Doing Business in Nigeria: A Beginner's Guide

Starting a business venture in Nigeria can be quite challenging but having the proper foundation and a good grasp of the laws, regulations, and requirements surrounding business in Nigeria can ensure that the journey is as seamless as possible. This article outlines key steps an individual or organization must undertake to set up a business venture in Nigeria.

Starting a business in Nigeria

To set up a business in Nigeria, you must follow the steps below:

1.     Register the business with the Corporate Affairs Commission (CAC):

Under the Companies and Allied Matters Act, 2020[1], every person or group of persons carrying on business in Nigeria is required to register such an enterprise or company with the Corporate Affairs Commission. Business registration in Nigeria is conducted by accredited agents. You must enlist the services of a professional who would assist you in doing the following:

a.  Identifying the Appropriate Business Structure: There are a myriad of factors that influence the choice of the right business structure. These factors include; the services your business will provide, the number of members, potential tax obligations, liability of members, financial considerations, succession considerations, fundraising methods, and the level of public involvement, amongst others. It’s important to enlist the services of a professional in identifying your business structure to ensure compliance with CAC guidelines and regulatory requirements whilst addressing your business needs. In Nigeria, the recognized business structures are;

i.               Sole proprietorship

ii.              Limited Partnership

iii.            Limited Liability Partnership

iv.            Private Limited Liability Company

v.              Public Limited Liability Company

vi.            Unlimited Company

vii.           Company Limited by Guarantee

b. Name Reservation/Filing of the Application: Once you identify the right business structure, the next stage is to propose and reserve the proposed name. At this stage, you are required to submit 2 (two) proposed names for your business. The name must not be identical to any existing registered entity in Nigeria and must comply with other CAC guidelines.[2] The accredited agent will then proceed to conduct a name availability search at the Corporate Affairs Commission (CAC) registry to confirm whether the name is available. If the name is available, CAC will approve it for registration. The requirements and documentation for registration depend on the corporate structure chosen. Once all required documents are submitted and approved, the CAC will issue the Certificate of Incorporation, along with other relevant incorporation documents.

2. Tax Registration and Compliance: In Nigeria, all registered businesses are required to register with either the Federal Inland Revenue Service (FIRS) or the relevant State Inland Revenue Service, depending on the corporate structure. Upon registration, the relevant agency issues a Tax Registration Certificate and Tax Identification Number (TIN).

Understanding the taxes applicable to your business is essential to avoid criminal liability for tax default or evasion. The taxes your business is required to pay will vary based on factors such as its size, location, nature of services, corporate structure, annual turnover, amongst others. In addition, your business may be entitled to certain tax incentives or reliefs[3] , as such, it is important to engage the services of a solicitor or accountant for advice on your tax obligations and possible incentives. Some taxes applicable to businesses in Nigeria are[4]:

1. Company Income Tax (CIT): This tax is provided for under the Company Income Tax Act (CITA) and it applies to profits derived from trade, business, or investment within Nigeria. The required amount is 30% for large companies, 20% for medium sized companies, and 0% for small companies.

2. Personal Income Tax: Personal Income Tax (PIT) is a tax imposed on the income of individuals living in Nigeria. This tax applies to business owners who are not operating as corporate entities in Nigeria.

3. Value Added Tax (VAT): This tax applies to companies carrying on a business that involves the supply of goods and services in Nigeria. VAT is charged at the rate of 7.5%. VAT is collected by companies and remitted to the relevant tax authorities.

4. Withholding Tax: This is an advance tax payment applicable to certain types of income, including dividends, interest, management fees, and royalties. The tax is withheld by the income payer and subsequently remitted to the Federal Inland Revenue Service (FIRS). The applicable tax rate varies depending on the specific type of income being taxed.

5. Capital Gains Tax: This tax applies to gains made from the sale or other disposal of assets, such as property, shares, and machinery. The rate of the tax charged depends on the nature of the asset.

3. Obtaining Licenses and Permits:  After registering a business in Nigeria, additional licenses may be required to operate depending on various factors, such as regulatory obligations, the level of foreign participation, industry standards, and the nature of the business activities. Please find below some sector-specific licenses, as well as the permits, certifications and licenses required for companies with foreign involvement.

a.  Sector-Specific Licenses: Below is a list of some of the sector-specific licenses. Please note that this list is not exhaustive, and it would be best to contact a professional to assist you in determining the licenses required for your intended sector.

      i.         Money Lending Licenses are issued through the Magistrate Court and Ministry of Home Affairs to money lending companies.

     ii.         Freight forwarding licenses are issued by the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN) to freight forwarding companies.

   iii.         National Agency for Food and Drug Administration and Control (NAFDAC) issues registration licenses for businesses in food, drugs, cosmetics, or related products.

1. Nigeria Civil Aviation Authority (NCAA) issues licenses and ratings for aviation, and also validates and converts foreign licenses. 

2. Nigerian Postal Service (NIPOST) issues logistics licenses for courier and logistics companies.

3. Licenses issued by the Nigerian Security and Civil Defence Corp to Security companies.

4.  Broadcasting licenses issued by the National Broadcasting Commission for radio, television, and other broadcasting services.

5.  Import/Export License issued by the Nigerian Customs Service

6.  Licenses issued by the Central Bank of Nigeria to Banks and Other Financial Institutions.

7. Licenses issued by the Nigerian Upstream Petroleum Regulatory Commission formerly the Department of Petroleum Resources to businesses in the oil and gas sector.

b. Permits/Licenses/Certifications for Companies with Foreign Participation:

Foreign investors can either fully own or hold an equity stake in a Nigerian company. However, any foreign company wishing to operate in Nigeria must incorporate the business with the Corporate Affairs Commission, unless granted an exemption.[5]Furthermore, to conduct business or invest in a Nigerian company, foreign investors are required to obtain the following permits, licenses, and certifications:

I.               Certificate of Capital Importation (CCI):  This is issued by the Central Bank of Nigeria to foreign investors as proof that capital has been legally brought into the country. This certificate is crucial for investors as it allows them to access various benefits, including the repatriation of dividends, profits, and capital gains. The CCI serves as an official record to ensure compliance with Nigeria’s foreign exchange regulations, under the supervision of the Central Bank of Nigeria (CBN).

II.             Business Permit: A business permit is a requirement for any wholly foreign-owned company, particularly those seeking to obtain expatriate quotas.[6] This permit serves as an operational and permanent authorization for the local activities of businesses with foreign investment, whether as a branch, subsidiary, or otherwise. It is issued by the Ministry of Interior.

III.           Expatriate Quota Approvals[7]: A business permit allows a foreigner to take up employment in Nigeria, but companies must first obtain an expatriate quota to employ foreign workers. The expatriate quota, granted by the Minister of Interior, defines the number of foreign employees a company can hire. The quota is granted for specific roles within the organization. These roles can be filled by different individuals, as long as the quota remains valid. While the expatriate quota permits the company to employ foreigners, it is not a substitute for a work permit, the company must separately obtain a work permit to allow the foreign employee to live and work in Nigeria,

IV.           Combined Expatriate Resident Permit and Alien Card[8]: The Combined Expatriate Residence and Aliens Card (CERPAC) functions as a work permit and is issued by the Comptroller General of the Nigerian Immigration Service or the Comptroller of Immigration in various states. The CERPAC permits a foreigner to live in Nigeria and work. The validity of the residence permit is contingent upon the expatriate quota. A valid residence permit can be used for re-entry into Nigeria.

V.             Registration with the National Office for Technology Acquisition and Promotion (NOTAP) [9]: When a business intends to import technology into Nigeria, it must register the contract governing the importation with the National Office for Technology Acquisition and Promotion (NOTAP). NOTAP assesses the contract to determine whether the importation of the technology will be permitted. Additionally, registering with NOTAP is crucial for the business to repatriate profits generated from the technology.

VI.           Registration with the Nigerian Investment Promotion Commission (NIPC):[10] The Nigerian Investment Promotion Commission (NIPC) is a federal agency established by the NIPC Act to promote, coordinate, and oversee all investments in Nigeria. To monitor foreign investment in the country, the NIPC requires foreign-owned companies operating in Nigeria to register with it, and compliance with this requirement is mandatory. The company should make an application to the NIPC after incorporating it as a Nigerian entity.

VII.         Increase of Share Capital: The minimum issued share capital for companies with foreign participation is set by the CAC at ₦100,000,00.00 (One Hundred Million Naira) Business Permits are only granted by the Nigerian Immigrations Service to wholly foreign-owned or joint venture companies with foreign participation that have a minimum paid-up capital of ₦100,000,000.00 (One Hundred Million Naira) to commence business in Nigeria.[11]Companies with foreign participation should consult experienced legal practitioners to understand the share capital requirements applicable to their particular venture.

4. Intellectual Property Protection:

After registering a business in Nigeria, another step to undertake is to ensure the protection of businesses’ intellectual property. The following are intellectual property that can be owned and registered by a business:

1. Trademarks: A trademark is a sign or identifier that distinguishes a product or service from that of another. It serves to represent to the consumers that the product or service belongs to the business that owns the trademark. Registered trademarks have a life span of 7 (seven) years and 14 (fourteen) years for each renewal. Please read our article on how to register trademarks here.

2. Patents:  A patent grants exclusive rights to inventors for their inventions, preventing others from making, using, selling, or distributing the patented invention without permission. This protection typically covers new products, processes, or improvements to existing inventions. To qualify for a patent, an invention must be novel, non-obvious, and useful. Patents are granted for 20 (twenty) years from the filing date, providing inventors with a competitive advantage in the market.

3. Copyright: This is a right reserved for the author of an artistic, literary or musical work which enables the author to protect the work from certain usage such as reproduction, commercial exploitation, adaptation, publication, etc. In Nigeria, copyright protection lasts for the life of the author plus 70 (seventy) years after their death.

4. Industrial Designs: This protection focuses on the aesthetic aspects of products, covering the visual design, shape, patterns, and colours of an item. Industrial design protection ensures that the unique visual features of a product are not copied or imitated by others, thus preserving the creator’s original design. Unlike patents, which protect functionality, industrial designs emphasize the ornamental aspects and are typically granted for a maximum period of 15 (fifteen) years.

It is important to note that these rights are not automatic and only accrue to registered intellectual property. It is necessary to seek the advice of a professional to know which forms of intellectual property registrations are best suited to your business.

Conclusion

Doing business in Nigeria can be very dynamic and requires one to be abreast with the requirements for starting a business in Nigeria. The steps outlined in this article are not exhaustive, additional steps a business should take before commencing operations include entering essential agreements with relevant stakeholders, acquiring necessary insurance policies, and drafting corporate governance and organizational policies, amongst others. As experienced corporate and commercial lawyers in Nigeria, we can help you navigate the entire process seamlessly, from ideation to business setup. For more information please contact us at enquiries@laperitum.com or click here to reach us directly.

[1] Section 863(1) & (2) of the Companies and Allied Matters Act, 2020.

[2] Section 31 of the Companies and Allied Matters Act, 2020

[3] PWC ‘Worldwide Tax Summaries’ https://taxsummaries.pwc.com/nigeria/corporate/tax-credits-and-incentives Accessed on September 29, 2024

[4] PML Advisory “List of taxes in Nigeria “

https://pml.com.ng/list-of-taxes-in-nigeria/ Accessed on September 20, 2024.

[5] Section 80 of the Companies and Allied Matters Act, 2020

[6] Section 36(1)(a) and (b) of the Immigration Act (2015), and Paragraph 4 of the Immigration Regulations (2017)

[7] Expatriate quota application https://ecitibiz.interior.gov.ng/expatriate/requirements Accessed on September 25, 2024.

[8]https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.legal500.com/developments/thought-leadership/procedure-and-requirements-for-work-permit-and-visas-in-nigeria/%23:~:text%3DThe%2520Combined%2520Expatriate%2520Residence%2520Permit,term%2520employment%2520or%2520business%2520opportunities.&ved=2ahUKEwjEl76YhN6IAxW4TUEAHZujPP0QFnoECBkQBA&usg=AOvVaw2zWIOWthbobOKVWk4J9m4GAcessed on September 25, 2024.

[9] https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.notap.gov.ng/wp-content/uploads/2024/07/Stages-involved-in-the-Technology-Transfer-Registration-Process-and-Timelines.pdf&ved=2ahUKEwj15Pftg96IAxWzWUEAHcD1AHcQFnoECCkQAQ&usg=AOvVaw3mLh4h-9jR08-HDBwf4H4E Accessed on September 25, 2024.

[10]  Section 20 of the NIPC Act

[11] Nigerian Immigrations Service Handbook on Expatriate Administration Quota (2022)