Nigeria is a country of more than 180 million people and the largest economy in Africa, with enormous human and natural resources which has made it an investment hub in Africa. The World Bank ranked Nigeria number 169 in the ease of doing business in the world in 2016 which was not cheering news to Nigeria. In trying to improve this standard, the Federal Government of Nigeria established the Presidential Enabling Business Environment Council (PEBEC) headed by the Vice President of Nigeria Prof. Yemi Osinbajo, with the objective of removing every administrative bottleneck associated with doing business in Nigeria. Sequel to that, the President of Nigeria Muhamadu Buhari has also ordered that Nigerian Embassies all over the world should issue visas to investors willing to do business in Nigeria within 48 hours and the Nigerian Immigration can also grant visa to investors coming to do business in Nigeria on arrival in some cases. All these efforts are directed towards ensuring that persons coming to do business in Nigeria do not have impediments.
As a result of these efforts of the government, we in BAN have provide some useful guide to investors (both foreigners and Nigerians) to enable them have an informed decision on doing business in Nigeria.
The guide:
1: Factors that determine choice of entity.
2: Incentives and restrictions provided by the Law.
3: Registration of the entity.
4: Types of Investment available for Foreign Investors in Nigeria.
FACTORS THAT DETERMINE CHOICE OF ENTITY:
include taxation, availability of capital, ownership and management, risk and liabilities, difficulties in formation of entity and legal framework. In setting up a business some of the things that you must consider are the tax regime of the jurisdiction as regards the business, availability of funds and the opportunities available with the stock exchange, the nature of management /ownership and the level of liability you may be willing to take. It’s also very important to study the laws that guide and regulate the business.
INCENTIVES AND RESTRICTIONS:
There are several incentives that can encourage foreign investors in Nigeria, for instance, Section 25 of the Nigerian Investment Promotion Act (CAP N117) LFN 2004 guarantees against nationalization and expropriation of any enterprise and should that happen for national interest or public purpose, fair and adequate compensation must be promptly paid. Authorizations for repatriation in convertible currency shall also be issued where applicable. Section 44 of Company Income Tax Act (CAP 21 ) LFN 2004 also provided that any company registered in Nigeria is exempted from payment of taxes which they have paid in any commonwealth country that has signed the double taxation treaty with Nigeria.
There are a host of other laws that provided some encouraging incentives for foreigners that want to invest in Nigeria.
However there are some restrictions in some businesses as in oil exploration and production where license cannot be granted to a company that Nigerians or Nigerian Government does not have 60% of the interest. There is also the issue of getting a written authorization from the governor of a state in Nigeria before a foreigner can acquire interest in land as provided by section 46 of Land Use Act and the Acquisition of Land by Alien Law of Lagos state. Attention must be paid to the prohibition of both Nigerians and Foreigners in participation in such enterprises like production or importation of arms and ammunition, narcotic drugs, psychotropic substances, military and paramilitary wears.
REGISTRATION OF ENTITIES:
Some guide on the types of entities upon which business can be operated in Nigeria and their registration requirements have been provided. They include sole proprietorship, partnership, companies limited by share, companies limited by guarantee, unlimited companies, public/private companies, incorporated trustees.
TYPES OF INVESTMENT AVAILABLE FOR FOREIGN INVESTORS IN NIGERIA:
They include:
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- a) Foreign Direct Investment: Which is a situation where a foreigner or a foreign company engages in a business directly in Nigeria by registering a company with the Cooperate Affairs Commission (CAC) and complying with all necessary laws governing the business.
- b) Portfolio Investment: This is a system of investment where a foreigner or foreign. Company invests in existing companies in Nigeria by purchasing the shares of the companies in Nigeria Stock Exchange.
- c) Exempted Companies: This is a situation where a foreign company can engage in business directly without the company being registered in Nigeria .The categories of companies that are exempted from registration before doing business in Nigeria are listed in Section 56 of the Company and Allied Act (CAMA).
The objective of these information and guidance is to assist any prospective investor who wants to invest in Nigeria to have an informed decision on doing business in Nigeria .It is also meant to inform investors that we in BAN have professionals and experts who can assist investors in a wide range of issues that can make their doing business in Nigeria a worthwhile experience.