With a nominal GDP of over $492 billion (2016) and a more than 180-million strong youthful population, Nigeria, is both Africa's biggest economy and the most populous black nation on earth. Whilst available demographic data presents the country as the preferred investment destination on the continent, ongoing economic reform continues to make Nigeria a progressively easier place to do business, with attendant inflow of significant foreign investments in recent years.
This document highlights the basic legal and regulatory framework for doing business in Nigeria. Analyzed in simple language understandable to all classes of persons and businesses, domestic and foreign investors from diverse places around the globe will find this compilation a useful guide to learning the basic requirements of doing business, in Africa's largest consumer market and economic hub.
Under Nigerian Law, business activities may be undertaken in Nigeria through any of the following entities:
- private or public limited liability company;
- unlimited liability company;
- company limited by guarantee;
- sole proprietorship; and
- incorporated trustees.
Specifically, the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria ("LFN") 2004 ("CAMA") regulates the formation of business organizations, save for partnership/firm and sole proprietorship.
Section 54 of CAMA provides that in order to 'carry on business' in Nigeria, a foreign company must be incorporated in Nigeria as an entity under the provisions of CAMA. The Nigerian company upon incorporation is a separate legal entity from its overseas parent. However, a foreign company may apply to the Federal Executive Council for exemption from the requirement to register in Nigeria if it belongs to one of the categories listed in Section 56 (1) of CAMA. The categories are as follows:
- Foreign companies invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project;
- Foreign companies which are in Nigeria for the execution of specific individual loan projects on behalf of a donor country or international organisation;
- Foreign Government-owned companies engaged solely in export promotion activities; and
- Engineering consultants and technical experts engaged in any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.
Under Nigerian company law, a company having a share capital may either be registered as a private limited liability company, a public limited liability company or an unlimited company. Most non-Nigerians desirous of setting up entities in Nigeria usually establish private limited liability companies, at inception and may then, based on their business models, convert these to public limited liability entities at a later date.
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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.