Breaking into Nigeria’s Business Frontier: A Comprehensive Guide for Foreigners
The Nigerian business scape is attractive with its growing consumer market and abundant resources. To answer this call as a foreign investor or business concern, it is crucial for you to understand local requirements and regulations that concern the setup and operation of a business in Nigeria as a foreigner.
A foreigner refers to any individual, organization or entity that originates from outside Nigeria. Thus, any person who is not a citizen of Nigeria, either by birth or naturalization, is a foreigner. In order to operate or participate in a business in Nigeria, a foreigner must comply with some requirements. This article outlines the current regulations, processes and costs you should expect for foreign participation in Nigeria.
First, the minimum capital requirement for businesses with foreign participation in Nigeria is now N100,000,000 (one hundred million naira). This was announced by the Corporate Affairs Commission in December 2023, consistent with the Ministry of Interior’s revised Handbook on Expatriate Quota Administration (2022). Consequently, all existing companies with foreign participation must increase their share capital to meet the new minimum requirement by 4th June, 2024. Failure to do so will result in compulsory winding up of defaulting companies.
In order to operate as a business concern in Nigeria, your business must be registered. A business which is wholly owned by a foreigner or owned jointly by foreigner and Nigerian must undergo the following registration process:
CORPORATE AFFAIRS COMMISSION
Registration with CAC is the first step before a company can legally operate in Nigeria. The requirements for CAC registration are:
- Registered office address of the company in Nigeria
- Phone number and valid email address of the company
- Objects of the company
- Share details of the company
- Details of Directors, Shareholders and Secretary (if any)
- Means of Identification of all Stakeholders
The cost of CAC registration includes: filing fees, status report and stamp duty. Professional fees apply as well.
NIGERIAN INVESTMENT PROMOTION COMMISSION
Foreign Investors and local businesses with foreign participation must be registered as such with NIPC. Registration with NIPC ensures protection from expropriation or nationalization as well as repatriation of funds. The requirements for NIPC registration are:
- Certificate of Incorporation from CAC
- Certified true copies of Memorandum and Articles of Association
- Tax Identification Number slip
- Proof of capital importation
- Feasibility study
- Annual audited accounts for 3 years or an exemption issued by FIRS for a new company
- Joint Venture agreement (if any)
- Passport photographs
- NIPC Application form
The application form will be obtained and submitted along with required documents. The Commission will verify the application after which the Certificate will be issued. Please note that this Certificate is subject to renewal annually.
The cost of NIPC registration is as follows:
Application fee- N150,000
Annual renewal fee- N50,000
Replacement fee for lost certificate- N100,000
Professional fees- To be negotiated
NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP)
For companies that need to import technology into Nigeria or utilize foreign technology or collaborate with foreign partners, registration with National Office for Technology Acquisition and Promotion (NOTAP) is required as well. The requirements for NOTAP registration are:
- Certificate of Incorporation from CAC
- Certified true copies of Memorandum and Articles of Association
- Company Profile
- Tax Identification Number
- Technology Transfer Agreement
- NOTAP registration application form
- Registration fee receipt
The application will be submitted with the required documents. Upon verification, NOTAP will issue a registration certificate.
The cost of NOTAP registration is:
- Registration fee- N100,000 to N20,000,000 (depending on the value of the agreement)
- Professional fees- to be negotiated
TAX CLEARANCE CERTIFICATE AND TAX IDENTIFICATION NUMBER
In order to obtain a Tax Identification Number (TIN) and or Tax Clearance Certificate (TCC), an application will be made to the Federal Inland Revenue Service requesting for both TIN and TCC to be issued to the company. The application will be submitted together with Certificate of Incorporation from CAC, Memorandum and Articles of Association, Company Status Report, Bank Verification Number (BVN) and other details of the principal officers of the company.
FIRS will create an account for the company on the TaxPro Max portal. The TIN slip will be issued as well as the TCC for the new company as there are no taxes owed yet.
BUSINESS PERMIT AND EXPATRIATE QUOTA
The Business Permit allows the company to operate legally in Nigeria and some specific sectors. Expatriate Quota is a permit issued by the Ministry of Interior allowing companies registered in Nigeria to employ foreigners. Expatriate Quota is not automatically granted in order to protect local content.
In order to apply for Expatriate Quota, the company will submit
- An application letter showing that the required expertise cannot be obtained locally
- Certificate of Incorporation from CAC
- Memorandum and Articles of Association
- Tax Identification Number
- Tax Clearance Certificate
- Curriculum Vitae of expatriates
- Passport photographs of expatriates
- Copies of expatriates’ passports
- Proof of qualifications and experience
- Job descriptions and roles of expatriates
The application will be submitted to the Ministry of Interior with the application fee. Expatriate Quota approval may be issued after process and verification.
The cost of applying for Expatriate Quota is as follows:
- Application and processing fee- N200,000
- Inspection fee- N150,000
- Business permit automation and processing fee- N200,000
- Business permit approval- N100,000
- Expatriate Quota fees- N300,000
- Professional fees – to be negotiated
VISA AND RESIDENCE/WORK PERMIT
The Subject to Regularization (STR) Visa is to be applied for at the country of residence and will be regularized upon entry into Nigeria. The STR Visa is only valid for 90 days. When regularized, the STR Visa is converted to CERPAC (Combined Expatriate Residence Permit and Alien Card). The residence permit and work permit for foreigners is combined in the CERPAC Card so it allows the foreigner to residence and work in Nigeria.
The documents required are:
- Application letter from employer
- Valid passport of expatriate with at least 6 months validity
- STR visa page and arrival endorsement page
- All STR associated documents
- Passport photographs
- Employment and acceptance letter
- Credentials and CV of expatriate
- Expatriate Quota approval
- Certificate of Incorporation from CAC
- Memorandum and Articles of Association
- Status Report of company from CAC
- Business permit of the company
- Proof of sufficient funds
- Proof of hotel reservation or host address in Nigeria
- A return ticket
- Evidence of payment of necessary fees
The costs of acquiring CERPAC are:
- Application fee- $2,000
- Combined work permit and residency card (per person)- $2,000
- Embassy Administrative charge- varies by country
- Professional fee- to be negotiated
As a benefit to doing business in Nigeria, there are tax incentives that may be granted to Companies to encourage investment. One of such tax incentives is Pioneer status.
Pioneer status is a Tax incentive aimed at encouraging investment in specific industries such as manufacturing, mining, agriculture, renewable energy etc. To qualify for Pioneer status the company must operate in a pioneer industry or an economically disadvantaged area. Pioneer status is not granted automatically, an application must be made to Nigerian Investment Promotion Commission.
The associated costs are:
- Application fee- N500,000
- Due diligence fee- N1,000,000
- Service charge fee- N3,000,000
- Annual service charge – 1.5% of pioneer profits
- Application for Pioneer Status renewal- N250,000.
