To register a foreign owned business in Nigeria requires compliance with the laws of alien participation in Nigeria. The word alien is sometimes used to describe a foreigner. Both Alien and Foreigner simply means a non-Nigerian. A non-Nigerian is allowed to do any business in Nigeria except those contained in the prohibited list. There are also certain businesses that foreigners are not allowed to participate in.
The focus of this article is on the procedure, steps and requirements needed to register a foreign owned business in Nigeria. In order to do justice to the topic, we will be highlighting the laws a foreign owned business needs to be conversant with, the step-by-step outline of foreign owned business registration as well as the licenses and permits required.
Should foreigners own a business in Nigeria?
Nigeria is attractive to foreign investors due to the many green areas that investors can make a huge profit from. Also, the population of the country which at the time of writing is estimated at over 200million. This appears to be a contributory factor to the growth of businesses in Nigeria. Hence, investors who are looking for opportunities beyond the borders of their home country have made Nigeria a popular investment destination.
There are lots of business areas that foreigners can invest in. They include, technology, finance, Agriculture and real estate.
However, when taking steps to do business in Nigeria, it is quite crucial to investigate the local laws and policies affecting the business. Speaking with a local attorney can go a long way in easing the process. You should also understand that all is not rosy due to a few unfavorable government policies which have seen some sectors experiencing low influx of foreign investment. An example is the government’s stand on cryptocurrency policy which saw many cryptocurrency businesses relocating their offices to countries with more crypto-friendly policies.
If you are a foreigner who is looking to do business in Nigeria, then this article would definitely provide the answers you need. Also, we have compiled a list of Frequently Asked Questions (FAQs) to help you cut through the excess and find the exact answers you are looking for.
You can take it a step further with a free initial consultation with us in order to discuss your specific needs as it relates to your business.
We would be happy to answer all your questions and help you set up your business in Nigeria.
Types of Businesses A Foreigner Can Do in Nigeria
As a foreigner who wants to invest in Nigeria, you can either invest through Foreign Portfolio Investment or Foreign Direct Investment.
Foreign portfolio Investment:
Foreign Portfolio Investment does not require you to register a foreign owned business in Nigeria. It is rather an indirect engagement in a Nigerian business with the aim of making profit. You can do this by investing in stocks and securities of a publicly listed company.
Also
Many private businesses in Nigeria have been able to raise funds from foreign investors and foreign based venture capitalists.
Tech companies, Fintech and Agriculture based businesses have received huge partnerships from investors across the world due to the attractive nature of doing business in Nigeria.
The aim of investing in a startup is to help the startup grow and make capital gains. An investor who participates in a foreign portfolio investment usually does not engage in running or managing the business.
Foreign direct investment:
Foreign direct investment (FDI) on the other hand requires that you register a foreign owned business in Nigeria. FDI may involve establishing a physical presence in Nigeria. For this you would have to register a legal entity before you begin operations.
Foreign direct investment can be in the form of starting a new business or establishing a branch or subsidiary of an existing foreign business.
A foreigner can participate in any kind of business in Nigeria either through sole ownership, in partnership with other foreigners or in partnership with a Nigerian or multiple Nigerians.
Laws and regulations you should consider before you venture into Nigeria
The Laws that regulate foreign investment in Nigeria are numerous. This is so because there are different aspects of doing business in Nigeria as a foreigner. Some typical examples of regulations a foreigner needs to consider are immigration laws, business registration laws, tax laws, policy on capital importation and exportation, foreign exchange laws and technology importation regulations.
Procedure for Registration of a foreign owned business in Nigeria
Until incorporation, a foreign company or business cannot operate in Nigeria. It must first register as a Nigerian entity with the Corporate Affairs Commission(CAC). The minimum share capital a foreign company should have is 10,000,000 (Ten Million Naira).
Basic requirements for registering a foreign owned company in Nigeria:
A foreigner who wishes to register would need to submit to us the following details in order for us to commence registration of the company.
- Proposed Name of the Company (2Names)
- Objects of the company
- The Nigerian Office Address of the Company
- Type of Company to be incorporated : (Private or Public Company)
- Particulars of the Director(s): (Name, Date of Birth, Gender, Phone Number, Email Address, Forms of Identification- International Passport and digital signature specimen).
- Particulars of Shareholder(s): (Name, Date of Birth, Gender, Phone Number, Email Address, Forms of Identification- International Passport and digital signature specimen),
- Percentage of shares to be held by each shareholder
- Particulars of the Company Secretary ): (Name, Date of Birth, Gender, Phone Number, Email Address, Forms of Identification- International Passport and digital signature specimen)
- Certificate of incorporation if a foreign entity would be a shareholder
Foreign Owned Businesses Not Required To Register
Not all foreign owned businesses are required to register in Nigeria. A category of foreign companies may apply to do business in Nigeria.
Foreign companies intending to do business in Nigeria may apply for exemption from the standard registration requirements if they are:
- Invited by any tier of government for specific individual projects;
- Executing specific individual loan projects on behalf of a donor country or international organization;
- Foreign government-owned companies engaged solely in export promotion activities; and
- Engineering consultants or technical experts engaged in specialist projects with any tier of government.
Businesses A Foreigner Cannot Participate In
Section 17 of the NIPC Act gives a non-Nigerian the eligibility to participate in the operation of any enterprise in Nigeria. However, section 18 of the Act, tags some businesses as the “negative list”
Section 31 further interprets the “negative list” as the list of those sectors of investment prohibited to both foreign and Nigerian investors.
Those are;
- Production of arms, ammunitions, etc:
- Production of and dealing in narcotic drugs and psychotropic substances
- Production of military and para-military wears and accoutrement, including those of the Police and the Customs, Immigration and Prison services; and
- Such other items as the Federal Executive Council may, from time to time, determine
Licenses and permits required by a foreign owned business
Registration with the Nipc
Under the NIPC Act, no foreign enterprise can be nationalized without first registering with the NIPC. Section 20 of the NIPC Act requires all enterprises in which foreign participation is permitted to apply to the Commission for business registration. Registration with the NIPC is mandated for every foreign business, and without it, one cannot obtain a business permit.
Requirements
To apply for NIPC Business Registration Certificate, the following documents are required:
- Duly completed NIPC Form I;
- Memorandum & Articles of Association;
- Certificate of Incorporation;
- CAC Form 1.1 (or CAC Forms CO2 and CO7 for old companies);
- Power of Attorney/ Letter of Authority (where applicable);
- Approved Remita payment receipt (Non- refundable)
- NIPC payment receipt
Business permit
Section 36(1)(a) and (b) of the Immigration Act(2015), and the Paragraph 4 of the Immigration Regulations (2017)
“ no person other than a Nigerian citizen shall, on his own account or in partnership with any other person, practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any purpose without the written consent of the Minister of Internal Affairs.”
A business permit allows foreign individuals and companies to run their business operations in Nigeria. It gives the company the power to request for expatriates. The business permit is issued by the Ministry of Interiors in Nigeria.
Expatriate quotas
By virtue of the section 36(1) Immigration act, The Expatriate Quota is a mandatory permit that allows foreigners to work in Nigeria. All companies intending to employ foreigners must have it. It can either be permanent until reviewed or temporary.
The Combined Expatriate Residence Permit along with Alien Card (CERPAC)
Any Expatriate who intends to live and work in Nigeria for more than 56 days is required to obtain a CERPAC. CERPAC is a document that allows a non-Nigerian to reside and work in Nigeria. It is valid for two years and subject to renewal
Subject to regulation(STR) Visa
The STR Entry Permit is a type of Permit that allows a foreign national to take up employment in Nigeria. Section 8 (1) of the Immigration Act
Furthermore, Section 33 of the Immigration Act provides that an application must be made to the Controller–General by the prospective Employer, in writing, confirming that he/she has a vacancy on the expatriate quota and at the same time stating the position in which the prospective employee is to be employed and confirming acceptance of immigration responsibility.
Incentives available to Foreign owned companies in Nigeria
In Nigeria, it has been noted that for over a decade, several incentive arrangement have been granted to multinational investors investing in Nigeria.
This was designed to gradually break the age-old jinx of the country’s counter-productive overdependence on its mono-product(oil).
Incentive policies have been adopted with a view to enhancing FDI in several other sectors of interest.
These incentives are either cost-based, ultimately targeted at decreasing costs for foreign investors. There are also profit based incentives which assist in reducing the proportion of profits paid as tax.
Please note that the country’s FDI drive has triggered some reform responses by the government in key sectors such as banking, power, transportation, infrastructure, as well as in Technology. The reforms are tailored towards enhancing the conduciveness of the country’s investment climate for foreign investors.
Categories of tax incentives;
- Pioneer status incentives
- Export incentive
- Rural location incentives
- Gas utilization incentives, and
- Free trade zones incentives
These incentives can also be specified as temporary or permanent and can also offer partial or full exemptions. Some of the various investment incentives provided under the relevant laws and regulations includes but not limited to tax holidays, tax credits, capital allowances. Investment allowances, tax exemptions, accelerated depreciation allowance, tax credit, reduced tax rate, loss carry forwards, zero or reduced tariffs, duty drawback, subsidies, export expansion grants, export development funds, double taxation reliefs and investment promotion and protection agreements are also included.
FREQUENTLY ASKED QUESTIONS ABOUT DOING BUSINESS IN NIGERIA
Before starting your business as a foreigner in Nigeria, you need to register with the local authorities. You first need to register your business and then apply for all permits and approvals related to foreign participation of business in Nigeria.
The length of time to register your business depends on the type of business that you are registering, the required permits and approvals. There are some business activities that require special approvals and permits. We would be able to advise you on how long it would take to register your business if you provide us with the details.
Your business does not expire once registered. However you are required to file annual returns and update the Corporate affairs commission of any changes made to the company. Failure to file annual returns can cause the company to be delisted by the commission.
The cost of registering your business depends on the type of business and the activities of the business.
You would need to consult with an expert for professional advice if you are starting your business in Nigeria. Lawyers provide expert professional advice that would help you navigate through the registration and starting process. You would need to engage a business lawyer or other business professionals versed in the provision of business startup services.
You do not need to be physically present in Nigeria during your business registration. You can instruct your lawyer via online communication and he or she would register your business. Business registration is an online process which can be done seamlessly without any physical contact with the officials.
To open and operate a bank account, you would be required to have a BVN and resident permit as a foreigner. This information is mandatory in accordance with the directives of the Central Bank of Nigeria. If however you have a local representative in Nigeria he or she may be able to operate the bank account as a signatory.
A foreigner can be appointed a director in a Nigerian company. However, the foreigner would require a resident permit if he is to operate in Nigeria.
A foreigner can own a business solely, with other foreigners or with a mixture of foreigners and Nigerians. Hence all directors can be foreigners.
