AN INVESTORS GUIDE TO DOING BUSINESS IN NIGERIA

Dear Subscriber,

Nigeria continues to face the challenge of diversifying its economy from total reliance on crude oil as its major revenue earner. In other to attract Foreign Direct Investment, making the business environment friendlier became a priority and this led to the establishment of the Presidential Enabling Business Environment Council (PEBEC) which had the mandate of removing bureaucratic impediments to doing business in the country.

The focus of PEBEC was Entry and Exit of goods; Entry and Exit of people and Government Transparency and Procurement. After the initial 60 day action period in 2017, Nigeria initially moved 24 places in the Ease of Doing Business Rankings from its 2016 spot of No. 169 to No. 145 and in the  World Bank’s Doing Business 2020 index the Country now ranks 131 and has been tagged as one of the most improved economies in the world for running a business.

This article aims to provide guidance on major aspects of Doing Business in Nigeria i.e. Business Formation, Capital Importation and Repatriation and Immigration Policies.

A. BUSINESS FORMATION:

An alien or foreign company may join in forming a company subject to compliance with the provisions of the laws regulating the rights and capacity of aliens to engage in business in Nigeria. Every foreign company intending to carry on business in Nigeria must take all necessary steps to obtain incorporation as a separate entity in Nigeria and until so incorporated, the foreign company shall not have a place of business in Nigeria for any purposes other than the receipt of notices and other documents as matters preliminary to incorporation. However, a foreign company may apply to the Federal Executive Council (FEC) for exemption from the requirement to register locally if it belongs to one of the following categories. That is:

• Foreign companies invited to Nigeria by or with the approval of the Federal Government to execute any specified loan project;
• Foreign Companies, which are in Nigeria for the execution of, specified individual loan project on behalf of a donor country or international organization;
• Foreign government owned companies engaged solely in export promotion activities; and
• Engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the federation or any of their agencies or with any other or person where such contract has been approved by the Federal Government.

Ultimately, a foreigner can fully participate in the operation of any enterprise in Nigeria except enterprises in the negative list (which largely relates to the manufacturing of firearms and other military materials). The foreigner may operate alone or in Joint venture with Nigerians by means of a company, which has to be formed and registered with the Corporate Affairs Commission (CAC) and with the Nigerian Investment Promotion Commission (NIPC).

Process of Registering a Business In Nigeria (Limited Liability Company)

• Check for availability of proposed Company name
• Reserve the approved Name
• Complete pre-registration form – CAC1.1 and prepare Memorandum and Articles of Association.
• Pay Stamp duty fee to Federal Inland Revenue Service.
• Pay filing fees to Corporate Affairs Commission. Submit all documents including Form CAC1.1; Memorandum and Article of Association; Proficiency certificate; Recognized form of identification for Director(s)/Subscriber(s) and Secretary; Stamp duty receipt; Evidence of payment to Corporate Affairs Commission.

Some of the reforms introduced in the process of business formation in Nigeria include the following:

• Company Registration timeline revised: It now takes 24-48 hours to register a business entity in Nigeria from when the application form is completed and all required documents available
• Company name search on CAC portal: It is now possible to conduct an online search on Corporate Affairs Commission (CAC) portal (www.cac.gov.ng) to avoid duplication of names and prevent selection of prohibited names.
• Company registration in Nigeria no longer requires lawyers: The new regulations made it optional for applicants to hire lawyers to prepare registration documents.
• Single incorporation form: The new regulations introduced single incorporation form (CAC1.1) to save time and reduce costs.
• Document Upload Interface: You can now submit completed business registration documents on the portal and physical submission no longer allowed.
• FIRS e-payment solution integrated: The Corporate Affairs Portal has now integrated the Federal Inland Revenue Service (FIRS) e-payment solution to enable e-stamping.

B. IMMIGRATION AND RESIDENCY POLICY 

Business Permit: Foreign nationals must obtain a business permit before beginning a profession, business or trade in Nigeria. This permit allows for the local operation of a business with foreign interest and this is issued by the Federal Ministry of Interior. Some of the requirements for obtaining Business Permits in Nigeria include:

• Certificate of Incorporation of the applicant company;
• Copies of the Tax Clearance Certificate of the applicant company;
• Copies of the Memorandum and Articles of Association;
• CAC Forms CO2 and CO7
• Joint Venture/Partnership Agreement where applicable.
• Shareholding of the Company should be a minimum of 10 million.

Expatriate Quota: Where a company intends to employ expatriates, it must apply for expatriate quota positions for the relevant number of expatriate personnel it intends to employ. This approval is also granted by the Federal Ministry of the Interior and is usually sought and obtained along with the Business Permit. There are basically two types-

1. Permanent until Reviewed (PUR): – This permit is usually granted for the post of Chairman of the Company’s Board of Directors or the Managing Director.
2. Temporary – This is for directors and other employees of the company. The Maximum number of years granted in the first instance is five years renewable for a further period of two years. Requirements for obtaining Expatriate Quota includes:

• Immigration Form II
• Tax Clearance Certificate
• Company Incorporation Documents
• Evidence of Capital Importation
• Evidence of ownership of premises/Lease Agreement
• Resume of the Expatriates
• Feasibility Studies/Business Plan.

Residence Permit: The Nigerian Immigration Service issues a Combined Expatriate Residence Permit and Aliens Card (CERPAC) for expatriates who intend to live and work in Nigeria. After the grant of the expatriate quota positions, the expatriates will each be required to apply for residence permits, in order for them to reside and work in Nigeria. Expatriates can be accompanied by their families and dependent applications will be submitted on their behalf. Requirements for obtaining a Residence Permit includes:

• Application letter from the employer requesting Regularization of stay and accepting Immigration Responsibility on behalf of the expatriate.
• Letter of Appointment/Employment.
• Acceptance of offer of Appointment/Employment.
• Form IMM22 with three (3) Passport –size photograph.
• Expatriate Quota Approval
• Vetted Credentials
• Valid Passport with STR (Subject to Regularization) visa and photocopies of relevant pages.

Temporary Work Permit – A Temporary Work Permit (TWP) is granted to expatriates coming into Nigeria to execute specific projects or contracts within a specific period. A TWP visa is usually single entry for the duration of the TWP and is usually valid for a maximum period of two (2) to three (3) months. It is important to note that the TWP only gives permission to the expatriate and does not extend to the spouse or dependents of the expatriate.

C. CAPITAL REPATRIATION

Certificate of Capital Importation (CCI) – Capital Importation Certificate (CCI) is a Central Bank of Nigeria (CBN) certificate issued by banks as evidence of capital in-flow/investment into a Nigerian company by a foreign investor which legitimizes and facilitates the repatriation of dividends, profits and capital attributable to the investment from Nigeria to a foreign country. The following are some of the requirements for the issuance of a CCI:

• Letter from the customer requesting for CCI
• Board resolution authorizing the investment (from the Nigerian Company)
• A copy of the Nigerian company’s certificate of incorporation
• Tested SWIFT telex copy stating amount and purpose of inflow
• Name and address of foreign investor (to be provided by the Nigerian company).
• Registration number and date of registration of investors
• Nature of Business of Investor
• Sector of Operation of the beneficiary.

Certificate of Capital Importation (CCI) – Capital Importation Certificate (CCI) is a Central Bank of Nigeria (CBN) certificate issued by banks as evidence of capital in-flow/investment into a Nigerian company by a foreign investor which legitimizes and facilitates the repatriation of dividends, profits and capital attributable to the investment from Nigeria to a foreign country. The following are requirements for the issuance of a CCI:

• Letter from the customer requesting for CCI
• Board resolution authorizing the investment (from the Nigerian Company)
• A copy of the Nigerian company’s certificate of incorporation
• Tested SWIFT telex copy stating amount and purpose of inflow
• Name and address of foreign investor (to be provided by the Nigerian company).
• Registration number and date of registration of investors
• Nature of Business of Investor
• Sector of Operation of the beneficiary.

The CBN introduced electronic CCIs, also known as e-CCIs, to replace the hardcopy CCIs. E-CCIs are issued, managed, and monitored via an electronic platform administered by the CBN, to which the commercial banks and investors have access.

CONCLUSION.

Nigeria is blessed with abundant human/natural resources and thus the Country is an obvious destination for investment capital. Whilst the potentials are huge for foreign companies intending to do business in Nigeria, however understanding how to navigate the hurdles associated with this environment is germane to survival. We have explained in detail some of the market entry requirements however it is advisable to work with the right professionals to better navigate the Nigerian business space.

The content of this document is solely for information purposes only and should not in any way be construed as a legal opinion. If you require specific legal advice on Doing Business in Nigeria please contact info@ioclaw.com