Tax Incentives and Renewable Energy Development in Nigeria: Evaluating Effectiveness and Policy Gaps

Abstract

Nigeria possesses vast renewable energy potential but continues to face severe electricity deficits, with over 85 million citizens lacking access to grid power. To address this challenge and accelerate clean energy adoption, the Nigerian government has introduced various fiscal incentives, including tax holidays, VAT exemptions, and import duty waivers, aimed at attracting renewable energy investors. This paper critically evaluates the effectiveness of these incentives in driving investment, enhancing energy access, and stimulating local industry development. Drawing on official reports, stakeholder consultations, and international benchmarks from countries such as India, Kenya, Brazil, South Africa, and Morocco, the study finds that while fiscal tools offer promise, their impact is limited by weak institutional coordination, inadequate monitoring frameworks, and low awareness among developers. Key policy gaps include short incentive durations, insufficient support for off-grid systems, and minimal local content integration. The paper concludes with actionable recommendations focused on reforming Nigeria’s incentive structure, including establishing a centralized coordination agency, expanding the scope of incentives, and strengthening local manufacturing capacity to better align fiscal policy with the country’s energy and climate goals.

Keywords:       Renewable energy, Tax incentives, Fiscal policy, Energy access, Investment