The finance act is the fiscal legislation that helps to itemize and provide guidance on some of the tax laws/regulation rates, percentage, and levies that guides the business environment for the year.
After over twenty years of a non-amendment, the federal government signed the first finance act into law in the year 2019.
The new finance act of 2020 will make it the second consecutive year that the federal government will be signing the finance act into law and this was signed into law on the 31st of December, 2020.
The law which introduces over 80 amendments to 14 different laws takes effect from 1st January 2021.
The law introduced some key changes into various sectors in Nigeria but we will be highlighting the changes that affect the agricultural sector.
- A small or medium company engaged in primary agricultural production may be granted pioneer status for an initial period of 4 years and an additional 2 years (making a total of 6 years)
- Reduction of import duty on Tractors from 35% to 5%; mass transit vehicles for transport of more than 10 persons and trucks from 35% to 10%, and reduction of import levy on cars from 30% to 5%
The small and medium scale businesses account for over 50% of business activities as well as employment and the agricultural space contributes over 20% to GDP and 25% to employment in Nigeria so, with these changes in place, it is a step in the right direction for the agricultural sector that will, in turn, provide a significant boost for Nigeria's GDP
Granting pioneer status to SMEs in agriculture and reducing the import duty on Tractors which is a major agricultural equipment provides incentives that will encourage many individuals to delve into agriculture and also encourage people already in agriculture to expand and grow their business.
The new finance act will also trigger increased production rates of major agricultural products and put a decline in the rate at which agricultural products are being imported into the country.
Another advantage that the new finance act will bring in the agricultural sector is an increased employment rate. The agricultural sector already accounts for 25% of employment in Nigeria and introducing favourable conditions to the agricultural sector will spell an uprise in employment rate.
If this new policy produces the predicted boost for Nigeria's GDP and increased employment rate, insecurity in Nigeria can also be checked because the youth will be occupied with work and a safer space for farming will be put in place.
While the production arm of the agricultural sector will profit greatly from the new changes in policy, one major area that seems to be overlooked is Processing. The amount spent in importing equipment for processing farm produce should also be checked and the favourable conditions put in place for production should cut across to processing too.