When it comes to doing business in Nigeria, there are numerous rules and regulations that you need to be aware of. This article aims to breakdown all the steps you need to take if you are thinking about doing business in Nigeria. Operating a business in Nigeria is governed by various laws, most notably the Companies and Allied Matters Act, which provides the primary framework for company formation and maintenance. Other key laws include the Companies Income Tax Act, Value Added Tax Act, Withholding Tax Act, Nigerian Investment Promotion Commission Act, Labour Act, Immigration Act and Regulations, Employee Compensation Act, and Banks and Other Financial Institutions Act.
When starting a business in Nigeria, the first steps are developing a legal, permissible business idea and registering the company with the Corporate Affairs Commission (CAC). Registration requires completing specific requirements and checklists. The business must adhere to all relevant laws during setup and ongoing operations in Nigeria.
Registering a Business in Nigeria: A Step-by-Step Guide
1. Search for Available Business Names
First, search the Corporate Affairs Commission (CAC) database to ensure your desired business name is available. Submit two name options and the CAC will check that neither is already registered or too similar to an existing name. If a name is approved, the CAC will reserve it for 60 days.
2. Prepare Registration Documents
Gather the required documents, including CAC Form 1.1 with shareholder and director details, the memorandum and articles of association, forms detailing the company secretary and statutory declaration, and original receipts for fees. Note that individuals or entities, Nigerian or foreign, can be shareholders, but restrictions apply to those under 18 or with a history of fraudulent business practices.
3. Complete Registration
Submit your documents and forms to the CAC within 60 days of reserving your business name. The CAC Registrar can refuse registration based on issues like fraudulent history. Once approved, you will receive your certificate of incorporation and your company can begin operating.
TAX APPLICABLE TO BUSINESSES
A company operating in Nigeria must pay a variety of taxes. The main taxes are:
– Company Income Tax – Charged at 30% of profits for companies with over 100 million Naira in annual turnover, or 20% for companies with 25-100 million Naira.
– Value Added Tax (VAT) – Charged at 7.5% on goods and services. Paid by the customer.
– Capital Gains Tax – 10% tax on capital gains from selling assets.
– Stamp Duties – Tax on legal documents, charged at fixed or percentage rates based on the transaction value.
– Withholding Tax – 5-10% tax deducted from payments to beneficiaries. An advance income tax payment.
– Industrial Training Fund – 1% payroll tax on companies with over 50 million Naira turnover or 5+ employees.
– National Social Insurance Trust Fund – 1% mandatory insurance payroll deduction.
– Education Tax – 2% tax on company profits.
– Petroleum Profits Tax – 50-85% tax on oil exploration and production profits.
Taxes are collected by the Federal Inland Revenue Service, State Boards of Internal Revenue, and Local Government Councils.
REGISTRATION WITH NIGERIAN INVESTMENT PROMOTION COMMISSION
The NIPC, established under the Nigerian Investment Promotion Commission Act, serves as the central agency for promoting, coordinating, and monitoring investments in Nigeria. Key NIPC functions include collecting and disseminating information on investment opportunities, registering enterprises, facilitating investor participation in projects, providing support services to investors, advising the government on policies for economic growth, and processing applications for tax incentives. Registration with the NIPC is advantageous as it enables companies to be considered for tax breaks and other incentives aimed at promoting investment and industrialization in Nigeria.
PROCEDRURE FOR EMPLOYMENT IN NIGERIA
An employment relationship is formed when an employer and employee agree on the work to be done, the employee performs that work under the employer’s supervision and control, and the employer compensates the employee for their labour. The terms and conditions of employment are established through legislation and collective bargaining agreements. Both the employer and employee have rights and responsibilities during and upon termination of the employment relationship. Employment contracts are typically guided by the Labour Act.
Section 7(1) of the Labour Act requires employers to provide an employment contract to employees within three months of starting work. The employment contract should contain:
– The names of the employer and employee
– The employee’s name and address, and the nature of their role
– If it is a fixed-term contract, the end date
– The employee’s wages and terms relating to hours, holidays, etc.
Either party may terminate the contract by giving notice to the other:
– One day’s notice if employed for 3 months or less
– One week’s notice if employed for more than 3 months but less than 2 years
– Two weeks’ notice if employed for 2-5 years
– One month’s notice if employed for 5+ years
The National Industrial Court has jurisdiction over employment matters in Nigeria.
BUSINESS PERMIT, EXPATRIATE QOUTA & CERPAC
A business permit allows foreigners to legally operate a business in Nigeria. The Federal Ministry of Interior issues these permits on behalf of the government. Foreign-owned companies must obtain a permit from the Ministry.
To get a business permit, applicants must provide:
– Company registration documents like the certificate of incorporation, memorandum and articles of association, and shareholder information.
– Tax clearance certificate
– Approvals from relevant professional bodies
– Joint venture agreements for partnerships between Nigerians and foreigners
Business permits are usually applied for along with an expatriate quota. This allows foreign employees and directors to work in Nigeria. The Ministry of Interior Affairs grants these quotas. Applicants can request multiple quotas depending on need.
Requirements for an expatriate quota include company documents, feasibility reports, tax certificates, proposed salaries, and training plans for Nigerian employees. Specialized sectors like oil/gas and telecoms need additional permits.
Once approved, foreigners can legally live and work in Nigeria. They must also obtain a CERPAC resident card from the Immigration Service. This combines their work permit and residency status. It is valid for 2 years.
Requirements for CERPAC include the quota approval, passport, application letter from the employer, appointment letter, credentials, and fees.
BUSINESS LICENSES
NAFDAC APPROVAL
The National Agency for Food and Drug Administration and Control (NAFDAC) was officially established in October 1992 by the National Agency for Food and Drug Administration and Control Act to regulate the manufacture, importation, exportation, distribution, advertisement, sale and use of food, drugs, cosmetics, medical devices, packaged water, chemicals and detergents in Nigeria. Companies producing foods or drugs must register each product separately with NAFDAC and obtain approval before distribution. Failure to register with NAFDAC and obtain approval before distributing regulated products can result in the seizure of those products by the government.
DEPARTMENT OF PETROLEUM RESOURCES
The Department of Petroleum Resource (DPR) is a department under Nigeria’s Federal Ministry of Petroleum Resources. The DPR is responsible for exploration, importation, and safety regulations related to petroleum products. It oversees upstream and downstream operations in Nigeria’s petroleum industry and manages permits and licenses required to operate oil and gas facilities.
The DPR issues three types of permits:
– General Purpose permits for work not requiring specialized skills.
– Major Category permits for applicants with verified technical expertise.
– Specialized Category permits for applicants with specialized technical skills in areas like offshore/onshore pipeline construction.
Companies involved in oil exploration and production can obtain licenses like Oil Exploration Licenses and Oil Mining Leases. Those in downstream operations like gas stations need separate licenses from the DPR to operate.
MINERAL MINING LICENSE
The Minerals and Mining Regulation 2011 allows qualified companies to apply for exploration licenses, which are valid for 25 years and renewable. The Federal Ministry of Mines and Steel Development coordinates the granting of mining leases through the Mining Cadastre Office. Applications for mining leases in Nigeria must adhere to the relevant requirements and procedures outlined in the Nigerian Minerals and Mining Act, 2007 and the Minerals and Mining Regulation 2011.
There are several licenses required for operating a business in Nigeria. The specific licenses needed depend on the type of business. For example, a company planning to provide banking, leasing, or payment services must obtain separate licenses from the Central Bank of Nigeria (CBN). However, CBN approval must first be secured before incorporating any proposed company subject to CBN licensing. Additionally, an Export License from the Nigerian Export Promotion Council is necessary for a business involved in exporting activities.
Opening a business bank account is essential for company operations in Nigeria. These accounts can be opened in Naira, Dollars, Euros, or British Pounds (GBP). A bank account enables businesses to easily conduct financial transactions and gives foreign investors access to a Certificate of Capital Importation.
To open a business bank account in Nigeria, companies should take the following steps:
– Select a bank
– Fill out the account application and provide identification documents like passports
– Submit the business license, registration, and tax ID number to the bank
– Provide any other required documentation to the bank
In conclusion, to start a business in Nigeria, the first step is registering with the Corporate Affairs Commission. After registering, companies must obtain a Tax Identification Number (TIN) to open a bank account, which is mandatory.
Depending on the industry, registered companies may also need to acquire certain licenses. For example, oil and gas companies must be licensed by the Department of Petroleum Resources.
To remain in good standing and operate smoothly, registered companies in Nigeria must comply with all statutory requirements governing business operations, particularly tax laws.
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