Nigeria is one of Africa's largest markets and actively welcomes foreign investment in its general business sector. There are no blanket restrictions on foreigners owning companies in Nigeria, and a foreign individual or entity can establish a fully foreign-owned limited liability company (LLC) and repatriate profits freely. However, there are specific legal procedures and requirements to ensure compliance with Nigerian law. This article provides a comprehensive step-by-step guide to incorporating an LLC in Nigeria as a foreigner, covering corporate registration with the Corporate Affairs Commission (CAC), legal requirements for foreign participation, immigration permits (expatriate quotas and business permits), tax registrations, labor law obligations, and ongoing compliance.
Legal Framework for Foreign Participation in Nigeria
Governing Laws
The principal law governing company formation in Nigeria is the Companies and Allied Matters Act, 2020 (CAMA 2020), administered by the Corporate Affairs Commission (CAC). CAMA modernized Nigeria's company law and introduced reforms to ease doing business. Under CAMA, foreigners are permitted to be shareholders and directors of Nigerian companies, and there is no requirement to have a Nigerian partner (except in a few industries such as oil & gas, mining and gaming).
The Nigerian Investment Promotion Commission (NIPC) Act also plays a vital role. The NIPC ensures foreign investors receive national treatment and can freely repatriate capital and profits. It maintains a short "negative list" of restricted sectors (such as arms, ammunition, narcotics), but otherwise most business sectors are fully open to foreign participation. Upon incorporation in Nigeria, any company with foreign shareholders must register with the NIPC.
Minimum Share Capital
While Nigerian companies can be formed with a very small capital base, companies with foreign participation must register with a minimum issued share capital of one million naira (₦100,000,000). This threshold distinguishes them from purely local small companies. Certain regulated industries, such as banking or oil and gas, impose higher capital requirements. The Ministry of Interior initially proposed a ₦100 million paid-up capital requirement for foreign-owned companies seeking Business Permits, which is now being enforced by the CAC
Shareholders and Directors
CAMA now allows single-shareholder private companies. This means a foreign investor can be the sole shareholder. However, foreign-owned companies do not qualify as "small companies" under CAMA, so they must appoint at least two directors and a company secretary.
Step 1: Incorporation with the Corporate Affairs Commission (CAC)
The first major step is to incorporate the company with the CAC. The process is largely done online and must follow the procedure stipulated below.
Name Reservation
The promoter submits a name reservation request on the CAC portal. Once approved, the name is reserved for 60 days.
Preparation of Incorporation Documents
The following documents and information are required:
- Memorandum and Articles of Association (MEMART)
- CAC Application Form with details of the company type, registered office, shareholders, directors, secretary, share capital, and nature of business
Key points:
- A registered office address in Nigeria is mandatory.
- A minimum of two directors for foreign-owned companies.
- Issued share capital of at least ₦100 million.
- A company secretary must be appointed.
Filing and Approval
The application is submitted online, and statutory fees are paid, including stamp duty on share capital. Once approved, the CAC issues a Certificate of Incorporation and Certified True Copies of filed documents electronically. The company may also automatically receive a Tax Identification Number (TIN) from the Federal Inland Revenue Service (FIRS). If not received, the company must approach the nearby FIRS office to obtain a TIN.
Step 2: Registration with the Nigerian Investment Promotion Commission (NIPC)
Any company with foreign shareholders must register with the NIPC after incorporation. NIPC registration provides legal recognition of foreign investment, entitles the company to investment protections, and facilitates repatriation of profits and capital. It is also a prerequisite for certain incentives, such as Pioneer Status tax holidays.
The company submits an application with its CAC documents, MEMART, and shareholder information, along with a registration fee. The NIPC then issues a Business Registration Certificate.
Step 3: Immigration Requirements – Business Permit and Expatriate Quota
Business Permit
A Business Permit, issued by the Ministry of Interior, is mandatory for any company with foreign ownership to legally commence operations. Application requirements include:
- CAC incorporation documents
- Business plan
- Evidence of office premises
- Evidence of capital importation or capital availability of at least ₦100 million
- Tax Clearance Certificate
Once granted, the Business Permit is permanent and does not need renewal.
Expatriate Quota
If the company intends to employ foreign staff, it must obtain an Expatriate Quota, which specifies the number of foreign employees allowed and their positions. Quotas are usually valid for two to three years and are renewable. Companies must also provide training and understudy plans for Nigerian employees to eventually take over the roles. A foreign director of the company intending to work in Nigeria also requires an Expatriate Quota.
Residence and Work Permits
Expatriates enter Nigeria on Subject to Regularization (STR) visas and then obtain the Combined Expatriate Residence Permit and Aliens Card (CERPAC), which serves as their work and residence permit if they intend to work from Nigeria
Ongoing Corporate Compliance
- Annual Returns to CAC: Every company must file annual returns with the CAC, except in its first year. Failure to file attracts penalties and may result in deregistration.
- Financial Statements and Audits: Foreign-owned companies must prepare audited financial statements annually and appoint auditors.
- Corporate Records: Companies must maintain statutory registers, minutes of meetings, and notify CAC of any changes (e.g., directors, shareholding, address).
- Expatriate Quota Reporting: Companies with expatriate quotas must submit periodic returns on quota utilization and Nigerian understudy training.
Conclusion
Setting up a limited liability company in Nigeria as a foreigner requires careful navigation of incorporation, investment registration, immigration permits, tax compliance, and labour obligations. While the CAC incorporation process is streamlined, additional steps such as NIPC registration, Business Permit, and Expatriate Quota are essential for a foreign-owned company. With recent reforms, Nigeria has sought to make its business environment more transparent and investor-friendly, though compliance requirements remain significant. By engaging competent local advisers, such as a corporate lawyer and adhering to statutory obligations, a foreign investor can successfully establish a company in Nigeria.
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.
