Introduction

From the year 2011 to 20201 , Nigeria was consistently ranked poorly out of about 190 countries in the World Bank's Ease of Doing Business Rankings, with average or less than average doing business scores.
In its efforts towards creating an enabling environment for Micro, Small, and Medium Enterprises as well as Foreign Direct Investments to thrive, the immediate past administration of the Federal Government of Nigeria developed initiatives such as: i) the establishment of the Presidential Enabling Business Environment Council (PEBEC); ii)enactment of laws including the Business Facilitation Act, 2022, the Companies and Allied Matters Act, 2020 ("CAMA"), the Nigerian Startup Act, 2022 and other notable laws and regulations; iii) the introduction of a Tax Administration Solution (TaxPro-Max) etc.

Despite the foregoing, there still leaves much to be desired as Nigeria's progress gives credence to the idiom "one step forward and two steps backward''. This is especially the case with respect to the unavailability of foreign currency, the country's foreign exchange policies, taxation regimes and difficulties in obtaining regulatory licenses and permits, all of which have made operating in the Nigerian market unsavory.

On May 29, 2023, Mr. Bola Ahmed Tinubu (the "President") was sworn into power as the 16th President of the Federal Republic of Nigeria. During the inaugural ceremony, the President highlighted the Key Economic Policies of his tenure, which if adhered to, will largely promote ease of doing business in Nigeria and encourage investment in the Nigerian market. This newsletter briefly highlights the Key Economic Principles of the President, possible effects for the business environment and the process of setting up a business in Nigeria.

The President's Key Economic Principles

1. Foreign Exchange– the President has now mandated the Central Bank of Nigeria to achieve a unified foreign exchange rate. If achieved, this will abolish the arbitrage within the foreign exchange parallel market and effectively reduce the foreign exchange rates.

2. Repatriation– ordinarily, the Nigerian Investment Promotion Commission Act guarantees foreign investors the unrestricted transferability of their capital and proceeds of investment through an authorized dealer (commercial banks) in freely convertible currency. However, in recent times, this has not been the case due to the pressure on the exchange rate which has led to the shortage of foreign currency. This has led to capital flight and deterred further investment in the Nigerian market.
To resolve this vital issue, the President highlighted his commitment to ensuring that foreign investors (foreign direct investment ("FDI") or foreign portfolio investment) are able to repatriate their hard-earned dividends and profits.

3. Taxation-the President undertook to receive and review all complaints on multiple taxation and other anti-investment inhibitions. In the past, major complaints have been made concerning the number of taxes introduced within the last decade such as the Information Technology Levy, the Police Trust Fund Levy, the Banking Sector Resolution Fund levy etc. There have also been complaints on multiple taxation by the different tiers of government such as value added tax and consumption tax; and

4. Electricity– the President promised to ensure the accessibility and affordability of electricity in Nigeria. In line with the 5th amendment to the Constitution of the Federal Republic of Nigeria, 1999, he also promised to encourage states to develop local sources of electricity.

Prior to the amendment, the states governments were only permitted to make laws for the generation, transmission and distribution of electricity to areas not covered a national grid system within the state. Due to the ambiguity of the provision, the federal government assumed monopoly of power generation, transmission and distribution in the country. Unfortunately, the federal government despite its efforts, has been unable to ensure the country's access to power supply. This is a major source of problem for both local and foreign investors, especially the manufacturing industry as they have to rely on alternative sources of electricity which increases the cost of production.

In view of the constitutional amendment and the commitment of the President, it is hoped that states will (in collaboration with players in the private sector), venture into the power sector to aid the reduction of electricity and increase accessibility.
The President's inaugural speech presents a beacon of hope for businesses in Nigeria and foreign investors that wish to operate in the Nigerian market. Reportedly, many analysts argue that the President's agenda seeks to tackle challenges of economic growth and will lead to an influx of FDI into the country, given its several business opportunities.
In view of the foregoing, this article briefly highlights the requirements for foreigners who may be interested in investing and commencing business in the Nigerian business environment.

Procedure for establishing a business in Nigeria

1. Registration of a Business Entity– persons or entities that intend to conduct business in Nigeria are required to register a business entity with the Corporate Affairs Commission ("CAC"). CAMA provides for the following business vehicles: a) limited liability companies (this can be either public or private); b) Unlimited liability companies; c) companies limited by guaranty; d) limited liability partnerships; e) limited partnerships; f) and a registered business name. The most common business vehicle used by foreign investors in conducting business in Nigeria is a private limited liability company. Private limited liability companies with foreign shareholders are required to have a minimum issued share capital of N10 million.
Foreign investors are also permitted to own 100% of the shares in the company unless they operate in specific sectors such as oil and gas, aviation, etc, which require local ownership and control.

2. Registration with the Nigerian Investment Promotion Commission ("NIPC") – Nigerian companies with foreign shareholders are required to be registered with the NIPC and obtain a business registration certificate to commence business operations in Nigeria.

3. Obtaining a Business Permit– Companies with foreign shareholders are required to obtain a business permit from the Federal Ministry of Interior prior to conducting any business in Nigeria. The certificate remains valid for as long as the company's operations do not violate Nigerian law.

4. Registration with the Federal Inland Revenue Service ("FIRS")– Although companies are given a Tax Identification Number upon registration at the CAC, newly registered companies are required to visit the FIRS to update their profile and obtain a Value Added Tax clearance certificate.

5. Obtaining a Certificate of Capital Importation ("CCI")– Investors intending to import capital into Nigeria are required to obtain a CCI from their commercial bank to enable them gain access to foreign currency at the official rate for the repatriation of capital and profits. The CCI will be obtained after the inflow of the funds through an authorized dealer (commercial bank). Please see our article on obtaining a CCI

6. Registration of Intellectual Property– Companies can register their names, logos, inventions and designs with the Trademarks, Patents and Designs Registry. Please see our article for information on the requirements and procedure for the registration of trademarks in Nigeria.

7. Employment of Staff– Companies that intend to employ foreign nationals are required to obtain an expatriate quota for the position which the foreign national is to occupy. An application for expatriate quota is granted by the Comptroller General. The application must justify the company's requirement of expatriates for the specified positions and disclose the plans of company to employ and train Nigerians who will understudy the foreign experts for the purpose of the eventual take-over of the expatriate quota positions.

An expatriate quota is valid for a period of 3 years and renewable biennially within a life span of 7 (seven) years.

8. Obtaining Special permits and licenses-Companies operating in an industry must inquire about the licenses and permits required for conducting business and the primary regulatory authority for such industries. Examples of regulatory authorities include the Central Bank of Nigeria (for banking and other financial institutions), the National Insurance Commission (for insurance companies), the Nigerian Upstream Petroleum Regulatory Commission (for companies conducting business in the oil and gas upstream sector) etc.

Footnote

1. The World Bank's Ease of Doing Business Rankings was discontinued after the year 2020.

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.