The Country
The Federal Republic of Nigeria is the most populous nation in Africa. It is located on the western coast of Africa. It is bordered to the north by Niger, the east by Chad and Cameroon, to the west by Benin and the south by the Gulf of Guinea of the Atlantic Ocean. As the sixth most populous country in the world, it covers a land area of 923,769 square kilometers (356,669 sq mi) with a population of approximately 220 million. Nigeria’s neighbours include the Republic of Benin (to the West), Cameroon (East), Niger (North) and Chad (North East). Nigeria operates a federal system comprising 36 States and the Federal Capital Territory, Abuja. The city of Lagos is Nigeria’s largest city and the commercial center in the country. The Nigerian currency is called the Naira and the official language is English.
Establishing a Foreign Owned Company in Nigeria
The Companies and Allied Matters Act (CAMA) 2020 regulates the establishment and operations of business entities by foreign investors in Nigeria. The law provides that foreign businesses interested in operating in Nigeria must register their companies with the Corporate Affairs Commission (CAC), which is responsible for the administration of the Companies and Allied Matters Act (CAMA).
Foreign owned businesses are required to register a limited liability company with a minimum authorized share capital of N10,000,000 (Ten Million Naira). This implies that the company must have at least 10,000,000 shares.
Foreign Investment Approvals
Foreign owned businesses in Nigeria require permits, approvals or licenses from the relevant regulatory approving federal government Ministries, Departments, and Agencies (MDAs) such as the Corporate Affairs Commission (CAC), Nigerian Investment Promotion Commission (NIPC), and the Nigeria Immigration Service before they can commence business operations in the country.
Other industry sector approving MDAs include the National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organization of Nigeria (SON), Department of Petroleum Resources (DPR), etc. The Federal Inland Revenue Service is responsible for tax registration and administration matters. Notable taxes include;
● Companies Income Tax (CIT): The federal tax levied on the annual turnover of companies in Nigeria is divided into 3 bands for small (less than N25 million), medium sized (N25 million to N100 million) and large companies (N100 million and above) respectively.
● Personal Income Tax: A state tax levied at between 7% to 24% on personal income depending on the assessment income band;
● Value Added Tax (VAT): 7.5% levied on the supply of goods and service values.
● Stamp Duty: A federal tax levied at 0.75% (fixed or ad-valorem) on the creation or increase of authorized share capital of a company, registration of new shares, instruments, etc.
● Withholding Tax: calculated at 10% for companies and 5% for individuals.
Investment Incentives
With regards to government incentives for doing business in Nigeria, tax holidays, investment allowances, and tax credits are available to companies operating in the viable market sectors listed under the Pioneer Industries and Products Regulations List 2017 such as agriculture, mining & quarrying, electricity and gas supply, construction, information and telecommunications. The Pioneer Status incentive includes tax exemptions for qualifying industries and promoted products on corporate tax and other investment incentives for an initial period of three to five years. Other incentives include duty free exemptions and waivers on importation of capital goods, machinery and raw materials; export expansion grants and double taxation relief.
The Game-Changing Business Facilitation (Miscellaneous Provisions) Act 2023
The Business Facilitation (Miscellaneous Provisions) Act 2023 signifies Nigeria’s resolute dedication to enhancing its business landscape. With Nigeria’s steady climb in the Ease of Doing Business ranking, from 146 to 131 out of 190 countries, this Act marks a significant milestone. It demonstrates Nigeria’s commitment to fostering investments and empowering micro, small, and medium-sized enterprises (MSMEs).
Encompassing 21 crucial business laws, including CAMA, Customs and Excise Management Act, Investment and Securities Act, Export Prohibition Act, National Housing Fund Act, and Financial Reporting Act, this legislation paves the way for a vibrant and efficient business arena. The Act mandates transparency by requiring the MDAs to share processes and requirements openly, bolstering accountability.
Service Level Agreements (SLAs) within the Act ensure adherence to specific service timelines, enhancing efficiency. If an MDA fails to communicate an application’s status within the stipulated time frame, approval is presumed thereby reducing uncertainty. The Act also revolutionizes Nigeria’s corporate sector, modernizing provisions for foreign company incorporation, share capital adjustments, electronic share certificates, and voting.
In addition, it also streamlines customs and trade operations under the Custom And Excise Management Act (CEMA) by promoting trade facilitation and procedural efficiency.
In essence, the Act embodies Nigeria’s pursuit of a business-friendly environment, fostering transparency, efficiency, and empowerment to drive innovation and growth. As Nigeria beckons businesses, the Act stands as its commitment to unlocking unparalleled business opportunities.
Article is written by
Akin Sanda,
Managing Partner at Akin Sanda & co,
Legal Practitioners Lagos Nigeria.
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