Effect of Tax Incentives on Foreign Direct Investment Inflows in Nigeria

This study assesses the extent to which tax incentives influence foreign direct investment (FDI) inflows into Nigeria. Tax incentives such as pioneer status, tax holidays, investment allowances, and duty exemptions are routinely offered by the Nigerian government to attract foreign capital across priority sectors including manufacturing, agriculture, and technology. Despite their prevalence, the actual contribution of these incentives to measurable FDI increases has been questioned by fiscal economists concerned about revenue costs and incentive misuse. Using an ex-post facto design, the study analyses FDI inflow data from the Nigerian Investment Promotion Commission, FIRS revenue reports, and World Bank investment datasets spanning the most recent decade. Descriptive statistics, correlation, and regression analysis form the analytical framework. The study anticipates finding a statistically significant but modest positive relationship between the generosity of tax incentive packages and FDI volumes, with sector-specific effects being most pronounced in export-processing zones. It further finds that infrastructure quality and rule of law are stronger determinants of FDI than tax incentives alone, suggesting that incentives are necessary but not sufficient conditions for investment attraction. Recommendations include rationalising the incentive framework to focus on sectors with genuine strategic comparative advantage, building a transparent public register of incentive beneficiaries, and conducting regular cost-benefit reviews of existing tax holidays. Keywords: tax incentives, foreign direct investment, NIPC, investment promotion, fiscal cost.