The Nigerian Content Development and Monitoring Board (NCDMB) has called on oil and gas companies to set aside a percentage of their annual budget to fund research and development in order to benefit from tax incentives derivable from such investment.
The Executive Secretary of the Board, Mr Simbi Wabote, made the call at the Nigerian Oil & Gas Industry Suppliers’ Tax Awareness Workshop organized by the Board in conjunction with the Federal Inland Revenue Service, FIRS at the NCDMB Conference Hall, Yenagoa, Bayelsa.
He said the workshop is in line with the NCDMB’s mandate to organize conferences, workshops, seminars, symposia, training, road shows as well as other public enlightenment fora to further the attainment of the goal of developing local content.
He noted that the Board is leveraging on the enabling business environment pilar of the 10-years Strategic Roadmap to collaborate with the Federal Inland Revenue Service.
The ES, said FIRS to create a platform to engage oil and gas industry stakeholders on tax incentives available to companies that invest in research and development.
He highlighted the benefits of investing in research and development which includes producing innovative products and making significant tax return to government, creating jobs opportunities, remain market leaders and growing the GDP of the economy.
Wabote, urged oil and gas industry players to take advantage of the Nigerian Content Development Fund in asset acquisition, contract financing and working capital and manufacturing of innovative and competitive products.
“Globally, there is a consensus on the adoption of the Triple Helix model to foster partnership between the academia, industry, and Government to foster market-driven research which advances the socio-economic development of nations.
“This tripartite collaboration requires the combination of human, financial and policy incentives to attract needed funding critical to the growth of research.
“Indeed, the level of technological advancement in most developed economies is a result of a combination of Government providing the enabling environment and the private sector providing the funds needed for Research and Development.
“It is on record how nations such as USA and Germany have used tax credit schemes to motivate researchers to look into ways of solving problems and enhancing creativity.
“Countries like Egypt and Saudi Arabia have similar arrangements in place to promote Research and Development.
Egypt for example has investment tax allowances (ITA) for many related R&D sectors such as energy, engineering, and sciences.
“The UK created incentives to boost investment in R&D through their R&D Tax Relief Scheme for small businesses and R&D expenditure credit scheme.
“Saudi Arabia has a tax deduction scheme available to R&D-related expenditures. Morocco also has incentives that span across several industries and corporate tax credits for R&D investments.
“In Nigeria, we have also commenced our journey of creating meaning of addressing our peculiar challenges by leveraging on our natural endowments.
“The 1% NCDF levy enshrined in the Nigerian Oil & Gas Industry Content Development Act 2010 is a typical example of statutory provision to support local content development in the Oil & Gas sector.
“The application of the Nigerian Content Development Fund to facilitate direct intervention in assets acquisition, contract financing, working capital.
“Manufacturing for players in the sector, through the instrumentality of the Nigerian Content Intervention Fund created by NCDMB, clearly shows how Government support drives growth.
“Indeed, 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.
“We are 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 2019, NCDMB developed its 10-year Research and Development Roadmap, which detailed dedicated research funding and requisite commercial framework as part of the success pillars for development of research in the Nigerian Oil & Gas sector.
“The roadmap is anchored on 8 key pillars and 42 initiatives which we have been driving in the last 4 years.
“One of the key pillars is Funding which led to the launch of the $50 million Nigerian Content Research & Development Fund to drive basic research.
“Commercialization of research breakthroughs, establishment of Centers of Excellence, and to sponsor University endowments.
“While the Fund is available for Research grants, we understand that Government should not be the sole provider of funds for research.
“The bulk of R&D funding should come from the private sector who are business owners and will ultimately benefit directly from the research outcomes,” he said.
The Executive Secretary lamented the gross underfunding of research in Nigeria which is estimated to be less than 0.2 % of the national budget.
He expressed the believe that the needed awareness would be created through the workshop to enable private sector to reverse the trend
In his remarks, the Executive Chairman, Federal Inland Revenue Service, FIRS, Mr Muhammad Nami, reiterated Government’s determination to continue to create the enabling tax policies to support businesses through modification of the tax codes through the Finance Act and other legislative interventions.
Represented by the Senior Special Assistant, Mr Gabriel Ogunjemilusi, he noted that tax incentives has become one of the major tools government used to attract investment, stimulate economic growth, encourage complaince and support small business.
He however stated that tax incentives must be designed and implemented in a manner that is fair, transparent and sustainable as not to have unintended consequences.