Nigeria is an independent republic on the west coast of Africa, on the Gulf of Guinea. It is bordered by Benin to the west, Niger to the north, Cameroon to the east, and the Atlantic Ocean to the south.
Area: 923 768 km2
Population: 152.2 million
GDP: USD 369.8 billion (2010)
Internet domain: .ng
Languages: English (official language)
Working week: Monday - Friday
Exports: Petroleum and petroleum products; cocoa; rubber
Imports: Machinery; chemicals; transport equipment; manufactured goods; food and live animals
There are five primary forms of companies commonly used by foreign investors:
- Public companies limited by shares
- Public unlimited companies
- Private companies limited by shares
- Private unlimited companies
- Guarantee (not for profit) companies
The minimum number of shareholders for a private company limited by shares is two, while the maximum number of shareholders is 50. In order for a foreign entity to trade in Nigeria it is mandatory that such entity incorporate a company. This is done at the Corporate Affairs Commission (CAC) situated in the country's capital Nairobi, and is evidenced by a CAC certificate upon the completion of the process. Unlimited liability companies are formed for certain professions which are not permitted to have limited liability.
Registration and formation
The following steps need to be taken in order to incorporate a company:
- A name must be reserved for incorporation. This is done by registering a company name at the CAC. The process takes approximately seven days.
- The memorandum and articles of association of the company, the incorporation forms containing the notice of registered office address, particulars of directors, statement of authorised share capital any other document required by the CAC will need to be submitted. An availability of name form showing that the proposed name of the company is available at the CAC Register will also be required. Furthermore, a statement by a legal practitioner confirming compliance will also need to be submitted.
The approximate timeframe will depend on the type of business being set up. A private or public company limited by shares typically takes between 2 to 3 weeks to set up.
Annual general meetings (AGM) are required in Nigeria. AGM's must be held within nine months of the financial year end and not more than 15 months after the previous meeting.
The minimum share capital to incorporate a private limited liability company is approximately USD 55. However, where foreigners will hold shares in the company, there is a minimum investment requirement of approximately USD 55 000 in order for the company to be eligible to apply for a business permit and expatriate quota approval.
The minimum number of directors for any company is 2. Directors can be appointed by the shareholders at incorporation; or by other directors to fill a casual vacancy subject to the ratification of the appointment by the shareholders at the AGM. The appointment of the directors can be done in three to five days.
A Nigerian resident must be appointed as the secretary of the company and all companies. Qualified Nigerian auditors are also required.
Are local shareholders required?
Foreigners are allowed to wholly own companies, however certain legislation stipulates mandatory indigenous participation in certain sectors, such as oil and gas and inland water trading. Companies with foreign shareholders are required to apply for a business permit from the Citizenship and Business Department of the Ministry of Interior to enable such company to carry on business in Nigeria.
Is it possible to establish a branch and, if so, what is the procedure?
A branch can be established. A representative office is not authorised to carry on business activities. The process is the same as for trading entities and takes between 2 to 3 weeks to register.
Nigeria currently has no national competition law or policy in place. However, in certain instances specific sector or industry legislation makes provision for competition related aspects.
Further to the paragraph above, competition law is not regulated in Nigeria and there are, accordingly, no specific merger controls in place.
Competition is not regulated in Nigeria and restrictive practices are therefore not regulated.
Abuse of Dominance
Owing to the lack of competition regulation in Nigeria, there are no abuse-of-dominance provisions to contend with.
As Nigeria has no competition legislation and/or policy in place, there are no specific sanctions with regard to competition law.
There are various piecemeal legislative provisions in Nigeria which have both a direct and indirect impact on consumer protection. In addition to such legislative provisions there is also the Consumer Protection Council Act, 1992 (CPCA) which is specifically aimed at the enforcement of consumer rights by providing consumers with the appropriate avenues to seek redress.
Some of the key provisions of the CPCA are as follows:
- Consumers who have suffered a loss, injury or damage as a result of the use of any product or service have the right to lodge a complaint against the supplier responsible for such product or service.
- Should a manufacturer or distributor of a product become aware, after such a product has been placed on the market, of an unforeseen hazard arising from the use of such product, such manufacturer or distributor is obligated to notify immediately the general public of such risk or danger and cause such product to be withdrawn from the market.
In 2010, the Cyber Security and Information Protection Agency Bill was tabled in Parliament. In terms of which a cyber-security and information protection agency will be established, which will be charged with protecting computer systems and networks, and liaise with the relevant law enforcement agency for the enforcement of cybercrimes laws and related matters. However, to date, no substantial progress has been made in this regard.
However, for the time being, data protection is regulated by the general provisions relating to the protection of privacy as set out in the Constitution of the Federal Republic of Nigeria as well as other relevant legislative provisions. In this respect the following principles apply:
- Every person is entitled to respect for 'his private and family life, his home and his correspondence'.
- The collection and maintenance of information on individual Consumers must be protected against improper or accidental disclosure.
Nigeria is a federation of 36 states, each with its own House of Assembly and laws. The highest court is the Supreme Court of Nigeria which sits above the Court of Appeal; both of these courts have federal jurisdiction. The Federal High Courts and the High Courts of States have concurrent jurisdiction, and the Sharia Court of Appeals and Customary Court of Appeals hear appeals from the lowest courts which are known as Customary, Area and Sharia Courts. The Magistrate's and District Courts hear smaller matters.
Security by foreign litigants
It is no longer an inflexible or rigid rule that a plaintiff resident abroad should provide security for costs. Courts must rather exercise discretion with regard to all the circumstances of the case.
The Judge has the discretion to make any order as to costs that he deems fit. In principle, the successful party is entitled to be indemnified for legitimate expenses which he has necessarily incurred by the institution of proceedings, either wholly or partially.
There is a single professional roll for all legal professionals that include both barristers and solicitors.
Alternative dispute resolution
The Arbitration and Conciliation Act, 1990 provides authority for the conduct of arbitrations and is modelled closely upon the UNCITRAL model law and its rules. The Constitution empowers the Chief Judge of each state to make practice directives for the incorporation of ADR into the civil procedure, which has resulted in certain states emphasizing ADR in the pre-trial stages. The Nigerian branch of the London based Chartered Institute of Arbitrators, the Chartered Institute of Arbitrators Nigeria, and the Lagos Regional Centre for International Commercial Arbitration have all handled high profile arbitrations, while the Lagos Chamber Arbitration Centre (LAC), the Society of Construction Industry Arbitrators (SCIArb), the Maritime Arbitrators of Nigeria, and the Negotiation and Conflict Management Group (NCMG) all also handle arbitrations. Nigeria is a party to the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards.
- Labour Act.
- National Minimum Wage Amendment Act, 2000.
- Trade Union Amendment Act, 2005.
Particulars of employment
A contract of employment must be given within 3 months of commencement.
Termination / Dismissal
- A termination is lawful where the tenure of such contract expires without a new contract being entered into by conduct or in writing; or either party dies; or a written notice is served and either party could equally elect to pay compensation in lieu of notice. No reason needs to be provided.
- Dismissal occurs where the employee's conduct undermines a relationship of confidence which must exist between the parties. What determines the wrongfulness of a termination/dismissal of an employment contract is whether the terms and conditions of the written contract were adhered to by the parties in effecting the termination/dismissal of such contract, not whether there was a fair hearing.
Dispute resolution mechanisms and remedy
- Only trade disputes can be referred to the Industrial Arbitration Panel. The National Industrial Court handles issues and disputes concerning labour and employment.
- Unlawful termination: The compensation of such period or salary that the terminating party would have paid in lieu of giving lawful notice. Wrongful dismissal without notice: The amount the injured party would have earned had he continued with the performance of the contract until lawfully terminated.
Points of significance
- Vicarious liability of the employer exists in respect of all work undertaken by the employee on the employer's behalf should such work cause injury or loss to a third party. As such, employers demand an acceptable guarantor's indemnity or fidelity guarantee to cover vicarious and unauthorised conduct.
- Employers must ensure monthly remittance of an employee's income tax and make monthly deductions of 7.5% of his salary and a 7.5% contribution to his retirement savings account.
- Employers must provide life assurance cover, medical examination at his expense and make a 1% monthly contribution of the total monthly payroll into a compensation fund.
- Strikes deemed to be about conflicts of interest or economic issues including strike action to protest against the government social economic policy are prohibited and criminalised.
There are certain exchange control regulations in Nigeria. A foreign investor may invest in any enterprise or securities with foreign currency or capital imported into Nigeria through an authorised dealer (a licensed bank).
An investor will be issued with a Certificate of Capital Importation (CCI) by the authorised dealer through which the capital is imported into Nigeria.
The CCI typically entitles the foreign investor to open a foreign currency domiciliary account with any authorised dealer for investment purposes, open a special non-resident Nigerian Dollar (Naira) account to which could be credited all receipts from the capital inflows, proceeds from sale of securities, dividends and interests.
Furthermore, to invest in securities in Nigeria out of the balances in the Naira account and repatriate the capital, capital gains, dividends and income received by way of interests through authorised dealers which are subject to deductions of taxes.
Resident companies are taxed on their worldwide income. Non-resident companies are taxed on profits derived from Nigeria, to the extent that profits are not attributable to operations outside of Nigeria.
Types of taxable income
Income tax, capital gains tax, tertiary education tax, petroleum profits tax and dividends tax are payable.
Both resident and non-resident companies are taxed at 30% except for petroleum profits tax, which for resident petroleum companies is at a rate of 85%.
CGT is at a rate of 10% on resident and non-resident companies and individuals. Dividends are taxed at 10%. Interest and rent are taxed at 10% on both resident and non-resident companies and individuals.
Royalties are taxed at 10% on royalties earned by resident companies and 5% on royalties earned by resident individuals and non-resident individuals and companies. There is a tax of 10% on consultancy fees and management fees.
Directors are taxed at 10% on director's fees earned by resident individuals.
Double taxation treaties
Nigeria has entered into double taxation agreements with the United Kingdom, France, Belgium, Pakistan, Canada, Romania, Netherlands, Czech Republic, Slovakia, Poland, Philippines, Japan, China, South Africa and Italy (shipping and air transportation only).
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.