NTA introduces stringent conditions governing the transferability and continuity of incentives in such transactions. Where incentivised companies merge or are acquired, the continuity of their Economic Development Incentive Certificate (“EDIC”) depends on how the transaction is structured and whether the resulting entity qualifies for fresh certification.
This briefing note builds upon our earlier analysis of the EDTI’s legal framework to examine a more practical question:
Between a merger and an acquisition, which structure offers greater viability for optimising Economic Development Tax Incentives in Nigeria?
The discussion evaluates how each transaction type interacts with statutory provisions on incentive termination, reapplication, and capital expenditure continuity.
RESTRICTION ON TRANSFERABILITY OF INCENTIVES
Section 170(6) of the NTA, establishes a comprehensive framework governing the treatment of EDTIs in corporate restructuring scenarios, specifically mergers and acquisitions.[4] The underlying policy objective is to prevent the abuse or unintended transfer of incentive benefits to entities that have not independently satisfied the qualifying conditions under the NTA. This ensures that the incentives remain tied to genuine investment and production activity within the certified entity.
The section distinguishes four key restructuring scenarios:
a. Acquisition between incentivised companies:
Where a company enjoying an EDIC acquires another company that also holds an EDIC (or an equivalent under the repealed Industrial Development (Income Tax Relief) Act), both companies’ incentive statuses automatically terminate upon the expiry date of the certificate of the surviving company. This ensures that overlapping or duplicate benefits do not persist beyond the original approved period.
b. Acquisition of a non-incentivised company:
If an incentivised company acquires the assets and business of a non-incentivised company, the transaction does not automatically extend the EDTI to the acquired business. Instead, such an acquisition is subject to fresh qualification and approval under Sections 168 and 171 of the NTA, which outline the eligibility and certification requirements for new incentive applicants. This condition ensures that the expanded operations meet the same investment and sectoral criteria as the original entity.
c. Acquisition by a non-incentivised company:
Conversely, where a non-incentivised company acquires an incentivised one, the EDTI does not transfer to the acquiring company. The acquiring entity must independently apply for approval under Sections 168 and 171 of the NTA, reaffirming that incentive benefits are not portable assets but are contingent upon compliance with statutory qualification standards.
d. Mergers involving incentivised companies:
Where two or more companies that each hold an EDIC merge, the incentive status of all merging entities ceases immediately on the merger date. However, the emerging company may apply for a new incentive certificate, subject to meeting all eligibility conditions. Notably, the duration of the new certificate cannot exceed the latest expiry date among the merging companies’ original EDIC. This provision prevents perpetual rollover of incentives through successive mergers while permitting continuity where justified by genuine post-merger investment.
OUR THOUGHTS
Between a merger and an acquisition, it is our considered view that an acquisition presents a more viable pathway for optimising EDTIs under Nigeria’s evolving fiscal regime. This is primarily because, while Section 170(6) of the NTA imposes stringent restrictions on the transferability of incentives in both scenarios, acquisitions, especially of non-incentivised entities, allow for a clearer route to reapplication and continuity under Sections 168 and 171 of the NTA. In contrast, mergers automatically terminate existing incentive statuses on the merger date, and any new EDIC granted to the emerging entity cannot extend beyond the latest expiry date of the merging parties’ EDICs. Thus, mergers carry a higher risk of incentive disruption and reduced tax optimisation potential.
CONCLUSION
In sum, while both mergers and acquisitions can serve as vehicles for economic growth, acquisitions currently offer the more practical route for sustaining and optimising tax incentives within Nigeria’s new economic development framework. However, the success of either structure ultimately depends on strategic timing, regulatory diligence, and early engagement with the NIPC to ensure proper alignment with the EDTI framework.
Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the authors.
REFERENCES
[1] “An Examination of the Incentive System under the Tax Reform Bills” available at https://ao2law.com/wp-content/uploads/2025/05/AN-EXAMINATION-OF-THE-INCENTIVE-SYSTEM-UNDER-THE-TAX-REFORM-BILLS.pdf and “Deemed Approval of Economic Development Tax Incentive – Any rescue by the Business Facilitation Act.” available at DEEMED APPROVAL OF ECONOMIC DEVELOPMENT TAX INCENTIVE – ANY RESCUE BY THE BUSINESS FACILITATION ACT? – Anaje Olumide Oke Akinkugbe
[2] See Sections 166 and 167 of the NTA, and the Tenth Schedule to the NTA.
[3] Section 168 of the NTA.
[4] A merger is simply defined as when two or more individual businesses consolidate to form a new enterprise. While an acquisition is when one organisation acquires the business of another, typically, a larger company takes over a smaller one. For details on what constitutes a merger in the Nigerian jurisprudence, see Section 92 of the Federal Competition and Consumer Protection Act, 2018
Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the authors.
