In this post we will be looking at the regulatory requirements that must be met before any company or foreigner can legally commence its business in Nigeria.
INTRODUCTION
As the most populous African nation, Nigeria continues to attract an increasing number of foreign investments annually. In 2020, the United Nations reported that Nigeria’s inflow of Foreign Direct investments (FDI) increased by 4.3% despite the outbreak of COVID-19. As the market expands, the government continually issues policies aimed at creating a conducive business environment. Nigeria operates a free-market economy and there are no restrictions on foreigners setting up companies in Nigeria. Subject to the laws of Nigeria, a foreign individual or entity can set up a fully owned company in Nigeria and operate, employ expatriates and repatriate profits. However, before any foreigner can carry on business in Nigeria, it is a mandatory requirement that the entity is duly registered in the country. The Companies and Allied Matters Act 2020 (CAMA) is the principal legislation that governs the registration of companies in Nigeria while the Corporate Affairs Commission (CAC) is the regulatory authority. Apart from the registration of the company, there are other regulatory requirements that must be met before any company can legally commence its business in Nigeria and a foreign investor needs to know this regulatory requirement, costs, timelines for achieving any registration or obtaining a license and the relevant agency responsible for any approval or permit as well as the applicable taxes, levies or other mandatory obligations.
Registration with CAC
The process involved in the registration of a company in Nigeria are as follows:
- Availability and Reservation of Proposed Name
- Application and Registration
- Approval
Availability and Reservation of Name: The first step is to conduct a name availability search with the CAC. The purpose of this is to ensure that the proposed name of the company is available for use and that there is no other company that has registered the same or similar name. Once the name is available, the CAC would issue a certificate of name reservation, which is usually valid for 60 days, enabling the registration to proceed to the next stage. It is always advisable to propose two names in case the first name is not approved.
Application and Registration:
Following the reservation of the proposed name above, the next step would be to prepare all the necessary documents in support of the application. These includes the memorandum and articles of association of the proposed company. To this end, the promoters of the proposed company are required to provide the following information:
- The type of company to be registered
- Registered address of the company
- The objects or nature of business of the company
- Details of the company secretaries
- Minimum issued share capital. (Please note that there is a minimum issued share capital requirement of N10,000,000 for companies with foreign participation. The minimum issued share capital could be more depending on the sector the company wishes to operate in).
- Particulars of the proposed shareholders.
- Particulars of the proposed directors.
Approval by CAC
Once the above information has been received and completed, they are submitted to the CAC for vetting. Payment of the filing fee is made and stamp duty is charged on the minimum issued share capital at the rate of 0.75%. If satisfied, the CAC shall issue a certificate of incorporation evidencing that the company is now a legal entity authorized to commence business in Nigeria.
Simultaneously, the Federal Inland Revenue Services (FIRS) would issue a Tax Identification Number (TIN) to the newly registered company. The TIN is a unique identifier that is linked to the company which enables it charge and remit the appropriate taxes to the FIRS.
Business Registration with Nigerian Investment Promotion Commission (NIPC)
Following the successful incorporation of the new entity with the CAC, there is a mandatory requirement for that entity to be registered with the NIPC before the company could legally commence any business in Nigeria. The NIPC has the primary responsibility to encourage, promote and coordinate investment in the Nigerian economy. The NIPC also has the responsibility of granting some incentives like pioneer status to any company which qualifies for such status. The application to the NIPC involves filling the relevant application form, providing details of the shareholders and directors of the company and paying the appropriate official fee. If satisfied, the NIPC would issues a Certificate of Business Registration to the entity.
Business Permit, Expatriate Quota and Work Permit
In addition to the above, a wholly owned foreign company wishing to operate in Nigeria must obtain a business permit from the Nigerian Ministry of Interior and expatriate quotas if it wishes to employ foreigners in the country. The expatriate quota is the precursor to the application for and issuance of work permit to the foreigner being employed by the company in Nigeria. Once approved, the expatriate is issued a Combined Expatriate Residence Permit and Aliens Card (CERPAC) which allows the employee to reside and work in Nigeria.
Tax Registration
It is important that after incorporation a registered company registers with the Federal Inland Revenue Service (FIRS) and obtains a Tax Identification Number (TIN). The TIN is often required to secure other licenses and operate a bank account. It is also necessary to register with the State Inland Revenue Service located in the state in Nigeria where it wishes to carry on business.
Trademark Protection/Registration
Companies that already have an existing trademark in their home countries are encouraged to register such trademarks in Nigeria to secure their usage by the company. A search must be conducted at the trademark registry to determine if the trademark is already in existence before registration will be approved or rejected. Note that approval for trademark registration will not be granted where the trademark is already registered by another company unless permission or assignment of that trademark has been granted by that company.
Operating a Bank Account
A company will generally require capital to set up its business in Nigeria. Commercial banks in Nigeria are appointed by the Central Bank of Nigeria as authorized dealers for the purpose of importing foreign exchange and guaranteeing repatriation of foreign capital which may have been imported through a Commercial Bank. Commercial banks also play a crucial role in facilitating the importation of goods into the country. Generally, the requirements for operating a bank account vary from one bank to another. Evidence of company registration, identities of a company’s directors, TIN of the company, proof of registered address, are however standard requirements.
Sector-Specific Licensing
The foreigner must enquire about the licenses required to do business in its proposed sector of operation. Some sectors may have special licensing requirements which must be fulfilled by operators. For instance, a foreign company interested in the sale of cosmetics in Nigeria must first obtain a permit from the National Agency for Food and Drug Administration and Control; a company seeking to import and distribute electronics must obtain a certificate from the Standard Organization of Nigeria (SON); also, a company that wishes to
provide logistics services must be licensed by the Nigerian Postal Service (NIPOST).
Advertising
It is worthy of note that a license to operate may not always confer permission to advertise. A foreign company must ensure it obtains the requisite advertising permit before advertising to its consumers.
Certificate of Capital Importation
The company will need to obtain a Certificate of Capital Importation (CCI) from an authorized dealer, usually a local bank to serve as evidence of importation of capital which could be equity, debt, cash or goods into the country. The CCI also
guarantees the unconditional repatriation of capital and profits out of the country.
Other Registrations/licensing Requirements
Depending on the sector of the Nigerian economy where the new company wishes to operate, it may be necessary to obtain registrations and/or licenses from some of the following (non-exhaustive) agencies:
- Central Bank of Nigeria (CBN)
- National Agency for Food and Drug Administration and Control (NAFDAC)
- Nigerian Electricity Regulatory Commission (NERC)
- Nigerian Communications Commission (NCC)
- Nigerian Civil Aviation Authority (NCAA)
- Nigerian Maritime Administration and Safety Agency (NIMASA)
CONCLUSION
It is advisable that a foreigner interested in doing business in Nigeria engages the services of a business lawyer who will offer transactional guidance specifically tailored to the sector which it seeks to operate.