Doing Business in Nigeria: An Investor's Guide

Nigeria identifies as the Giant of Africa and is considered as one of the potential power economies globally. The country has a population of a little over 200 million, 54% of which are under the age of twenty-five, and renowned for being energetic, tech savvy and entrepreneurial. It has a geographical land mass bigger than the United Kingdom and France combined, and approximately thirty times the size of Belgium. Nigeria has ranked Africa’s biggest economy for the past seven years, and was named in the World Bank Doing Business Report 2020 as one of the ten most improved economies, likely to be one of the world’s 20^th largest economies by 2030.

 

Nigeria is a top investment destination, supported by strong economic fundamentals that drive the continuity of businesses of all types and sizes. It boasts the largest trade and financial market in Africa, with a capital markets capitalization rate of over $40 billion, and plays host to many international corporations across a broad spectrum of sectors such as hydrocarbon, energy, agriculture, fast moving consumer goods, fintech, telecoms, trade and manufacturing. While oil and gas accounts for 90% of export revenues, the country is increasingly diversifying away from oil by developing a globally competitive manufacturing sector. A major attraction for foreign investors to Nigeria is its significantly privatized economy, beneficial tax system, abundance of human resources and low labour costs.

 

Investment Frameworks

Individuals or entities seeking to invest in Nigeria can accomplish this through Foreign Direct Investments (FDI) or Portfolio Investments.

 

Foreign Direct Investments (FDI)

The Nigerian Investments and Promotions Commission (NIPC) Act liberalized ownership and management of FDIs, thereby opening all sectors of the Nigerian economy to foreign participation, except for sectors considered as crucial to national security e.g. military and paramilitary clothing, ammunitions and weapons. The operative framework allows for 100% foreign shareholding and management control in all sectors, except for industries which local content laws require a majority Nigerian shareholding and board composition e.g. the petroleum sector. Foreign investors largely enjoy the same protection, privileges and treatment as Nigerian businesses, including tax incentives and asset ownership. The government also encourages competition and protects private property in accordance with the NIPC Act.

The Nigerian government has also implemented several sectoral programmes to drive FDIs. These include oil and gas exploration and extraction, agriculture, shipping, manufacturing and export. Pioneering industries considered as driving the country’s development, enjoy significant tax incentives, interest waivers on loans and allowances which facilitate capital investments. Nigeria also has operative bilateral trade and economic agreements with a number of countries.

 

Portfolio Investments (PIs)

These are securities and shares passively owned and held by foreign entities. Unlike, FDIs, PFIs do not confer ownership or management of the Nigerian company on the foreign investor, and they have a relatively short-term interest in the ownership of these investments. Under the regulatory framework for Portfolio Investments, a foreign entity can invest in Nigeria by taking up shares in a private Nigerian company or acquiring securities of a Nigerian company publicly traded on the floor of the Nigerian stock exchange.

 

Setting Up a Business

Foreign entities seeking to establish a commercial presence in Nigeria as foreign direct investors may do so as a new company or a subsidiary of an existing company, either of which must be registered as a Nigerian company. The Corporate Affairs Commission registers and regulates corporate entities in Nigeria through the Companies and Allied Matters Act (2020). The cost of setting up a business is comparably cheaper than in other jurisdictions and with the implementation of the recent presidential directives on the ease of doing business, companies may now be registered digitally and in a matter of days.

 

Specific Obligations for Foreign Investors

1. Business Model: - There are different types that can be employed e.g. sole proprietorships, private companies, public companies and incorporated trustees (non-profits). The most recommended is usually a private liability company limited by shares (Ltd). Note that the business model determines the legal and tax obligations of the registered entity.  Contact us for specific advice on which is best suited for your needs and its attendant implications.
2. Share Capital Structure – a company with foreign shareholding or management must be registered with an authorized share capital of N10,000,00 (Ten Million Naira), all of which must be allotted to shareholders at registration. Shares and management may be wholly or partly owned by foreigners, except in restricted sectors e.g. Oil & Gas, which require majority Nigerian shareholding and management.
3. Business location – land acquisitions are administered by the government and open to foreign investors. For leases, we can provide you with a list of suitable private options or in the alternative, facilitate the use of the address of our Nigerian partners for a fee.
4. Taxation: - Companies registered in Nigeria are subject to federal and state taxes which are administered by the Federal Inland Revenue Service and State Inland Revenue Service jointly. Companies are obligated to file and remit applicable taxes within specific deadlines.
5. Trademark Registration – Foreign companies may acquire exclusive proprietary interests in their products and services, or protect their brand names by registering their trademarks, patents or copyrights at the Trademark Registry.
6. Bank Account & Capital Exportation: - Every company operating in Nigeria is obligated to open a naira or forex denominated account. Also, foreign companies operating in Nigeria enjoy the right to import capital via equity or loan, and subsequently repatriate proceeds. Where a company imports capital, it must apply for a Certificate of Capital Importation (CCI) from the Central Bank of Nigeria. The certificate enables the investor to repatriate proceeds out of the country using the official channel and with ease.
7. Immigration Requirements: a foreign entity seeking to invest in Nigeria must comply with certain immigration requirements summarised below: 

Business permit – a company with 100% foreign ownership must obtain a business permit from the Nigerian Ministry of Interior. A business with partial foreign ownership may be exempt from this requirement.

Expatriate Quota - This permit is issued by the Ministry of Interior to companies seeking to hire expatriate staff to work in Nigeria, subject to the submission of required documents. Foreign companies are bound to recruit staff within the quota approved by the Ministry.

Subject To Regularisation (STR):- This is issued to foreign nationals seeking to take up employment in Nigeria. A STR visa is valid for 90 days and must be regularised before expiration.

Combined Expatriate Residence Permit Quota and Aliens Card (CERPAC) – a STR visa is regularized by conversion to a CERPAC upon approval by the Nigerian Immigration Service. It gives the holder the right to work and reside in Nigeria and is renewable annually.

 

A-Law can assist foreign companies on all of the above and other ante and post- incorporation imperatives for a new company or European/Belgian subsidiary in Nigeria. All our services are confidential.

 

Please be informed that the foregoing only serves as a summarised guide on doing business in Nigeria, and is not a substitute for legal advice specific to your business interests. For more information on the above or on our services on Nigeria, please consult Legal Counsel Nigeria, Temitayo Ogunmokun via t.ogunmokun@a-law.eu or fill in our online contact form.