DOING BUSINESS IN NIGERIA

The Companies and Allied matters Act 1990 (CAMA) is the principal law regulating the incorporation  of  business  in  Nigeria.  The administration of  the  Companies  Act  is undertaken by the Corporate Affairs Commission (CAC). The principal law regulating Foreign  Investments  in  Nigerian  is  the  Investment  Promotional  Act 1995 and administered by Nigeria is Nigeria Investment Promotion Council (NIPC).

INVESTMENT PROTECTION ASSURANCE

The NIPC Decree provides that:
(a)    No  enterprise  shall  be  nationalised  or  expropriated  by  any  Government  of  the Federation; and

(b)    No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other persons.

There will be no acquisition of an enterprise by the Federal Government unless the acquisition is in the national interest or for a public purpose under a law which makes provision for:

(a)      payment of fair and adequate compensation; and
(b)      a right of access to the courts for the determination of the investor’s interest of right

Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable.

COMPANY INCORPORATION AND REGISTRATION
Foreigners wishing to set-up business operations in Nigeria is obliged to take necessary steps to :
1     Obtain local incorporation of a  Nigerian company, OR
2     Incorporating a Branch or subsidiary of an existing company

The following organisations are excepted from the above requirement: that all foreign
investor doing business in Nigeria must incorporate in Nigeria .

i       Companies undertaking approved loan projects on behalf of donor countries
ii      Companies engaged by Federal government to execute specific projects
iii     Foreign government owned companies engaged wholly in export promotion activities

These exceptions are granted for a fixed period of time (usually three years) and are hardly renewed and may be revoked by the Federal Executive Council. Foreign investors envisaging a long-term existence in Nigeria are therefore advised to incorporate a local company.

Instead on incorporating a local company, Foreign companies may consider to set-up Representative Offices in Nigeria. A Representative Office however, cannot engage in business activities.  It can  only serve  as a  promotional  and/or  liaison  office.  In this circumstance, its local operational expenses have to flow in from the foreign company. Representative Office also must be registered with the CAC.

iii    Certificate of Capital Importation (CCI)
Investors who wish to be able to remit dividends to non-resident shareholders or repatriate capital must ensure that they obtain Certificate of Capital Importation from the Nigerian bank through which the payment is transferred into Nigeria.

Requirement for obtaining CCI
a   Application to the company's banker
b     The foreign shareholders will instruct their bank ( the remitting bank) by telex to
c     The transfer must be accompanied by a telex stating the money being remitted to
d     Upon confirmation that the funds have been remitted to Nigeria, the company is
e     The following documents must be submitted together with the letter of application:
i      A Board resolution authorizing the foreign investment
ii     A letter from the company stating the purpose for which the money has been
remitted
iii    A copy of the certificate of incorporation
iv  A copy of the swift message from the remitting bank
f      If satisfied with the documentation, the receiving bank will issue a CCI in respect

iv    Business Permit
In order for a company with foreign participation to undertake any business in Nigeria, it must obtain a business permit from the Ministry of Internal Affairs. A business permit will only be granted in respect of companies having authorised share capital of at least N10million.

Requirement for obtaining Business Permit
a   Application to the Ministry of Internal affairs
b   Certificate of Capital Importation (CCI)
c   Completed copies of the NIPC Form 1 (in triplicates)
d   Original copy of receipt of purchase of NIPC Form 1 (and 3 copies) e   Memorandum and Article of Association
f      Copy of Certificate of Incorporation
g   Evidence that the Company has a minimum share capital of 10million (3 copies)
h   Company's allotment of shares- Form CO 2 (3 copies)
i      Company's particulars of directors - Form CO 7 (3 copies)
j      Details of the shareholding structure of the company (3 copies)
k   Shareholders agreement , where applicable (3 copies)

v     Expatriate Quota
A company wishing to employ expatriates must obtain an Expatriate Quota position for each expatriate it wishes to employ. The expatriate quota establishes the maximum number of expatriates that the company may employ.
A company having a paid-up share capital of not less than 10million is entitled to one automatic quota position, while a company with paid-up share capital of 20million is entitled to four automatic quota positions.

Requirement for obtaining Expatriate Quota
a     Application to the Ministry of Internal affairs
b     In addition to requirements under Business permit, the following documents are
required
i      Evidence of acquisition of operational machinery and equipment
ii     Management and technical Service agreement
iii    Minimum authorised share capital of N10million
iv  Tax clearance certificate
v     Company applying for Permanent Until Reviewed (PUR) Quota slots must
show evidence of payment of tax for minimum of N1million.
vi   Name, addresses, qualification and positions to be occupied by the expatriate vii  project implementation Program
viii  Training program for Nigerians and a Management succession schedule

The Difference Between ‘BUSINESS PERMIT’ and ‘EXPATRIATE QUOTA’

Business permit, as the name connotes, is the permanent authorization for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise.

Expatriate quota is the official permit to a company, conveying permission for the company  to  employ  individual  expatriates  to  specifically  approved  job designations, and also specifying the permissible duration of such employment.

The expatriate quota forms the basis of work permits for expatriate individuals employed ( whose  qualifications  must  fulfil  the  criteria  established  for  the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted not more than one (1) “PUR” Quota ( i.e. Permanent Until Reviewed) position.

vi    Approval for transfer of Technology and other Agreements
By virtue of the provisions of the national OFFICE FOR Technology Acquisition and
promotion Act, 1992 any agreement under which a foreigner is to provide foreign
technology, management, or assistance, to a Nigerian company must be approved by
the National office for technology Acquisition and promotion (NOTAP). Fees payable
for the provision

vii   Pioneer Status
The benefit of a Pioneer status Certificate is that the holder is exempted from payment
of tax for a specified number of years (5 years in urban area and 7 years in rural area).
The company must not be more than one year old from commencement of production.

Requirement for obtaining Pioneer status
a   Application to the Ministry of the Executive Secretary b   Duly completed NIPC Form II
c   Certificate of incorporation
d   CAC's Form CO2 and CO7
e   Memorandum and article of association
f      Tax Clearance Certificate
g   Evidence of acquisition of machinery (Form M)
h   Evidence of business premises (Tenancy or lease agreement) i Shareholder or Joint venture agreement (where applicable)

viii Registration with appropriate Regulatory Authority relevant to the company's business ( such as DPR, NCC, NAFDAC, etc)

DPR
Companies that wish to engage in petroleum operations in Nigeria are required to register with the Department of Petroleum Resources (DPR). The DPR issues permits, upon application, in respect of oil exploration and production activities, as well as oil service activities. fees payable depends on the category of operations for which the company applies.

FEES

 

IMPORTANT NOTE: One Stop Investment Centre (OSIC) is available with Nigeria Investment Promotion Council (NIPC) to take care of all incorporation and registration needs at a go. Foreign investors are advice to exploit this opportunity to reduce cost of entry and to maintain close and professional working relationship among government Agencies/Ministries in support of investors