TerraLex Cross-Border Guide to Cross-Border Guide to Business Investment in Africa

• Private Company Limited By Shares (Ltd): this is the most popular and widely used legal structure. It is a separate legal entity with limited liability for its shareholders. It has a minimum of one and a maximum of 50 shareholders.
• Public Company Limited By Shares (Plc): this is similar to a Private Company Limited By Shares but is more suitable for larger businesses. It must have a minimum of two shareholders.
• Unlimited Company: a type of company where the liability of members is not limited. This means that members are personally responsible for the debts and liabilities of the company.
• Partnership: The Limited Liability Partnership (LLP) and Limited Partnership (LP) are the newest forms of corporate entities in Nigeria. An LLP is a corporate body that has a legal personality separate from its members and can sue and be sued in its own name. It has a minimum of two partners and no maximum. It must also have at least two designated partners, one of whom must be a resident of Nigeria. An LP is a corporate body that does not have a distinct legal personality from its partners. It has a minimum of two and a maximum of 20 persons, of whom at least one is a limited partner, and the others are general partners. Therefore, while the liability of the general partners is unlimited, that of the other partners is limited to the amount they contributed or agreed to contribute.
• Branch Office: A Nigerian extension of a foreign parent company. It does not have a separate legal entity, and the parent company is liable for its operations and debts.
• Representative Office: established solely for non-profit activities, such as market research, promotion or coordinating activities on behalf of the parent company. It cannot engage in commercial activities or directly earn revenue.

• Nigerian Investment and Promotion Commission Act (Chapter N117), Laws of the Federation of Nigeria 2007
• Companies and Allied Matters Act (Chapter C20), Laws of the Federation of Nigeria, 2020
• Central Bank of Nigeria Act, 2007
• Federal Inland Revenue Service (Establishment) Act, 2007
• Immigration Act, 2015 (Act No. 8 of 2015)
• Investments and Securities Act, 2007
• Industrial Inspectorate Act (No. 53 of 1970) (Chapter 180)
• Foreign Exchange (Monitoring and Miscellaneous Provisions) Act (Chapter F34), Laws of the Federation of Nigeria 2007
• Business Facilitation (Miscellaneous Provision) Act, 2023

Registration of companies and partnerships is done through the Corporate Affairs Commission’s (CAC) online portal. The process involves:

• Reservation of the Name
• Filing out necessary forms
• Payment of Filing Fees at CAC and Stamp Duty at the Federal Inland Revenue Service (FIRS) or an approved Stamp Duty Vendor
• Submission of Documents to CAC
• CAC Review and Approval

Overall, the registration process for a Nigerian company typically takes around three to four weeks.

In Nigeria, the Companies and Allied Matters Act (CAMA) provides the legal requirement that a foreign-owned company – either private or public – must have a minimum of N10 million authorised share capital to be incorporated. Furthermore, The Handbook on Expatriate Quota Administration, 2022, states that when commencing business in the Federal Republic of Nigeria, a Business Permit is granted only to wholly foreign-owned or joint venture companies with foreign participation with a minimum issued or paid-up capital of N100 million. Finally, Companies Limited by Guarantee/Incorporated Trustee (non-profit) have no share minimum requirement.

In Nigeria, exchange control guidelines and regulations are primarily managed by the Central Bank of Nigeria (CBN) and are aimed at controlling foreign exchange transactions to maintain stability in the country's exchange rate and preserve its foreign reserves. These exchange control laws include:

1. Foreign Exchange Market: the CBN operates the foreign exchange market in Nigeria and determines the official exchange rate. Transactions involving foreign exchange must go through authorised banks and foreign exchange dealers.
2. Capital Importation: there are regulations governing the inflow of foreign capital into Nigeria. Investors are required to register with the Nigerian Investment Promotion Commission (NIPC) and obtain a certificate of capital importation (CCI) for foreign investments. This certificate is essential for repatriating profits and capital.
3. Foreign Exchange Transactions Reporting: banks and financial institutions in Nigeria are required to report foreign exchange transactions to the CBN regularly. This includes transactions related to imports, exports, investments, and loans.
4. Restrictions on Certain Transactions: the CBN may impose restrictions on specific transactions or goods to conserve foreign exchange reserves. These restrictions can include limits on the amount of foreign currency that can be purchased, bans on specific imports and more.
5. Domiciliary Accounts: individuals and businesses can maintain domiciliary accounts in foreign currencies with authorised banks. These accounts can be used for specific transactions, such as receiving foreign remittances or making international payments.
6. Repatriation of Funds: investors are generally allowed to repatriate profits, dividends, and capital out of Nigeria, subject to the CBN's regulations and documentation requirements.
7. Anti-Money Laundering (AML) and Know Your Customer (KYC) Requirements: Nigerian financial institutions are required to adhere to AML and KYC regulations when dealing with foreign exchange transactions.

Nigeria does not have a specific legal requirement that mandates a certain number of locals (Nigerian nationals) as directors for Nigerian-incorporated companies. It is, however, mandatory for a company with foreign participation to have a minimum of two shareholders and two directors, with at least one of the directors residing in Nigeria.

There is no legislation that specifically requires legal entities to meet specific quotas based on demographics such as gender, ethnicity, race, or disability.

• Annual Financial Statements
• Annual Returns
• Tax Returns
• Value Added Tax (VAT) Returns
• Employee-related Reports
• Industry-specific Reports
• Environmental Reports
• Trade and Customs Declarations

• Labour Act, (Chapter L1), Laws of the Federation of Nigeria, 2004
• Employee Compensation Act, 2010
• Trade Union (Amendment) Act, 2005, Law of the Federation of Nigeria
• Employee Pensions Act, 2020
• Immigration Act, 2015 (Act No. 8 of 2015)
• National Health Insurance Authority Act, 2022
• National Industrial Court Act, 2006
• Common Law

1. Visa: Nigeria offers a Visa on Arrival (VoA) programme for foreign investors. The VoA programme is designed to facilitate and attract foreign investment by providing a streamlined visa process for eligible investors. It is available for all business travellers and African Union countries. Applications are done online through the Nigerian Immigration Service (NIS) website.
2. Work Permit: all foreigners seeking to work in Nigeria on a short-term or long-term basis are required to obtain a work permit; this can be a Temporary Work Permit (TWP) or a Combined Expatriate Residence Permit and Alien Card (CERPAC). They can be applied for through the Nigeria Immigration Service’s online portal, or new applications can be submitted to the Office of the Comptroller General at the Nigeria Immigration Service Headquarters in Abuja.

• TWP – designed for expatriates or foreigners intending to engage in short-term work activities in Nigeria. This work permit is applicable to individuals invited by corporate organisations to provide specialised services, such as equipment installation, maintenance, repair, or training for Nigerian staff. The TWP is typically granted for a duration of two months and can be extended in-country, in phases, for up to six months.
• CERPAC – A CERPAC Green Card will be issued to show that the expatriate can work in Nigeria. It is also a residence permit, which a foreign national working in Nigeria is required to obtain. The CERPAC is valid for two years.

Under the Land Use Act of 1978 (Chapter L5, Laws of the Federation of Nigeria, 2004), the ownership of all lands within a state in Nigeria is vested in the state's Governor. Individuals are granted a right of occupancy, the duration of which is set by the Governor. For foreigners, the duration of this right is typically capped at 25 years as per the Acquisition of Lands by Alien Laws in most states. Abuja, however, follows the Acquisition of Lands by Aliens Act. Nonetheless, any such rights acquired by a foreigner are subject to the Governor's approval.

Nigeria is a party to several bilateral and multilateral treaties aimed at fostering foreign business investment. Some of these treaties include: 1. Trade and Investment Framework Agreement (TIFA) – Nigeria and the United States have signed a trade and investment agreement. This agreement provides for dialogue on improving and strengthening trade and investment opportunities between the two countries. 2. Economic Community Of West African States (ECOWAS) Trade Liberalization Scheme (ETLS) – the ETLS is a regional trade agreement aimed at promoting intra-regional trade and investment among ECOWAS member countries. It allows for the free movement of goods produced within the region and provides preferential treatment for investors from member states. 3. African Continental Free Trade Area (AfCFTA) – Nigeria is a signatory to the AfCFTA, which is a continent-wide trade agreement aimed at creating a single market for goods and services in Africa. The AfCFTA seeks to boost trade and investment among African nations, potentially attracting foreign investors to the region. 4. Double Taxation Treaties – designed to prevent double taxation of the income of companies operating in countries that Nigeria has entered into double taxation treaties with. These include various countries such as Belgium, Canada, China, France, the Netherlands, Singapore, South Africa, Spain, Sweden, and the United Kingdom. 5. World Trade Organization (WTO) Agreements – Nigeria is a member of the WTO and is party to various agreements that promote international trade and investment. Nigeria ratified the WTO Trade Facilitation Agreement on 20 January 2017 and the amended WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS) Agreement on 16 January 2017. 6. International Investment Agreements (IIAs) – Nigeria may have entered specific IIAs with individual countries to encourage foreign investment and provide legal protections to investors, such as China, Finland, France, Germany, Italy, Korea Republic, Netherlands, Romania, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan Province of China, and the United Kingdom. 7. African Growth and Opportunity Act (AGOA) – Nigeria is a party to the AGOA, which is a US trade act that grants products from 40 sub-Saharan African countries (including Nigeria) duty-free access to the US market.

Some of the key incentives available to foreign investors in Nigeria include: - VoA

• Pioneer Status
• Free Trade Zones
• Investment Guarantees and Protection
• Tax Relief and Exemptions
• Sector-specific Incentives
• Free repatriation of capital and profit
• Duty draw-back and Suspension Scheme

The key tax implications associated with opening and running legal entities in Nigeria vary depending on the entity type. Companies are subject to Companies Income Tax at a rate of 30%, while partnerships and sole proprietorships are subject to Personal Income Tax up to a maximum rate of 24%. VAT is also applicable to certain goods and services at a rate of 7.5%.

Companies are also subject to Tertiary Education Tax at a rate of 3%, Petroleum Profit Tax at a maximum rate of 85% and Capital Gains Tax imposed by FIRS at a rate of 10%. Additionally, there may be other tax obligations, such as PAYE (Pay as You Earn), paid by people in employment, directly deducted by their employers.

The key Competition Law in Nigeria is the Federal Competition and Consumer Protection Act (FCCPA), which prohibits anti-competitive practices such as abuse of dominant position and anti-competitive agreements. Foreign investors are subject to the same regulatory framework as domestic investors.

The FCCPA is quite precise and concise as to various provisions, particularly on Mergers and Acquisitions as foreign investors generally prefer merger and acquisition agreements when investing. This is where the FCCPA becomes effective, as Sections 131–134 lay down the provisions engaging in these kinds of agreements as well as the prerequisites. This is done in a bid to effectively regulate competition in the country.

Yes, Nigeria recognises alternative dispute resolution mechanisms. Local and international arbitral awards are enforceable under the Arbitration and Mediation Act, 2023. This provides a structured framework for resolving disputes outside the courts, thereby enhancing investor confidence in the legal system.

The country is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means that foreign arbitral awards can be recognised and enforced in Nigerian courts.

In addition, under the Lagos State Arbitration Law, a party to an arbitral proceeding may apply to the High Court of Lagos State, upon giving notice to the other party and the challenged arbitrator, to remove an arbitrator on the grounds upon which the challenge is brought.

Nigeria has laws aimed at protecting investors, such as: - The Investment and Securities Act, 2007

• The Securities and Exchange Commission SEC) Rules and Regulations, 2013
• Nigerian Investment and Promotion Commission Act (Chapter N117), Laws of the Federation of Nigeria, 2007
• CAMA (Chapter C20), Laws of the Federation of Nigeria, 2020

The current state of the investment climate in Nigeria is characterised by ongoing economic reforms and efforts to improve the ease of doing business. The government is actively promoting investment, particularly in sectors such as agriculture, manufacturing, infrastructure, gas, renewable energy, mining, and information technology.

The government has implemented various reforms to attract foreign investment, such as ease-of-doing business initiatives, fiscal incentives, and infrastructure development.

Nigeria offers various investment opportunities for foreign investors. The most viable industries for investing include: 1. Agriculture and Agribusiness – Nigeria has vast land and a favourable climate for agriculture. Opportunities exist in crop cultivation, livestock farming, fisheries and agro-processing. 2. Manufacturing – the manufacturing sector presents opportunities in areas such as textiles, cement production, petrochemicals, pharmaceuticals, Fast Moving Consumer Goods (FMCG) and automobile assembly. 3. Energy and Power – Nigeria offers significant opportunities in the oil and gas industry, renewable energy projects and power generation and distribution. 4. Infrastructure Development – there is a need for investment in transportation, housing, telecommunications, and water supply infrastructure. 5. Information and Communication Technology (ICT) – the ICT sector is rapidly growing in Nigeria, creating opportunities for investors in software development, e-commerce, telecom services and IT infrastructure. 6. Real Estate and Construction – Nigeria's urban population is on the rise, creating demand for housing, commercial properties, and infrastructure development. These include malls, residential estates, office complexes, etc. 7. Mining – Nigeria is rich in solid minerals such as tin, limestone, lithium, copper, nickel, coal, lead, and gold. This guarantees that investments in mining and mineral processing are profitable. 8. Entertainment – there has been significant growth in the entertainment industry in areas such as film production, music, gaming and esports, fashion and design, art, media and broadcasting, technology, and startups; as well as publishing and literature.

The state of infrastructure in Nigeria is a key factor affecting foreign investment. While the country has seen improvements in recent years, there are still challenges in areas such as power supply, transportation, and logistics. However, the Nigerian government is actively investing in infrastructure development through public-private partnerships and seeking foreign investment to address these deficiencies. This includes various initiatives such as road construction, rail projects and power sector reforms, as improved infrastructure will enhance the ease of doing business and attract more foreign investment.

Risks associated with investing in Nigeria include political and security concerns, regulatory challenges, corruption, and infrastructural limitations. To mitigate these risks, investors should conduct due diligence, seek local partners with a good track record, understand the local business culture, secure reliable legal and financial advice and adopt Alternative Dispute Resolution (ADR) mechanisms for dispute resolution.