A. GENERAL OVERVIEW

With immense growth in technology and globalization, cross-border investments have taken prime positions in global economies. As a developing country with immeasurable growth potential, Nigeria ranks as the largest oil producer in Africa and the 11th largest oil producer in the world. Aside from available oil and gas reserves, Nigeria has enormous mineral resources, such as iron ore, bitumen, gold, coal, bauxite, bronze etc. As at 2018, the gross domestic product (GDP) of Nigeria was estimated at USD 397 billion1.

Leveraging on its demographic advantage as most populous country in Africa as well as the biggest economy2, Nigeria sets its path as the most preferred investment destination for investors looking to onboard into Africa's largest emerging market. This is further accentuated by the ever-developing economic and structural reform targeted at making the country a hive for ease of doing business.

Achieving holistic tax reform and creating a business-friendly environment is one of the key objectives of the present administration. This gave rise to the establishment of the Presidential Enabling Business Environment Council (PEBEC) to address bottlenecks and compliance issues associated with the ease of doing business in Nigeria. PEBEC's initiatives include simplifying/ fast-tracking the process of incorporation of companies in Nigeria and tax compliance as well as the deployment of the Integrated Tax Administration System (ITAS). Very recently, the Startup Act 2022 and the Business Facilitation Act, 2023 were enacted with the objective of promoting the ease of doing business in Nigeria through transparency, efficiency, productivity and elimination of unnecessary bureaucracy.

Just like in other jurisdictions, there are certain legally established compliance requirements for embarking on certain business projects in Nigeria. Cross-border investment comes with certain challenges and uncertainties for investors, the government of Nigeria has taken steps to allay this fear by introducing investment-friendly policies that accord foreign investors certain privileges and incentives. In this guide we provide insights and relevant information on doing business in Nigeria that will assist investors in making informed investment decisions, encompassing the Nigerian business landscape, business/investment structures, regulatory framework, foreign exchange control considerations, applicable taxes, available business/tax incentives and an appraisal of the future fiscal outlook for the Nigerian economy.

B. BUSINESS STRUCTURES

Business can be carried out in Nigeria in form of a Sole Proprietorship, a Partnership or an incorporated company. A foreigner can participate in business in Nigeria either through foreign direct investment (FDI) or foreign portfolio investment (FPI). With regard to FDIs, every foreign investor must first incorporate his/her business as a Nigerian business as a preliminary step, except such a company has been granted an exemption. However, in certain circumstances, which are specified under applicable laws, a foreign entity may apply to the Minister for exemption from the mandatory requirement of registration. Any company that is exempted will operate in Nigeria as an unregistered company. Also, this exemption can now be enjoyed by foreign companies where an Act of the National Assembly provides for same3.

Incorporating a Company in Nigeria

A company can be incorporated in Nigeria within a very short period (twenty-four (24) hours or more) from the time of submission of relevant documents at the CAC and the payment of official filing fees. It involves the following steps:

i. Name Availability Search for the Company

This entails conducting a name availability search at the Corporate Affairs Commission (CAC), to ensure that the name designated for the proposed company is not already in use by another company and that the name is not similar to that of another company, or trade name. Any available name will be reserved for the proposed company for a period of 60 days which is renewable for another period of 60 days.

ii. Filing Incorporation Documents at the CAC

Relevant incorporation documents to be filed at the CAC are briefly discussed below:

  • Memorandum and Articles of Association (MEMART)
  • The MEMART of a company documents its objects and corporate or internal governance procedures. The Memorandum and article of association must be subscribed to by the founding or initial shareholders of the company.
  • Application to the CAC
  • The application is in a standard form that contains detailed information on the pro posed company such as:
    • type of company to be incorporated;
    • the reserved name obtained via the name availability search exercise;
    • the address of the proposed company
    • The minimum issued share capital of the company
    • Particulars of first directors and their consent to function as directors
    • Particulars of Company Secretary (Individual)
    • Statutory Declaration of Compliance in the prescribed form.
  • Evidence of Payment of Filing Fees
  • The statutory fees payable upon incorporation of a company limited by shares is assessed based on its authorized share capital. We have listed hereunder, the applicable statutory fees:
    • Stamp duties – 0.75% of the minimum issued share capital.
    • CAC filing fees – 1% of the minimum issued share capital which is payable to the CAC.
    • Approximately N5,000 (Five Thousand Naira) which is payable for obtaining certified true copies of incorporation documents from the CAC.

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Footnotes

1. Nigerian Bureau of Statistics https://www.nigerianstat.gov.ng/

2. James Emejo "IMF: Nigeria Remains Largest Economy in Africa, 26th in the World", This day: https://www.this daylive.com/index.php/2020/12/29/imf-nigeria-remains-largest-economy-in-africa-26th-in-the-world/

3. Section 2, Part 1 of the Schedule to the BFA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.