Nigeria currently has the largest economy in Africa. The abundant oil reserves and huge human resources have made the country a destination of choice for the global investing community.
Requirements for business setup in Nigeria
Setting up a company in Nigeria is inexpensive compared to the cost of establishing a company in other jurisdictions. Additionally, legal requirements for starting a business in Nigeria are not too complex there. Every foreign entity seeking to navigate a path to a successful business setup in Nigeria must also comply with the following requirements for a proper business setup:
- Company Registration in Nigeria: The first step to take for any individual or investor seeking to start a business in Nigeria is to register a company. There are different types of company that can be registered in Nigeria, but the most suitable and recommended type of company for private individuals or organizations is the private limited liability company. The requirements for company registration in Nigeria for foreigners are slightly different from the similar requirements for the citizens. Every Nigerian citizen can register any company with any threshold of authorized share capital as long as it is above N500,000, but a foreigner or foreign company registering in Nigeria must register a company with a minimum of N10, 000,000 (Ten Million Naira) authorized share capital. Most foreigner often want to know whether they are required to pay the N10,000,000 to any bank or government agency at the time of registration? The simple answer to that is No! The Nigerian’s company law does not mandate that this capital should be paid up at the point of registration. The shareholders or the company’s subscribers can pay the capital or part of it to their company’s bank account after the entire business setup process is completed. However, it is a general requirement of law that every new company in Nigeria must be composed of a minimum of 2 directors and 2 shareholders. A foreign entity registering in Nigeria, which does not have the required two people to act as directors may appoint a nominee director(s) who is a Nigeria citizen for the purpose of meeting up with statutory requirements among other purposes. The company registration in Nigeria is governed by Companies and Allied Matters Act (1990) and the government agency in charge of company registration is the Corporate Affairs Commission.
- Registration of the registered company with Nigeria Investment Promotion Commission (NIPC): NIPC is a statutory body that promotes foreign investment in Nigeria. The commission registers any company with foreign participation and issues its certificate to such company. The major requirement for a registration with NIPC is incorporation documents for the registered company. The commission will also seek additional details concerning the nature of the business and the capital to be imported for the business purpose.
- Tax Clearance Certificate (TCC), Tax Identification Number (TIN) and Value Added Tax (VAT) registrations: Every new company must register with the Federal Inland Revenue Service for TCC, TIN and VAT numbers. The tax identification number would enable the company to remit its taxes. Moreover, every other government organizations processing any document for the new company or its directors in future may also demand the evidence of the company’s tax clearance certificate.
- Business Permit with the Ministry of Interiors: Every new company wholly owned by foreigners must apply to the Ministry of Interiors for a business permit. A company that is partly owned or controlled by a Nigerian citizen may not be subjected to this requirement. There are requirements highlighted for processing of the business permit in Nigeria with the Ministry of Interiors.
- Expatriate Quota: This is another permit being issued by the Ministry of Interiors upon the application of company for the benefit of any foreigner seeking to work in Nigeria, either permanently as the owner of the business or temporary as the employee. The application for expatriate quota in Nigeria must be accompanied by the prescribed documents.
- Combined Expatriate Residence Permit and Aliens Card (CERPAC): Every individual foreigner seeking to work in Nigeria must hold a valid residence or work permit. In Nigeria, CERPAC serves as the work permit every foreigner living or working in the country must hold. CERPAC Nigeria entitles the holder to live and work in the country. The application must be preceded with the expatriate quota approval for the company. CERPAC is issued upon the application to the Comptroller General of the Nigerian Immigration Service or Comptroller of Immigration Service in various state commands.
- Bank Account Opening & Capital Importation: One of the criteria for business setup in Nigeria or anywhere in the world is bank account opening. Regardless of any bank in Nigeria an investor chooses to bank with, the requirements for bank account opening are consistent among all banks. Such requirements will include incorporation certificate and documents, valid mode of identification, account opening package duly completed and signed, company’s board resolution authorizing an account to be opened, Tax Identification Number (TIN) and Bank Verification Number (BVN). The BVN must be obtained inside a banking hall in Nigeria. Therefore, every foreign company must have its directors resident in Nigeria to be able to open a bank account. An international entity seeking to set up a business in Nigeria and resident overseas must either get a local partner or nominee directors who can be able to open a bank account to carry on such business. After successful opening a bank account, a new company may choose to import capital through the Central Bank of Nigeria’s authorized dealers, which are banks. Money can be imported in form of equity or loan. Upon arrival of the capital, the authorized dealer must issue a certificate of capital importation within 48 hours. The certificate of capital importation enables the company to repatriate its capital and profits in the future without any hindrances. And there is also a provision for raw materials and equipment importation for companies who choose to do such instead of importing money.
- Export Permit, Import Permit or Business License: Depending on the sector of the economy any new company, either foreign-owned or locally owned, may choose to engage in, an additional permit or business license may be required. For instance, any company that chooses to import any pharmaceutical or food product into Nigeria must obtain a permit or approval from the National Agency for Food and Drug Administration and Control (NAFDAC). And any company engaging in telecom services must obtain a license from the Nigerian Communication Commission (NCC). In the same vein, every company seeking to trade and export Nigerian mineral resources must obtain purchase or possess license and export permit from the Ministry of Mines and Steel Development.
- Business Office & Property Acquisition: New businesses are required to acquire business address or properties to successfully carry on their business activities in Nigeria. Proposed registered office address is one of the requirements for company incorporation in Nigeria. Every new company springing up in Nigeria can rent office accommodation for the start of business. However, a company, especially a foreign-owned one, which is about to be newly formed may discuss with a lawyer or consultant on how to acquire a takeoff address for the purpose of incorporation. A consultant may assist a new company with registration address in Nigeria, and the company may file for a change of address with the Corporate Affairs Commission after acquiring a new address. However, over the time, there have been high numbers of virtual, shared and mini offices setup springing up in commercial cities in Nigeria. A new company that is looking for a very small office accommodation to plan its business strategy or operation may engage the services of these new forms of offices.
- Appointment of Auditor & Company Secretary: The Nigerian company’s law- CAMA mandates an appointment of the auditor for every company. The functions of the auditor are stated in the Act, but which generally include auditing and preparing the company’s account. Although an auditor must be appointed at the general meeting of the company, however, the director of the company can appoint the first auditor before a general meeting. On the other hand, company secretary must be appointed during the process of incorporation. Meanwhile, any of the 2 first directors of the company can also be appointed as the secretary. The requirement is different for a public company, which must appoint only professionals as the secretary. However, most private companies in Nigeria nowadays still prefer to appoint professionals, especially lawyers or law firms as the company secretary. The company secretarial roles include a lot of statutory and administrative duties. The statutory duties include providing and keeping of registers required by statute, such as a register of shareholders, registers of directors among others. Administrative duties include the filing of company’s returns, co-signing annual returns with directors among others.
Finally, it is worthy of note that the business registration process in Nigeria has been simplified. The Nigerian company house- the Corporate Affairs Commission (CAC), as a company may now be formed in less than a week in Nigeria. And in line with the presidential directives on ease of doing business in Nigeria, every other government ministries must also follow the CAC example by ensuring seamless and smooth processing of any required permits, approvals or licenses for a quick business setup in Nigeria.
There are various incentives applicable to doing business in Nigeria and the country will continue to attract a plethora of international businesses and investments for many years to come.
Written by Corporate & Commercial Law Department at Resolution Law Firm, Nigeria
NOTE: The above write-up is for general information purpose only. It must not be misconstrued as a business advice. Every individual seeking to do business in Nigeria should privately consult with a lawyer for complete legal requirements