Assessing the Impact of Accelerated Capital Allowance and Corporate Tax Reduction on Firm Performance in Nigeria’s Manufacturing Sector

Abstract

This study investigates the impact of accelerated capital allowance (ACA) and reduced corporate income tax (RCIT) on the financial performance of quoted manufacturing firms in Nigeria. Using panel regression on data from 14 industrial goods companies over 2012–2023, three performance indicators were examined: Return on capital employed (ROCE), price-earnings ratio (PER), and Tobin’s Q. Results reveal that ACA significantly improves profitability and investment efficiency, while RCIT exerts a positive but modest influence. However, both incentives showed no significant effect on market valuation (Tobin’s Q), suggesting investor skepticism and weak capital market responsiveness. Based on these findings, the study recommends two targeted policy actions. First, the ACA administration should be simplified and digitalized to increase uptake, particularly by small and medium enterprises. Second, RCIT should be tied to measurable performance outcomes such as job creation, technological investment, and export expansion, ensuring that tax relief translates into tangible economic benefits. Complementary reforms in infrastructure and regulatory efficiency are also required to strengthen investor confidence. Overall, the study underscores that while tax incentives are vital for industrial growth, their effectiveness depends on transparent administration, targeted application, and integration with broader structural reforms.