For Entrepreneurs, finding a sustainable and enabling environment is crucial to building a successful enterprise. Investors are naturally drawn to regions where they can advance their business objectives effectively. Recent amendments to local company and tax laws in Nigeria, aimed at fostering a more conducive business climate, along with Nigeria’s ratification of the African Continental Free Trade Area (AfCFTA) Agreement, have positioned the country to attract foreign investments and establish a profitable business presence for international investors.
Investment Structures
In Nigeria, businesses can be structured as sole proprietorships, partnerships, or companies with limited or unlimited liability. Nigerian company law permits both local and foreign entrepreneurs to establish partnerships and companies, holding direct or indirect stakes in the business.
Investors can choose to set up wholly-owned companies or form joint ventures with local investors. Under Nigerian law, foreign investors can own 100% equity in any business outside those listed in the negative list provided by Section 31 of the Nigerian Investment Promotion Commission (NIPC) Act. Prohibited activities include the production of arms and ammunition, narcotic drugs, military and paramilitary wear, and other items as determined by the Federal Executive Council.
Business Registration Requirements
According to the Companies and Allied Matters Act 2020 (CAMA), companies operating in Nigeria must register with the Corporate Affairs Commission (CAC). This requirement extends to foreign companies intending to operate in Nigeria. Exemptions from registration are granted under special conditions, such as being invited by the Federal Government for a special project or being commissioned by a donor organization. Exemptions also apply to foreign government-owned companies engaged in export promotion or technical consultants working on specific projects for Nigerian governments.
Capital Importation
To encourage foreign investment, the Nigerian government guarantees the repatriation of capital for investors who bring in capital through the official foreign exchange window. The Central Bank of Nigeria (CBN) issues Certificates of Capital Importation (CCIs) to document the inflow of foreign exchange, including loans and other investment instruments, following CBN guidelines.
In 2017, paper CCIs were replaced with electronic versions (eCCIs), which are transferable between banks and provide a more efficient process for capital transfers. eCCIs enable foreign investors to repatriate the proceeds from their investments.
Permits and Licences
The Nigerian Investment Promotion Commission (NIPC) oversees foreign business operations in Nigeria, issuing business registration certificates and regulating foreign-owned businesses. All enterprises with foreign participation must apply to the NIPC for a business license before commencing operations. Additionally, certain industries require specific licenses, such as telecommunication licenses from the Nigerian Communications Commission (NCC), mining licenses from the Ministry of Mines and Steel Development (MMSD), and permits from the National Agency for Food and Drug Administration and Control (NAFDAC) for importing food and drugs.
The Ministry of Interior’s e-citibiz portal facilitates applications for business permits and expatriate quotas, enabling foreign companies to operate legally and hire expatriates for specific periods. Expatriates can obtain a Combined Expatriate Residence Permit and Alien Card (CERPAC), which serves as a residence and work permit.
To streamline the registration and permit process, the NIPC established the One-Stop Investment Centre (OSIC), housing relevant government agencies to provide expedited services. Participating agencies include the CAC, Federal Inland Revenue Service (FIRS), Nigerian Immigration Service (NIS), and others.
Trade Area Agreements and Incentives
Nigeria’s ratification of the AfCFTA positions the country to engage in more liberal intra-African trade, reducing tariffs and trade costs, and enhancing the potential for foreign direct investments. Trade agreements attract new businesses by lowering barriers and reducing bureaucracy.
Incentives for Investors:
1. Full Repatriation of Capital: Foreign investors can fully repatriate capital and profits, provided they obtain the required CCIs.
2. Tax Reliefs: Various tax incentives are available, such as indefinite carry forward of unutilized capital allowances for agricultural companies and tax exemptions for new mining companies.
3. Pioneer Status: Grants tax holidays to qualifying industries, providing relief from corporate income tax for up to five years.
4. Double Taxation Reliefs: Agreements prevent multiple taxation on the same income in different jurisdictions.
5. Reconstruction and Rural Investment Allowance: Companies receive allowances for expenditure on plant, equipment, and facilities like electricity, water, and roads.
Understanding the requirements for establishing a business presence in Nigeria is essential for investors. Evaluating these factors helps in strategic decision-making and contributes to a successful business venture in Nigeria.
This article provides a general overview of the subject. Please contact us directly for any specific legal assistance.