Nigeria is a capitalist economy where free enterprise is the norm. This allows for almost anyone and everyone to engage in business within the borders of Nigeria. However, there are some important sectors like Electricity and Water that are partially owned and controlled by the government.
Most of Nigeria’s economic activities occur in the major metropolitan areas such Abuja, Lagos, Kano, Onitsha, and Port Harcourt. Oil and Gas is the major export and revenue earner for the country.
Relevant Laws
Certain laws affecting foreign participation in Nigeria include:
- Companies and Allied Matters Act (CAMA) 2020
- Nigerian Investment Promotion Commission Act (NIPC), 2004
- Foreign Exchange (Monitoring and Miscellaneous Provisions) Act – FEMPA
- Investments and Securities Act, 2007
- Immigration Act, 2015 and Immigration Regulations 2017
- National Office for Technology Acquisition and Promotion Act, 2004 (NOTAP)
- Industrial Inspectorate Act, 2004
- Industrial Development (Income Tax Relief) Act, and 2014 Pioneer Status Incentive Regulations 2014.
- Companies Income Tax Act Cap. C21 L.F.N. 2004
- Personal Income Tax Act Cap. P8 L.F.N. 2004
- Nigerian Stock Exchange Act
- National Agency for Food and Drug Administration and Control (NAFDAC) Act
- Federal Competition and Consumer Protection Act (FCCPA) 2019
- Central Bank of Nigeria Act 2007
- Companies Regulations 2012 ISA 2007
Regulatory Institutions
Just as there are regulatory laws guiding foreign participation in the Nigerian Business Sector, at the same time, there are
- Nigerian Immigration Service (NIS)
- Corporate Affairs Commission (CAC)
- Nigerian Investment Promotion Commission (NIPC)
- National Office Agency for Technology Acquisition and Promotion (NOTAP)
- Industrial Inspectorate Division, Federal Ministry of Industry
- Central Bank of Nigeria
- Securities and Exchange Commission
- National Agency for Food and Drug Administration and Control
It is mostly to the advantage to the country.
• It boosts the economy of the company.
Can foreigners participate in business in Nigeria?
The simple and direct answer to this is YES, they can. However, this is subject to certain restrictions. For one
- A foreigner is free to do Business alone or in partnership with any other person - Section 20(4) of CAMA, and Section 17 of Nigerian Investment Promotion Commission Act.
- An alien or foreign company may join in forming a company subject to compliance with the provisions of the laws regulating the rights and capacity of aliens to engage in business in Nigeria - Section 20(4) of CAMA
- Every foreign company, incorporated outside Nigeria, intending to carry on business in Nigeria must take all necessary steps to obtain incorporation as a separate entity in Nigeria and until so incorporated, the foreign company shall not have a place of business in Nigeria
Establishing a Business with Foreign Shareholding in Nigeria
- Registration and Expatriate Quota;
- Pioneer Status and other incentives (where applicable)
The application to the Ministry of the Interior should be accompanied with the following documents: –
- Original and duplicate Copy of the duly completed NIPC Form 1
- Original Copy of the treasury receipt for the purchase of NIPC Form;
- A Copy of the Certificate of Incorporation of the applicant company;
- A Copy of the Tax Clearance Certificate of the applicant company;
- Produce CAC’s Forms duly certified;
- A Copy of the Memorandum and Articles of Association;
A Copy of treasury receipt as evidence of payment of stamp duties on the authorised share capital of the company as at date of application;
A Copy of the Joint-Venture Agreement -UNLESS 100% foreign ownership is envisaged;
Particulars of names, addresses, nationalities and occupations of the proposed directors of the company;
Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions. It is pertinent to note that expatriate quota on a “Permanent Until Reviewed” (PUR) status is only accorded to a Managing Director, where the non-resident shareholders own a majority of the company’s shares, and the authorised capital of the company is N10 million and above;
Copies of information brochure on foreign shareholder (if available) as testimony of international expertise and credibility of the foreign partner in the proposed line of business.
Capital Importation
Once the NIPC approvals are obtained, the non-resident shareholder must take effective steps to import its foreign equity holding in the company. To ensure prompt importation of the foreign equity components, the NIPC may register company but defer approvals for Expatriate Quota and Pioneer Status and other applicable investment incentives, until evidence of capital importation is produced. After obtaining Certificate of Capital Importation from the bank, the NIPC is to be notified of this fact with the supporting documentation, in order for it to resume processing of pending approvals that might have been deferred on such ground. As soon as expatriate quota position are granted and the respective individuals to fill the quota positions are recruited, the company must embark on steps to obtain work permit and residency status for the expatriate employees and their accompanying spouses and children (if any).
Current Legal Regulation on the Appointment of Foreign Directors
The promoters of business ventures in Nigeria are free to appoint directors of their choice, either foreign or Nigerian, and the directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign directors (with an indication of resident and non-resident directors). The Registration Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the directors representing each proprietor or co-proprietor.
Tax advantages to a “Pioneer Company”
By virtue of the Industrial Development (Income Tax Relief) Act, Cap. 17 Laws of the Federation of Nigeria, 2004, certain industries are declared to be “pioneer industries.” Thus, any company whose products fall within the categorised industries could be conferred with Pioneer Status.
This designation is not necessarily a reflection that a company was pioneer per se in the industry, as several companies within the same pioneer industry classification could qualify for Pioneer Status. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief available on conferment of Pioneer Status would be restricted to income derived from pioneer products only. Under the current industrial policy, conferment of Pioneer Status accords a company relief from income tax liability for a period of up to 5 years (tax-holiday status).
The Criteria for Granting Pioneer Status: –
(i) the amount of qualifying capital investment in a company (N10 million and above) must be verifiable by physical inspection and supported by a report of the Industrial Inspectorate Division of the Federal Ministry of Industry before a Pioneer Certificate is granted;
(ii) the socio-economic advantages of a company’s activities to the Nigerian economy as set out in its Feasibility Study is also an important consideration.
Without prejudice to these conditions, NIPC is empowered to confer Pioneer Status and other investment incentives, in any other deserving circumstance as the Council of NIPC may approve in accordance with the provision of the Nigerian Investment Promotion Commission Act and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act in 1995.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
for any purposes other than the receipt of notices and other documents as matters preliminary to incorporation. See S. 78(1) CAMA.
• Thus, the foreign company must register with the CAC. • Same as above applies to foreign LLPs.
A foreign limited liability partnership incorporated outside Nigeria can as well do business as an LLP in Nigeria after undergoing registration as such. Section 788 CAMA
• Also, the Minister can exempt a foreign company from the requirement of incorporation. Section 80 CAMA . As such, a company need not be incorporated where it is classified as an exempted company, but it must apply to be exempted as it is not automatic.
Consequence of Non-Compliance
Below are the consequences of non-compliance
- If a foreign company does not register in Nigeria, any transaction entered into is void. Section 78(2) CAMA
- The court will not enforce the contract at the instance of any party to the transaction. See however SOLANKE V. ABED, 1962 1 ANLR 230.
- Where a company falls under the category of exemption under Section 80 CAMA but fails to comply with the requirements, and get an exemption order; a. it commits an offence, liable to prosecution, b. and the company and every officer are liable to a penalty as may be specified by Corporate Affairs Commission - S 79 CAMA
- However, a foreign company, not registered, can sue or be sued in Nigeria in its name or that of its agent - S 84 CAMA
Negative List
The negative list contains a list of businesses generally prohibited to everybody. These include:- Production of arms, ammunition etc
- Production of and dealing in narcotic drugs and psychotropic substances.
- Production of military and paramilitary wears including those of the police, customs, immigration and prison.
- Such other items as the Federal Executive Council may determine S.18 and 32 NIPC Act
Exempted Foreign Companies
Where a company doesn’t fall under the exempted companies, he must register under the Companies and Allied Matters Act (CAMA). Also, if an exempted company wants to do business outside the exemption order, he must take steps to register under CAMAWhere exemption is granted for a project in a state, he cannot do same in another state except he registers under CAMA or APPLY FOR ANOTHER EXEMPTION ORDER FOR SUCH • KNOW THE EXEMPTED COMPANIES IN DETAIL • KNOW THE STATUS OF AN EXEMPTED COMPANY (UNREGISTERED) • WRITE AS A COMPANY, EXCEPT TOLD OTHERWISE; • SIGN OUT BY THE SECRETARY
• DON’T ADD OR REMOVE FROM THE FACTS. • KNOW THE MINISTER THE APPLICATION IS TO BE MADE
Categories of EXEMPTED FOREIGN COMPANIES UNDER CAMA -----
YOU MUST KNOW THE EXEMPTED COMPANIES IN DETAILS• Note that Prohibited Companies are different from Exempted Companies. • Companies granted exemption before the commencement of CAMA in accordance with preceding Companies Act will continue to enjoy such exemption. S. 78(3)(a) CAMA ----- BAR PART II FOCUS (POSSIBILITIES OF BUSINESS WITHOUT REG)
• SECTION 80(1) CAMA provides that “A foreign company may apply to the Minister for exemption from the provisions of Section 78 of this Act if that foreign company belongs to one of the following categories, that is— 1. Invited Companies: Foreign companies other than those specified in paragraph (d), invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project; S. 80(1)(a) CAMA Note: • The project must be specified. • It cannot go outside the specified project, except it incorporates a Nigerian company
2. Loan Projects: Foreign companies which are in Nigeria for the execution of specific individual loan projects on behalf of a donor country or international organization; S. 80(1)(b) CAMA ----- BAR PART II FOCUS Note: • The project must be specified. • It could be that a company has obtained loan from IMF to construct a power plant in Enugu State.
3. FG-owned companies: Foreign government-owned companies engaged solely in export promotion activities; and S. 80(1)(c) CAMA Note: • It must solely be for export activities
4. Engineering consultants and Technical experts: Engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government. S. 80(1)(d) CAMA.
5. Treaty: Companies exempted under any treaty to which Nigeria is a Party. S. 78(3)(b) CAMA
6. Act of the NA: Companies exempted under any Act of the National Assembly. S. 78(3)(c) CAMA as amended by S. 2 of BFA. NOTE: • The company cannot automatically enjoy the exemption except it applies for the exemption • It is the company that will apply for the exemption
PROCEDURE FOR APPLICATION FOR EXEMPTION • An application for exemption from registration as a Nigerian company is addressed to the Minister of Trade, Industry and Investment. TII • There are eight (8) requirements as stated in the CAMA • S. 80(2) CAMA provides that “An application for exemption under this section shall be in writing addressed to the Minister (of Trade, Industry, and Investments) and shall set out— ----- BAR PART II FOCUS 1. the name and place of business of the foreign company outside Nigeria; 2. the name and place of business or the proposed name and place of business of the foreign company in Nigeria; 3. the name and address of each director, partner or other principal officer of the foreign company; 4. a certified copy of the charter, statutes, or memorandum and articles of association of the company, or other instrument constituting or defining the constitution of the company and if the instrument is not written in the English Language, a certified translation thereof; 5. the names and addresses of one or more person’s resident in Nigeria authorized to accept, on behalf of the foreign company, service of processes and any notice required to be served on the company; 6. the business or proposed business in Nigeria of the foreign company and the duration of such business; 7. particulars of any project previously carried out by the company as an exempted foreign company; and 8. such other particulars as may be required by the Minister or Secretary to the Government of the Federation. See S. 80(2) of CAMA. NOTE: • The above are merely documents to the application to be attached to the application. (Enclosed). ----- BAR PART II FOCUS • If the Minister is satisfied, he may grant the exemption. It is at his discretion. Section 80(3) CAMA
Post Exemption Requirements
There are three (3) post exemption requirements
- Serve Notice to CAC: Once the exemption is granted, the company, upon payment of prescribed fees, must serve a notice of its exemption (in FORM CAC 23) to the CAC within 30 days. If it fails to do so, it will be liable to penalty for every day of the default. Section 80(7) & (8) CAMA.
- Publication by Minister: The Minister is required to publish the exemption in any Gazette of the FG, with the name of the company, and details of the exemption. Section 80(6) CAMA.
- Annual Report by Company: The exempted company shall deliver an Annual Report every calendar year in the form prescribed (FORM CAC 24) to the CAC. Section 81 CAMA.
- CAC Form 21 is Annual Returns Form (registered company) while CAC Form 24 is Annual Report of Exempted Company (unregistered company).
- Exempted companies do not use Annual Returns Form, but Annual Report Form.
- Annual Report shall disclose the following
- Place/country of registration
- Date of registration and certificate number
- Principal place of business in place/country of registration
- Share capital of the company (if any)
- Principal place of business in Nigeria
- Date of exemption
- Description of business in Nigeria
- Expected date of completion of business in Nigeria
- Name and address of each director, partner or other principal officers of the company since date of exemption and any changes therein of reports with CAC.
REVOCATION OF EXEMPTION • There are three (3) grounds of revocation • A grant of exemption may also be revoked. • The Minister may revoke the exemption if he is of the opinion that: a. the company has contravened CAMA or b. has not fulfilled any condition of the exemption order or c. for any good or sufficient reason. Section 80(5) CAMA
NOTE: • In exams if they say write as a solicitor to the company, use your own letterhead, but if it says just write a letter, then use company’s letterhead. • In concluding, use yours faithfully. • If they ask what materials and agencies will you have reference to, it is the laws and the regulatory bodies above.
PROCEDURE FOR APPLYING EXEMPTION 1. The company applies through an application letter to the Minister for exemption, as stated in Section 80(2) CAMA 2. The Company shall attach the necessary documents stated in Section 80(2) CAMA which are: (Always state the documents to be attached in exams): 3. The Minister considers the application, and grants the exemption. 4. Once the exemption is granted, the company, upon payment of prescribed fees, serve a notice of its exemption in Form CAC 23 to the CAC with 30 days. If it fails to do so, it will be liable to penalty for every day of the default. Section 80(7) & (8) CAMA. 5. The Minister is required to publish the exemption in any Gazette of the FG, with the name of the company, and details of the exemption. Section 80(6) CAMA. 6. Upon exemption, an exempted company have the status of an unregistered company. Section 82 CAMA
Status of an Exempted Company
• A foreign company exempted pursuant to this Act shall have the status of an unregistered company and accordingly, the provisions of this Act applicable to an unregistered company shall apply in relation to such an exempted company as they apply in relation to an unregistered company under this Act. (S. 82) • This provision does not affect the liability of a foreign company to be sued by Nigerians in Nigeria or their right to sue Nigerians in Nigeria: (S.84) CAMA. Ritz Pumenfabrik GMBH & Co Kg v. Techno Continental Engineers Nig. Ltd (1999)
FAILURE TO ADHERE STRICTLY TO THE PROVISIONS OF REGISTRATION FOR FOREIGN COMPANIES IN NIGERIA • There are four consequences of failure to comply with Section 80 CAMA • If any foreign company fails to comply with the requirements of Section 80 of this Act (as to getting an order of exemption before carrying on business) in so far as they may apply to the company, a. the company commits an offence and is, in addition to being liable to prosecution, b. the company is also, liable to such penalty as the Commission shall specify by regulation. c. Every officer or agent of the company who authorises or permits the default or failure to comply is, whether or not the company is also convicted of any offence, liable on conviction to such penalty as the Commission shall specify by regulation.
d. Where the offence is a continuing one, the company and every officer or agent of the company are liable to a further penalty as the Commission shall specify by regulation for every day during which the default continues. (S.79)
PENALTIES FOR FALSE INFORMATION • A person who, for the purpose of obtaining an exemption or of complying with any of the provisions of section 80 of this Act, makes any statement or presents any instrument which is false commits an offence unless he proves that he has taken all reasonable steps to ascertain the truth of the statement made or contained in the instrument so presented. • Any person who contravenes subsection (1) commits an offence under this section and is liable on conviction to a fine or imprisonment as the court deems fit. (S.83) • Punishment for failure to serve notice of exemption with CAC is penalty
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PARTICIPATION IN ENTERPRISES IMPORTANT AGENCIES THAT REGULATE PARTICIPATION OF ALIES IN NIGERIA BUSINESS • There are six (6) primary agencies, and five (5) other agencies. • All are Nigerian except NOTAP & NIC 1. Corporate Affairs Commission (CAC) 2. Nigerian Investment Promotion Commission (NIPC) 3. Securities And Exchange Commission (SEC) 4. Nigerian Immigration Services 5. National Office for Technology Acquisition and Promotion (NOTAP) 6. Industrial Inspectorate Office of the Ministry of Trade, Industry, and Investments OTHER AGENCIES ARE: 1. Federal High Court (FHC) 2. Central Bank of Nigeria (CBN) – regulates application of FOREX Act. 3. Investment and Securities Tribunal (IST) 4. National Insurance Commission (NIC) 5. Nigerian Deposit Insurance Corporation (NDIC)
GENERAL PROCEDURE FOR ESTABLISHING A BUSINESS IN NIGERIA ----- BAR PART II FOCUS 1. Obtain from the Nigerian embassy, a cable visa subject to regularisation for owners and officers of the company. (Business visa) – from Nigerian Immigration 2. Securing an address in Nigeria for service of documents and other pre-formation of the company in lieu of registration. 3. Prepare and execute Joint Venture agreement and other pre-incorporation contracts if in partnership with Nigerians. – where applicable. (i.e., where opening a company with a Nigerian).
4. Other Pre-Incorporation Agreements. 5. Incorporate the company with Corporate Affairs Commission (CAC) and obtain original certificate of Incorporation and other documents or obtain letter of exemption. 6. Apply to register the company with Nigerian Investment Promotion Commission (NIPC)--S. 19 NIPC ACT. Compulsory by virtue of section 20 NIPC Act. Registration procedure - Section 20(2) NIPC Act 7. Apply to the Securities and Exchange Commission (SEC) for registration of interest of foreigner in the shares of the company. Section 8 of the SEC Act 8. Importation of capital through an Authorized Dealer (i.e., Approved Bank and obtain certificate of capital importation). Section 15 of the FOREX 9. Obtain relevant permits from the relevant Regulatory Agencies. E.g., where applicable Registration for Transfer of Technology. 10. Apply to obtain relevant incentives and reliefs available for foreign investors in Nigeria (Note that it must be applied for if one want to enjoy it). E.g., Application to Director of the Industrial Inspectorate Division of the Federal Ministry of Industry for a Certificate, which can be used as a tax waiver at the Board of Customs and Excise, the Federal Board of Inland Revenue.
OVERVIEW • A FOREIGNER IS A PERSON WHO IS NOT A NIGERIAN CITIZEN • IT ALSO MEANS ANY COMPANY WHICH IS NOT REGISTERED UNDER THE CAMA • THUS, FOREIGNER MAY BE AN INDIVIDUAL OR A COMPANY • NOTE: A FOREIGNER IS ALLOWED TO OWN A NIGERIAN BUSINESS 100% • KNOW THE LAWS RELATING TO FOREIGN PARTICIPATION • QUESTION: A FOREIGN COMPANY, MICROSOFT WANTS TO HAVE A MICROSOFT NIG LTD IN NIGERIA WHICH WILL BE A SUBSIDAIRY OF MICROSFT. WHAT PROCEDURE WILL HE FOLLOW? ANSWER: FDI • QUESTION: ELON MUSK ONLY WANTS TO BUSY SHARES. ANSWER: FPI • IT MAY GO FURTHER THAT HE WANTS TO BRING TWO FOREIGNERS TO WORK IN SUCH COMPANY. • WHEN ASKED THAT WHAT PROCEDURE WILL HE FOLLOW IN ESTABLISHING THE COMPANY, YOU LIST THE LAWS, AND ARRGANGE THE PROCEDURE UNDER EACH LAW
1. COMPANIES AND ALLIED MATTERS ACT (CAMA) • THIS IS THE FIRST STEP. • The company must register with the CAC. See also Section 19(1) CAMA – General • EXCEPT where it is classified as an exempted company. Section 78(1) & 80 CAMA – Foreign Companies • IT MUST GET A REGISTERED ADDRESS IN NIGERIA FOR INCORPORATION
2. NIPC Act
• This law enacted the NIPC. • A non-Nigerian may now freely invest and participate in the operation of any enterprise in Nigeria except enterprises in the “Negative List”. S.17 NIPC Act • Foreign companies cannot do business or invest in any business in the Negative List (production of arms and ammunition, service uniforms or paramilitary wears, production and dealing in drugs, and any other business as may be exempted by the FG.) • FDI: The alien may operate alone or in joint venture with Nigerians by means of a company, which must first of all a. be formed and registered by the Corporate Affairs Commission. S.19 CAMA and b. thereafter registered with the Nigerian Investment Promotion Commission. Sections 20 and 27 of NIPC Act. • According to the NIPC Act, he can own 100% shares of a company. Unlike the former position where he can only hold 40% • The Company must register with the NIPC. Section 20 of NIPC Act • FPI: An alien not wishing to establish a business may buy shares in a Nigerian company in any convertible currency. Section 21 of NIPC Act. a. Investment will be effected with foreign currency imported freely into Nigeria through an authorised dealer and converted into the naira at the official foreign exchange market. Sections 12, 13 and 15 FEMPA. b. The authorised dealer will issue a certificate of capital importation. c. Imported capital is guaranteed unconditional transferability and repatriation of funds with regard to both earnings and capital. Section 15(4) of FEMMPA and S.24 of NIPC Act. • He can repatriate 100% of its profit but must be done through an authorized dealer • He can invest in any business except in the Negative List. • The company must obtain relevant permit and approval through the NIPC • The Nigerian Investment Promotion Commission will act as liaison between the foreign enterprise and relevant government departments or agencies, especially with regard to issuance of permits. Section 28 of NIPC Act • It is to this effect that the NIPC established the One-Stop Investment Centre (OSIC): to help the foreigners get all the necessary permits and licenses through the NIPC, by reaching out to all the relevant agencies through the OSIC. • One Stop Investment Centre (OSIC) is an agency that helps foreigners to interface with agencies like Immigration CAC, SEC, • Thus, foreigner can choose to apply directly to those Agencies or use OSIC. • There are 27 Agencies in OSIC • OSIC helps reduces red-tape, and abuse of discretion.
PROCEDURES FOR APPLICATION TO NIPC ----- BAR PART II FOCUS - This is the procedure for Application for Business Permit; Expatriate Quota; Pioneer Status; OR Registration of Technical Service Agreement - Take Note of the Documents to Attach. 1. Application to Nigerian Investment Promotion Commission is on NIPC Form 1 for
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a. Business Permit b. Expatriate Quota; c. Pioneer Status; and d. Technical Assistance Agreement • In case of other fiscal incentives, a separate Form is to be completed. 2. A non-refundable deposit of N10,25,15,000 naira is payable for each application in bank draft to the nearest Nigerian Investment Promotion Commission office. 3. The application should be forwarded to the NIPC Headquarters, Abuja or State Ministries of Trade and Industries for onward transmission to NIPC, Abuja, along with two (2) copies of the receipt for purchase of the Form. 4. After the submission of the NIPC Form 1, the Commission will register the applicant company WITHIN 14 working days of the receipt of the application. 5. The company must have met the required capital expenditure of not less than N5, 000,000. Section 3(1) of the Industrial Inspectorate Act. Amended by BFA 6. For Pioneer Status, it must have a share capital of not less than 10 million naira.
Items to be Attached to the Application for NIPC
1. Completed NIPC Form 1 (1 copy) accompanied by payment of N15,000 non-refundable deposit.
2. Partnership (Joint-Venture) agreement where applicable (1 copy)
3. Photocopy of payment receipt for application form (2 copies)
4. The Certificate of Incorporation of the applicant company. 5. Memorandum and articles of association of the applicant company. 6. Certificate of Capital Importation 7. Form CAC 1.1 8. Tax clearance certificate of the applicant company. 9. Receipt for payment of stamp duties on the authorised share capital of the company as at the date of application. 10. Feasibility report and project implementation programme of the company for its proposed business. 11. Title deeds of land evidencing firm commitment to acquire requisite business premises for the company’s operations. 12. Training programme for Nigerian staff or personnel policy of the company, incorporating management succession schedule for qualified Nigerians. 13. Names, addresses, nationalities and occupations of the proposed directors of the company, including non-resident directors which should be marked “NRD”. 14. Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions. 15. Information brochure on shareholders, if any, on the foreign partner. See Abdulai Taiwo and Co. Solicitors.
DISPUTE RESOLUTION UNDER NIPC ----- BAR PART II FOCUS • Where a dispute arises between an investor and any government of the federation in respect of an enterprise,
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1. all effort shall be made to reach an amicable settlement through mutual discussion (FIRST OPTION), 2. failing which, the dispute may be submitted to Arbitration at the option of the aggrieved party as follows: (SECOND OPTION) Note: i.e., the Aggrieved Party determines the law at Arbitration a. In the case of a Nigerian Investor, in accordance with the Arbitration and Conciliation Act. (Cap A18); or – where the aggrieved party is a Nigerian Investor b. In the case of a Foreign Investor, within the framework of any Bilateral or Multilateral agreement on Investment Protection to which the federal government and the country of which the investor is a national are parties (i.e., both countries); or – where the aggrieved party is a Foreign Investor c. In accordance with any other national or international machinery for the settlement of investment dispute agreed on by the parties. – the above is applicable where a national or international machinery has been agreed, irrespective of the parties. (Lecturer says it is where party is foreign investor) • Where there is disagreement between the investor and the federal government as to the method of dispute settlement to be adopted, the International Centre for Settlement of Investment Disputes (ICSID) Rules will apply - (Section 26 of Cap N117). – Thus, applies where there is disagreement as to method of dispute settlement, and not where there is a dispute. Also, this only relates to the FG and an investor.
SUMMARY OF PROCEDURE FOR ESTABLISHMENT OF BUSINESS 1. Prepare joint-venture agreement and any other necessary pre-incorporation agreement. 2. Take steps to form a company to be registered with the Corporate Affairs Commission (CAC). 3. Application to the Nigerian Investment Promotion Commission (NIPC). 4. Application to the Securities and Exchange Commission (SEC) for registration of the security/investment. See Investments and Securities Act, 2007 section 54(1) 5. Application for other permits including application to the Nigerian Embassy in the country of the investor for grant of BUSINESS VISA “Subject to Regularization” (STR). 6. Importation of capital through an authorized dealer and obtaining certificate of capital importation.
3. FEMMPA (FOREIGN EXCHANGE MONITORING AND MISCELLANEOUS ACT) • Provide that any person may invest in foreign currency • When investing with foreign currency, it must import the capital (i.e., the foreign currency through an authorized dealer, and obtain a certificate of Capital Importation. Section 15(1) of FOREX Act. CAPITAL IMPORTATION (WAYS OF IMPORTING CAPITAL INTO NIGERIA) • This is different from modes of Foreign Participation. • Having obtained the requisite NIPC registration, the foreign company (now a Nigerian company, if registered) must then import its foreign equity through any of the three ways:
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A. Through an authorized dealer B. Through the debt-equity conversion scheme C. By bringing in equipment (Transfer of Technology)
A. IMPORTATION OF CAPITAL THROUGH AUTHORIZED DEALER • This is done pursuant to the Foreign Exchange (Monitoring & Miscellaneous Provisions) FEMMPA Act. • A foreign investor wishing to buy shares or import foreign capital loan for doing business in Nigeria should freely import the capital through an Authorised Dealer, which currency is convertible into the Naira at the official foreign exchange market. S. 12, 13, 15 Foreign exchange (Monitoring Miscellaneous Provisions) Act. • An authorized dealer is a bank or other body recognized as such by the Central Bank of Nigeria pursuant to the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and obtain a certificate of Capital Importation from the bank. PROCEDURE FOR IMPORTATION OF CAPITAL 1. A foreign investor is expected to freely import the capital through an authorized dealer 2. The currency is converted into Naira by the authorized dealer at the official foreign exchange market – S. 12 FE (M&MP) Act. 3. A Certificate of Importation is usually issued to the foreign investor by an authorized dealer – within 24 hours of application. 4. The foreign investor must make returns to the CBN within 48 hours of the issuance of that certificate. Note: that the investor may be a Nigerian or Foreigner, but so far, the capital is coming as foreign currency, this process must be followed. ADVANTAGES / FISCAL INCETIVES OF THE CERTIFICATE OF CAPITAL IMPORTATION (CCI) ----- BAR PART II FOCUS 1. It enables the opening of foreign currency domiciliary accounts with banks in Nigeria. Section 17 FEMMPA 2. Open a special non-resident Naira Account. 3. Buy shares in Nigerian companies out of the naira account. 4. It aids repatriation of capital, dividends and incomes without restrictions at autonomous market rates minus taxes. Rule 408(2) (ad) SEC Rules 2013. 5. Unconditional transferability of funds through an authorised dealer in freely convertible currency S. 24 of the NIPC Act 6. If the purpose is to finance foreign loan, the company will be allowed to purchase foreign currency at the official rate for servicing of the foreign loan. 7. The company will be exempted from money laundering investigations. Forfeiture of undisclosed funds or negotiable instrument or to imprisonment of not less than 2 years or to both. See Money Laundering (Prohibition) (Amendment) Act 2012. Amount increased to $10000
B. IMPORTATION OF CAPITAL THROUGH THE DEBT-EQUITY CONVERSION PROGRAMME
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• Capital can be brought into the country through the debt-equity programme of the federal government, whereby Nigeria’s debt instrument is bought at a discounted value from any stock exchange anywhere in the world, and the foreign investor will get the naira equivalent of the face value of the instrument • This entails the exchange of a country’s foreign currency debt for local currency that can be used for: 1. Establishment of new enterprises ---FDI 2. Purchase of shares in existing business whether privately or public owned. ---FPI • It is a feature of the deregulation programme introduced by the federal military government of Babaginda in 1988. • If for example, a foreigner needs to invest $30 million but he has only $10 million, he can take his $10 million to any stock exchange anywhere in the world to buy Nigeria’s debt instrument at a discounted value, i.e., he could pay $10 million for a debt instrument with a face value of $30 million and not the discounted value, the certificate is brought into Nigeria, taken to a bank as proof of their capital importation into Nigeria, he can obtain the naira equivalent of $30 million. • Proceeds (5): It must be pointed out that the repatriation of part of the profits derived from the initial capital outlay i.e. ($30 million) is postponed until after a minimum of five (5) years, • Capital (10), but 20%: while the capital proceeds cannot be repatriated until after ten (10) years, even then only 20 per cent per annum of such capital outlay can be repatriated. • It is implemented by the Debt Conversion Committee (DCC) in CBN. • It is the money bought at face value that cannot be easily repatriated. Limit on profit is only 5 years. • To participate, a company must have a minimum paid-up capital of N5,000,000 • The minimum amount of debt to be considered under the Scheme shall be $250, 000 • Eligible participants are: Companies and individuals, Nigerians and non-Nigerians, Residents and non-residents
4. THE INVESTMENT AND SECURITIES ACT • Registration of Securities by SEC • The securities of a public company allotted to an alien must be registered with the SEC • The SEC is required to keep and maintain two separate registers of FDI (foreign direct investments) and FPI (foreign portfolio investments). Section 8(k), Investments and Securities Act, 2007 • Foreign Companies exempted can also participate in foreign participation. MODES OF FOREIGN PARTICIPATION IN NIGERIA • There are only two ways of doing business • This can be done through any of the two following ways A. Foreign Direct Investment (FDI) B. Foreign Portfolio Investment (FPI)
CATEGORIES OF FOREIGN INVESTORS (FIS)
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1. Foreign Direct Investors 2. Foreign Portfolio Investors 3. Foreign companies/investors who qualify for exemption NOTE: Any of the above could be: • Institutional or individual foreigners who invest in the Nigerian market (primary or secondary) with foreign currency, and • Nigerians’ resident abroad spending FX, or investing with foreign currency. See Rule 208 SEC Rules • So far, the capital is coming as foreign currency, they fall in such category.
A. FOREIGN DIRECT INVESTMENT • Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. • Foreigners take part in business either by: a. takeover of existing Nigerian companies, merger (Stanbic IBTC - Stanbic was incorporated in South Africa and IBTC was a Nigerian Bank) or b. forming/incorporating companies in Nigeria. The company established must be registered unless it qualifies and obtains an exemption from registration. Section 20(4) CAMA, Section 19 NIPC Act. Section 80 CAMA CATEGORIES OF FDI 1. Registered Companies 2. Exempted Companies Note: • Registration options open to a foreigner proposing to create a company (FDI) are Registered Companies or Exempted Companies 1. When it is a registered company, the options are: o Company limited by Shares, Company Unlimited, Company Limited by guarantee, General Partnership, Limited Partnership, Limited Liability Partnership. o Procedure for registration of companies are same; while business & partnership are same 2. Where it is an exempted company, the qualification are: …………. CONSEQUENCES OF FAILING TO REGISTER WITH CAC 1. It cannot carry on any business in Nigeria 2. If it carries out any transactions, such will be void and illegal 3. The court will therefore not enforce any of such contract at the instance of any party to the transaction: See SOLANKE V. ABED. 4. It cannot have a place of business or service of documents or processes in Nigeria, except receipt of documents as a prelude to incorporation- Section 78 CAMA 5. Criminal sanctions for company and officers - Section 79 CAMA PROCEDURE FOR FDI 1. Obtain from the Nigerian embassy, a cable visa (Business visa) subject to regularisation for owners and officers of the company from Nigerian Immigration
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2. Securing an address in Nigeria for service of documents and other pre-formation of the company in lieu of registration. 3. Prepare and execute Joint Venture agreement where applicable. (i.e., where opening a company with a Nigerian). 4. Execute other Pre-Incorporation Agreements. 5. Incorporate the company with CAC and obtain original certificate of Incorporation and other documents. 6. Apply to register the company with NIPC. S. 19 NIPC ACT. This is compulsory by virtue of Section 20 NIPC Act. Registration procedure - Section 20(2) NIPC Act 7. Apply to the Securities and Exchange Commission (SEC) for registration of interest of foreigner in the shares of the company. Section 8 of the SEC Rules. 8. Importation of capital through an Authorized Dealer. Section 15 of the Forex Act. Importation of capital is after all registration with CAC, NIPC, and SEC). 9. Obtain relevant permits from the relevant Regulatory Agencies. 10. Apply to obtain relevant incentives and reliefs available for foreign investors in Nigeria (Note that it must be applied for if one want to enjoy it).
B. FOREIGN PORTFOLIO INVESTMENT (FPI) • Foreign Portfolio Investment (FPI) is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets. • Foreign portfolio investment represents passive holdings of securities such as shares, bonds, debentures or other financial assets, without participating in the running of the entity they invest in. • There is no physical business, he only possess shares certificate which can be electronic. • Thus, if an alien wants to invest in the shares of a company, whether public or private, he can do so through Foreign Portfolio Investment. • Foreign portfolio (shares owned by foreigners) must be registered with the Securities and Exchange Commission - Sec 13(l) ISA PROCEDURE FOR FPI ----- BAR PART II FOCUS 1. Application for allotment of shares by the Foreign Investor or a capital market operator to the Nigeria Company directly at primary market (during public offer) or through the stock broker for shares quoted at the Stock Exchange (Secondary market) or private placements. 2. Approval of Allotment of the shares to the foreign investor by the Board of Directors, subject to requisite approvals. 3. Obtain share certificates from the company’s Registrar, enlist the shares in the electronic stock holding at the Central Securities Clearing Systems Ltd (CSCS) and obtain Statements of Stock holding from the CSCS. 4. Apply to the Securities and Exchange Commission (SEC) for registration of security in FORM SEC 6F accompanied by prescribed fee. 5. Importation of the capital through an authorized dealer (Approved Bank) and obtain certificate of capital importation issued by CBN, and pay for the shares. (You can add the process of importation of CC)
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5. IMMIGRATION ACT 2015 • See Immigration Act, No. 8 2015 And Immigration Regulations, 2017 PERMITS/APPROVALS / IMMIGRATION REQUIREMENTS---VERB T ----- BAR PART II FOCUS A. Business Visa (subject to regularization) B. Business Permit C. Residence Permit & Alien Card (CERPAC) D. Expatriate Quota E. Temporary Work Permit F. Permanent Resident Permit G. Visiting Permit H. Transit Permit
A. VISA • The Nigerian Visa Policy (NVP 2020) introduces: • 4 primary visa channels: a. E-Visa System b. Visa on Arrival (VOA) c. Nigeria Consular Mission d. Visa Application Center (VAC) • 3 categories of mandatory visas and expansion of visa classes from 6 to 79. Classes of Visa a. 4 Visa Free / Exemption Visa Mandatory: b. 24 Short Visit Visa (SVV): - 3-months c. 15 Temporary Residence Visa (TRV): two years, and d. 36 Permanent Residence Visa (PRV) NOTE: • Short Visit Visa - tourism, study tour, academic exchange program, humanitarian services, relief/emergency works and temporary work permit • Temporary Residence Visas: 2 years, multiple entry visa • Permanent Residence Visas: highly skilled individuals as well as some categories of retirees. TYPES OF VISAS • Where he is to engage in business in Nigeria, he must apply for Business Visa, as Tourist Visa is for 90 days. • Note that IR means acceptance of Immigration Responsibility. – For companies in TRV • Nigerian Visas are obtained in the Countries where applicants are domiciled or the nearest Nigerian Mission nearest to their Countries of residence. 1. Transit Visa: Transiting passengers with confirmed Visa to onward destination other than Nigeria, Seamen/pilots 2. Direct Transit Visa
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Transiting passengers with confirmed Visa to onward destination other than Nigeria, Seamen/Pilots signing on. Validity of stay is 48 hours. Not valid for employment. 3. Business Visa Business men and Investors coming to Nigeria for business discussions Obtainable from Nigerian Missions abroad. Validity of stay is 90 days but extendable. Not valid for employment 4. Tourist Visa Persons wishing to visit Nigeria for the purpose of tourism, Individuals who want to visit family members. Not valid for employment 5. Diplomatic Visa • Visiting Heads of States and their families • Top officials of Government and their families • Diplomats and their families • Holders of United Nations Diplomatic Passport and Laisser passes • members of accredited Diplomatic Missions • members of international organizations • members of accredited International non-governmental organizations 6. Subject to Regularization Visa (SRV) Expatriates employed by individuals, corporate bodies or governments (i.e., to take up employment in Nigeria) 7. Temporary Work Permit Visa (TRV) Experts invited by corporate bodies to provide specialized skilled services, such as after sales installation, maintenance, repairs of machines & equipment Visa On Arrival • Fill the Application • Pay fee online • Wait for approval letter from Immigration • Take approval letter to Nigeria where you obtain VOA Visa Exemptions • Holders of official travel documents from United Nations Organizations (UNO). African Union Commission (AUC), ECOWAS Commission and African Development Bank can visit Nigeria without a visa. • Reciprocity Visa Waiver Agreement Countries: Citizens of Brazil, Venezuela, Kenya, China, Cuba, Sudan, Namibia, South Africa, Mauritius, Singapore, Turkey, Tanzania and Rwanda holding diplomatic and/or official passport can travel to Nigeria visa-free. • Visa Abolition Agreement Countries: Citizens can travel to Nigeria for a short visit based on the bilateral agreement • Ecowas Nationals do not need visas to enter the country. However, they are required to register with the Nigerian Immigration Service (NIS). The registration is satisfied by obtaining the ECOWAS Residence Card (ERC). ECOWAS Citizens (Resident in Nigeria) must have entered into the country before applying for the ERC.
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B. EXPATRIATE QUOTA • Where he is to be employed, the company employing him must apply for ex-patriate quota • The person to make application for the expatriate quota is the company, not the person. • Note difference between Residence Permit and Expatriate Quota. (Residence Permit is to stay. Expatriate quota is to be an employee in Nigeria. Business Permit is do business in Nigeria). • For ex-patriate quota, you need consent of the Chief Federal Immigration Officer • Initial expatriate quota is sought and obtained usually along with the business permit. • No person other than a citizen of Nigeria shall accept employment (not being employment with the federal or a state government) without the written consent of the Chief Federal Immigration Officer (Immigration Act S.8(1)(a). • Foreigners employed in federal or state government do not need ex-patriate quota. • There are two types of expatriate quota: a. Permanent Until Reviewed (PUR)- usually for the post of chairman of the company’s board of directors or the managing director. b. Temporary - Directors and other employees of the company. The maximum number of years granted in the first instance (initial expatriate quota) is five (5) years renewable for a further period of two (2) years. • Note that mere Director is Temporary • Application is made on Immigration Form T/2. • It is the duty of the company and not that of the employee, to apply for expatriate quota. See Oilfields Supply Center Ltd v Johnson (No. 2) [1987]
DOCUMENTS TO ACCOMPANY APPLICATION FOR EX-PATRIATE QUOTA 1. NIPC Form 1 2. Completed Immigration Form T/12 3. Copy of Certificate of Incorporation 4. Company’s Profile 5. Form CAC 1.1 used in registering the Company 6. Memorandum and Article of Association 7. Business plan/Feasibility Report (should be certified or registered with Corporate Affairs commission (CAC) 8. Form CAC 7A PARTICULARS OF FIRST DIRECTORS OR CHANGES THEREOF 9. CAC 2A - RETURN OF ALLOTMENT (POST INCORPORATION) MINIMUM N10 million 10. Company’s Current Tax Clearance Certificate (Original to be presented for sighting) 11. Lease agreement for C of O for opening premises (original to be presented for sighting) in respect of each Company. 12. Proof there is need for an expatriate e.g., Evidence of imported machinery 13. License / Permit / Certificate from relevant Government Agencies / department / ministries for the operation or execution of project 14. Joint Venture Agreement for partnership venture between Nigerian and foreigners (original to be presented for sighting);
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15. Evidence of Imported Machinery 16. Proposed annual salaries to be paid to the expatriates to be recruited indicating designation, names, jobs description and qualifications (CV and copies of credentials of expatriate to be attached) 17. Evidence of work at hand, its duration and value attached to the contract(s) if the company is engaged in building, civil engineering, construction, etc. (original to be presented for sighting); 18. Evidence of Training program for Nigerians and management succession schedule; and 19. Evidence that the skills of the required personnel are unavailable in Nigeria.
C. BUSINESS PERMIT • Where he is to engage in business in Nigeria, he must apply for Business Visa, as Tourist Visa is for 90 days. • Where he is to engage in business in Nigeria, he must take up a Business Permit • For business permit, you need consent of the Minister of Internal Affairs. • You must have a Business Visa, then apply for Business Permit. They are not the same. • He must also obtain a Residence Permit. Note that Residence Permit and Alien registration card is now combined as CERPAC • 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 company with limited liability for any such purpose without the written consent of the Minister of Internal Affairs. (Immigration Act s.8(1)(b) and Immigration Regulations). • Initial expatriate quota is sought and obtained usually along with the business permit.
DOCUMENTS TO ACCOMPANY APPLICATION FOR BUSINESS PERMIT 1. Completed Immigration Form T/1 2. A copy of company’s Certificate of Incorporation (of the foreign company where it is incorporated). 3. A copy of company’s Memorandum and Article of Association 4. Feasibility Report (should be certified or registered with Corporate Affairs commission (CAC) 5. Form CAC 1.1 for registering the Company 6. Joint Venture Agreement (if applicable) 7. Form CAC 2 (Statement of share capital). Authorised share capital must not be less than 10 million naira in respect of each company 8. Form CAC 7 (List of directors) 9. Technical Services Agreement or Joint Services Agreement 10. Lease agreement for C of O (write in full) for operating premises (original to be presented for sighting
D. RESIDENCE PERMIT • Every alien may enter Nigeria and stay therein for three (3) months with a residence visa (Tourist Visa).
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• You should have a Business Visa that is extendable beyond 90 days, then apply for Residence Permit. They are not the same. To further do business, get Business Permit • For residence permit, it is an application to Immigration Department through Consular Authorities. • Any person who is not a citizen of Nigeria who desires to enter Nigeria for purpose of residence (i.e., beyond three months) must obtain a residence permit. • Application (2 copies) is made by the company requesting permission to employ the alien, accompanied by a valid passport of the alien, to the Immigration Department (via Consular Authorities).
COMBINED EXPATRIATE RESIDENCE PERMIT AND ALIENS CARD (CERPAC) • This part is very important. • CERPAC is Combined Expatriate Residence Permit, and Aliens Card • What is combined here is Residence Permit and Alien Registration Certificate • CERPAC is also called a Green Card • When writing CERPAC, don’t add Card because the word CERPAC contains Card. • The combined CERPAC scheme was introduced in 2002, providing for foreigners (except ECOWAS citizens, accredited diplomats and children below the age of 15 years) working or living in Nigeria to carry CERPAC card. • Note that Diplomats, Govt Officials, Nigerian wives, NGOs are issued CERPAC Gratis • The scheme is expected to simplify the process of acquiring residence permit and alien registration certificate. • It provides a computerized unit at various points of entries like airports that is linked to a central database centre containing information on every foreigner residing in Nigeria. • The residence permit allows a foreigner and his dependents or family to reside in Nigeria. This is in addition to the visa requirement as stated above, while every foreigner resident in Nigeria for more than 56 days is required to register. • Unlike the residence permit, the alien registration certificate is essentially a movement chart. • Under the CERPAC scheme, registration is valid for one year, after which application for revalidation must be made. • Website, and BHADMUS says CERPAC validity is two years. • Foreigners relocating to a different part of Nigeria must inform the nearest Aliens Office of the move. • Also, if a foreigner holding an Aliens Card leaves Nigeria permanently then the card has to be handed over to the Aliens Office. • The fee is US dollars--$350. • On payment and submitting of the completed application form, a temporary receipt is given. This receipt should be carried at all times as proof of residence. Applicants will then be told when and where to collect their cards. • Take special note of the below: • In conclusion, a foreigner doing business in Nigeria is required to have:
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a. Business visa (3 types). b. Business permit, (usually applied for together with initial ex-patriate quota) c. CERPAC (residence permit, and alien registration card) • Only residence permit and alien registration have been combined. • Expatriate Residence Permit in the word CERPAC just means Residence Permit, it doesn’t mean that Expatriate quota and Residence Permit is combined.
6. NATIONAL OFFICE OF TECHNOLOGY ACQUISITION AND PROMOTION ACT (NOTAP) • It regulates transfer of foreign technology into Nigeria. • Every contract or agreement entered into by any person in Nigeria with another person outside Nigeria involving the transfer of foreign technology (not available in Nigeria) to Nigerian partners shall be registered with the National Office of Technology Acquisition and Promotion (NOTAP) in the prescribed manner not later than sixty (60) days from the execution or conclusion of the agreement. S.5(2) of National Office of Technology Acquisition and Promotion Act • Application is made to Director of NOTAP
REGISTRABLE CONTRACTS/AGREEMENTS • An agreement involves transfer of technology, if its purpose or intent is, in the opinion of NOTAP, wholly or partially connected with any of the following matters: 1. The use of trademarks 2. The right of use of patented inventions. 3. The supply of technical expertise in the form of the preparation of plans, diagrams, operating manuals or any other form of technical assistance of any description whatsoever. 4. The supply of basic or detailed engineering. 5. The supply of machinery and plant; and 6. The provision of operating staff or managerial assistance and the training of personnel. See section 4(d) of NOTAP Act. • Every application for the registration of a contract or agreement shall be addressed to the Director of NOTAP. • The application shall be accompanied by such number of certified true copies of such contract or agreement and by all other related documents and information as may be specified in any particular case by the director. Section 6(1) of NOTAP Act.
HOW TO APPLY FOR NOTAP REGISTRATION 1. Make an application to the Director of NOTAP 2. A duly completed NOTAP Application Form (Form NOIP 1- 84) must be lodged with NOTAP by the recipient or transferee of the technology supported by the following documents: - CAR MAP FATE a. Certificate of Incorporation b. Application fee
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c. Revised Form NOIP 2-84--Two copies of duly completed Questionnaire d. Memorandum and Articles of Association of the Company e. Agreement to be registered-- Two certified true copies f. Profile on Transferor/Technical Partner (Website, Brochure, etc) g. Feasibility study h. Annual audited accounts for 3 years2(if not a new company), and if it is a new company, a copy of the exemption from FIRS i. Tax Payer Identification Number (TIN) j. Evidence of Tax payments (Company tax) for the last 3 years 3. Upon submission, NOTAP vets the agreement to determine its conformity with its evaluation criteria. 4. If the agreement is approved, NOTAP computes and advises the applicant on the fees payable as registration fees for the use of the technology and the duration approved for the agreement. NOTE • It is the obligation of both the transferor and transferee of such technology to register the agreement. The registration is expected to be done within 60 days of execution or conclusion of the agreement. • When the Agreement is finally accepted by NOTAP (either in its original form or in an amended form) a “registration fee” becomes payable to NOTAP. • A presentation fee of N50,000 is made upon submission of the agreement and the supporting documents. N100,000 is payable upon approval where the fee or royalty payable under the agreement is less than N5m fee, and it graduates to N20m for royalties of N10b and above. • The NOTAP Certificate is usually issued within a period of two weeks (max- 6 months) of the application and valid for a period of between one to ten years.
EFFECT OF NON-REGISTRATION -- SECTION 7 OF NOTAP ACT • Non-registration does not render the contract void or unenforceable between the parties but merely frustrates transfer of any fees or payment due under the contract to the account of the aliens outside Nigeria. • Thus, they will not enjoy the benefits/repatriation of fees profits. • Royalties through CBN is disallowed unless a certificate of registration accompanies the application to repatriate in respect of such contract---S. 7 NOTAP ACT. BEECHAMS’s case
REFUSAL OF APPLICATION BY NOTAP • The Director of NOTAP may refuse registration of contract on many grounds which fall within 18 specifications e.g.: a. Where its purpose is the transfer of the technology freely available in Nigeria. b. Where the price is not commensurate with the technology in question c. Where the contract involves the transfer of obsolete technology,
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d. Where the transferee is obliged to submit to foreign jurisdiction in any controversy arising for decision concerning the interpretation or enforcement in Nigeria of any such contract - 6(2).
7. INDUSTRIAL INSPECTORATE ACT • Supervisory body is Industrial Inspectorate Division of the Federal Ministry of Industry • It is to enjoy certain incentive and reliefs from tax.
INTENTION TO INCUR CAPITAL EXPENDITURE • Application is made to Director of the Industrial Inspectorate Division of the Federal Ministry of Trade, Industry, and Investment. • Any person proposing to start a new undertaking or in the case of an existing undertaking, to incur additional expenditure, of not less than N5,000,000 must give to the Director of the Industrial Inspectorate Division of the Federal Ministry of Industry notice of his intention. See Industrial Inspectorate Act. Section 3(1) of the Industrial Inspectorate Act • Application is made in Form 1 (2 copies), obtainable from the Federal Ministry of Industries, Inspectorate Division. • If the director is satisfied with the valuation for the property, he issues a Certificate of Acceptance which binds other government like the Board of Customs and Excise and the Federal Board of Inland Revenue (i.e., it binds Customs, and FIRS amongst others) • Thus, if you take it to the FIR authorities, you have a kind of tax waiver, in form of expenditure allowance, else you will pay full companies income tax under CITA. • Thus, once such a company plans to expend more than N500K in the purchase of assets, you can apply to the Director for the Certificate, and you can then go to the FIR, or Board of Customs for a waiver of some tax • Fiscal Approval- in respect of fees for management, technical, consultancy agreement etc.
PROCEDURE FOR ESTABLISHING A BUSINESS IN NIGERIA 1. Obtain from the Nigerian embassy, a cable visa subject to regularisation for owners and officers of the company. (Business visa) – from Nigerian Immigration 2. Securing an address in Nigeria for service of documents and other pre-formation of the company in lieu of registration. 3. Prepare and execute Joint Venture agreement and other pre-incorporation contracts if in partnership with Nigerians. – where applicable. (i.e., where opening a company with a Nigerian). 4. Other Pre-Incorporation Agreements. 5. Incorporate the company with Corporate Affairs Commission (CAC) and obtain original certificate of Incorporation and other documents or obtain letter of exemption. 6. Apply to register the company with Nigerian Investment Promotion Commission (NIPC)--S. 19 NIPC ACT. Compulsory by virtue of section 20 NIPC Act. Registration procedure - Section 20(2) NIPC Act
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7. Apply to the Securities and Exchange Commission (SEC) for registration of interest of foreigner in the shares of the company. Section 8 of the SEC Act 8. Importation of capital through an Authorized Dealer (i.e., Approved Bank and obtain certificate of capital importation). Section 15 of the FOREX 9. Obtain relevant permits from the relevant Regulatory Agencies. E.g., where applicable Registration for Transfer of Technology. 10. Apply to obtain relevant incentives and reliefs available for foreign investors in Nigeria (Note that it must be applied for if one want to enjoy it). E.g., Application to Director of the Industrial Inspectorate Division of the Federal Ministry of Industry for a Certificate, which can be used as a tax waiver at the Board of Customs and Excise, the Federal Board of Inland Revenue.
ASSURANCES AND INCENTIVES
Assurances are promises, while incentives are reliefs or rewards. • THERE IS A THIN LINE BETWEEN RELIEFS AND INCENTIVES • FIRST KNOW IF IT IS QUALIFIED FOR A PIONEER STATUS – STATE THE RELIEFS • WHETHER IT IS LOCATED IN A RURAL AREA – STATE THE RELIEFS • WHETHER IT IS AN EXPORT COMPANY – STATE THE RELIEFS • NB: IF YOU ARE NOT GIVEN THE TYPE OF COMPANIES, IT IS, STATE EVERYTHING • IF FOR EDUCATIONAL PURPOSES, THERE IS A RELIEF • IF THE CAPITAL IS A FOREIGN LOAN, THERE IS A RELIEF ON THE INTEREST PAYABLE ON THE LOAN • IF IN THE POWER SECTOR ETC
A. ASSURANCES
- A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria except those in the negative list which are prohibited to both foreign and Nigerian investors. (SS. 17, 18 and 31 NIPC Act).
- A foreign enterprise may buy the share of any Nigerian enterprise in any convertible foreign currency (Section 21 NIPC Act).
- A foreign investor in Nigerian economy is guaranteed unconditional transferability of his dividends, profits, payments in respect of loans and remittance of proceeds through an authorized dealer in freely convertible currency, either as: a. Dividends or taxes (net of taxes) attributable to the investment b. Payments in respect of loan servicing where a foreign loan has been obtained
- No nationalization or expropriation of any enterprise in Nigeria by any Government of the Federation, and in the case of acquisition in the national interest or public purpose, fair and adequate compensation will be paid (S. 25 NIPC Act).
- There is a dispute resolution mechanism that does not give any advantage to any Nigerian or Government over a foreign investor - (S. 26 NIPC Act). State the options
- Importation of foreign currency is made easy. Declaration is only necessary for statistics only when the value of imported foreign currency is in excess of $5.000 - (S 12. FOREX Act)
- Any foreign currency purchased from the market may be repatriated without further approval - (S. 13 FOREX Act). 8. Any person may invest in any enterprise or security with foreign currency or capital imported into Nigeria through an Authorized Dealer - (S. 15 FOREX Act). 9. Any person may open, maintain and operate more than one domiciliary account designated in the same or different foreign currencies at the same or different banks and interest shall be paid on the accounts at such rate as the Central Bank may, from time to time, prescribe (SS. 17(1)(4) and 18 (2) FOREX Act. 10. No money imported for the purpose of legitimate investment will be liable to seizure or forfeiture or suffer any form of expropriation by the Federal or a State Government - (S. 17 (5) FOREX Act.
B. INCENTIVES
• There are general and specific incentives targeted at particular sectors. • There are Agric Sector, Power Sector, Oil and Gas Sector, Telecommunication Industry, Export Companies.
- GENERAL INCENTIVES
- 1. All companies with a turnover of less than N25 million a year are exempted from CIT
- 2. Rural investment allowance of between 15% to 100% of the cost incurred in providing facilities infrastructure in rural areas.
- 3. Investment allowance of 10 % on qualifying expendiure on plant, machinery and equipment
- 4. Capital allowances of 95% in the first year of purchase of plant and machinery to replace old ones.
- 5. Tax exemption of between 10% and 70% on the interest earned on foreign loans advanced to companies in any industry that meet the conditions 6. Exemption of small companies (that has less than 25 million turnover) from CITA and TETFUND 7. Deductibilty of donations made to the government or its agencies during a pandemic, natural disaster, or other exigency from CIT 8. Investment in infracstructure like accees roads, pipe borne water and electricity 20 % of the cost of producing this by companies is tax deductible Investment in economically disadvantage areas, a 100% tax holiday is granted to a pioneer industry in economically disavantage local govt. 9. Local value added: a 10% concession for 5 years is granted to engineering companies that produce goods with greater local content. 10. Tax relief for Reseach and Development (R&D): up to 120 % on expenses on R&D are tax deductible provided the R&D is carried out in Nigeria and related to a business that generates income.
11. In-plant training: indusries with in-plant training facilities are entitled to a two percent tax concession over a period of 5 years. 12. Bonus for filing return on time: A company which files return within the time stipulated for filing is granted a bonus of one percent of the tax payable---S. 56 CITA 13. Export Free Zone: A free trade zone is an area within which goods may be landed, handled, and re-exported freely. – S. 35 CITA. The purpose is to remove obstacles to trade and to permit quick turnaround of ships and planes. 14. Relief in respect of Commonwealth Income Tax / Double Taxation Treaties Relief: These are agreements entered into by Nigerian and other countries with a view to affording relief from double taxation in relation to taxes imposed on profit taxable in Nigeria, and any taxes of similar character imposed by the law of the country concerned. The method of relief under Nigeria tax treaties is by way of “tax credit”. Thus, if a Nigerian company that has paid or is, liable to pay tax, proves that it has paid the tax in a Commonwealth or another country that has double taxation agreement with Nigeria, then, such a company will be entitled to relief from tax paid or payable by it. See Double Taxation Relief Between The Federal Republic Of Nigeria and Canada; Pakistan; Belgium; France; Romania; Netherlands; United Kingdom; China; South Africa; Philippines; Czech and Slovakia. Spain and a shipping and air transport DTA with Italy. 15. PIONEER STATUS (Tax Exemption) Status Certificate: Pioneer status in Nigeria is issued by NIPC, and confers on companies’ tax exemption on the companies’ statutory income. The grant of pioneer status to a company is aimed at enabling the company concerned to make a reasonable level of profit within its formative years. The profit so made is expected to be ploughed back into the business. Parameters considered by NIPC to grant pioneer status are: export potential, employment generation, valued addition, local content, corporate social responsibility. etc, ----- BAR PART II FOCUS 1. Exemption from CIT for 3 years with a possible extension for another two years 2. Tax free dividends during the tax holiday 3. Losses in the relief period may be set off against profits after the end of the period 4. Capital allowance on capital expenditure on qualifying assets during the relief period Procedure for the Grant of Pioneer Status: SEE APPLICATION TO NIPC ----- BAR PART II FOCUS 16. Investment Promotion and Protection Agreements (IPPA): As part of the additional effort to foster economy, Governnent continues to enter into bilateral investment promotion and proscion agreements with countries that do business with Nigeria. The IPPA helps to guarantee the safety of the investment of contracting parties in the event of war, revolution, expropriation or nationalization. It also guarantees investors the transfer of interests, dividends, profit and other income as well as compensation for dispossession or loss.
IPPA - Countries China, Finland, France, Germany, Italy, Korea Republic, Netherlands, Romania, Singapore, South Africa, Spain, Algeria, Sweden, Switzerland, Taiwan Province of China, United Kingdom, Morocco, Austria, Bulgaria, Canada, Egypt, Ethiopia, Jamaica, Montenegro, Republic of Korea, Kuwait, Romania, Russia, Serbia, Turkey and Uganda, International Centre for Settlement of Investment Disputes (ICSID) For other countries with no treaty or investment protection agreement with Nigeria, you look at rules made by International Centre for Settlement of Investment Disputes (ICSID)
SECTORAL INCENTIVES A. Agric sector 1. Companies that engage in agricutural trade or business are not liable to the minimum CIT 2. Tax exemption of the interest earned from agricultural loans, provided the moratorium is not less than 18 months and the rate of interest is not more than the base lending rate at the time of the loan. 3. Exemption from CIT for an initial period of 4 years with a possible extension for two years on satisfactory performance of agricultural production.
B. Power sector 1. A 3 year CIT tax holiday with possible renewal for additional 2 years 2. Tax free dividends during the tax holiday period if the investment was made in foreign currency 3. Plant machinery and equipment purchased for utilisation of gas in downstream petroleum operations are VAT exempt. 4. They also enjoy additional investment allowance of 15 % which does not reduce the value of the asset.
C. Real Estate Investment companies 1. Exemption of dividend and rental income received by REICs on behalf of their shareholders from CIT, provided a minimum of 75 % of the divdend of rental income is distributed within 12 months of the end of the financial year in which the income was earned. Any icome earned by the REICs other than those collected on behalf of investors is liable to CIT 2. Exemption of rental and dividend income distributed by REICs to its shareholders from excess divdend tax 3. Dividends or mandatory payments made to shareholders and are approved by SEC are deductible for CIT purposes 4. Exemption of dividends received by a REIC fromwitholding tax if it meets the requirments in (i) above.
D. Road infrastructure development and refurbishment investment tax credit Scheme. • This scheme was set by the FGN on 25/01/2019 as a public-private intervension that enables to enable the FGN to leverage private sector capital and efficency for the construction, refurbishment and maintenance of critical road infracsructure in key economic areas in Nigeria. • Participants under the scheme will be entiled to the project cost incurred in the construction or refurbishment of an eligible road as tax credit against their CIT liability, until ful cost recovery is acieved.
E. Oil and gas industry 1. Capital allowance 2. Petroleum investment allowance: A company in Production Sharing Contract with the NNPC is entitled to petroleum investment allowance – 50% of chargeable profit-S. 22 PETROLEUM PROFITS TAX ACT 3. Investment tax credit 4. Investment tax allowance 5. Concessionary Profit taxes
F. Telecommunication industry 1. Pioneer status 2. Exclusivity period of licences ie, 5 years for GSM licences Reduced import duty for all telecom equipments for 2 years 3. Tariff structure that will enable them to recover their investment in good time 4. Measures to ensure speedy clearance of goods at the ports 5. Unconditional transferability of of funds into and from Nigeria through an authorised dealer
G. Tech Industry (Companies under the Start-up Act) Section 25 of the Start-up Act provides that companies labelled as Start-ups (i.e., tech start-ups that offer unique digital technology innovate product or service and have been in existence for not more than 10 years) may be entitled to: 1. Exemption from PIT for 3 years, and additional 2 years if still a start-up company. 2. Full deduction on any expenses on R&D which are wholly incurred in Nigeria 3. Exemption from contribution to Industrial Training Fund where it provides in-house training to its employees.
H. Free trade/ export processing zones 1. Exemption from payment of federal, state and local govt. Taxes 2. All goods imported into the zone are duty free 3. There 100 percent assurance of repatriation of capital, profits and dividends 4. No requirement of import or export licence 5. 100 percent foreign ownersip of companies allowed
I. Export Incentives 1. Duty Draw Back / Duty Suspension Scheme: This scheme provides for refunds of duties/surcharges on raw materials including packing and packaging materials used for the manufacture of products upon effective exportation of the final products. The new duty drawback scheme shall give automatic refunds (60%) on initial screening by the duty drawback committee and upon presentation of bond from a recognizable bank, insurance company or other financial institution. ----- BAR PART II FOCUS 2. Plant, machinery, equipment and accessories imported exclusively for mining operations in Nigeria are exempted from custom duties. 3. A wholly-export-oriented company established outside the EPZ is exempt from CIT for the first 3 years provided the export proceeds constitute 75% of its turnover, and it repatriates at least 75% of the export earnings to Nigeria. 4. Duty drawback facilities: The scheme provides for fixed drawback and individual drawback facilities. The fixed drawback facility is for exporters producers whose export products are listed in the fixed drawback schedule to be issued from time to time by the committee.
COMPANIES INCOME TAX ACT • The Federal Government has exclusive jurisdiction over the taxation of companies. • The profits of any company accruing in, derived from, brought into, or received in, Nigeria in respect of its business are taxable by FIRS
PERSONAL INCOME TAX ACT • This Act governs taxation of income of individuals, families, communities and trustees. • In practice, the majority of those paying personal income tax in Nigeria are in paid employment and subject to the Pay-As-You-Earn Scheme (PAYE).
REQUIREMENTS FOR FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SPACE
It is possible for a foreigner to participate in Nigerian business whether by forming a company, joining in forming a company, buying shares into an existing company.
How a Foreigner can Participate in Nigerian Business
Foreign participation means alien participation. Section 650 of Companies and Allied Matters Act (CAMA) defines an alien as a person or association, whether corporate or incorporated, other than a Nigerian citizen or association. It is possible for a foreigner to participate in Nigerian business whether by forming a company, joining in forming a company, buying shares into an existing company.A non-Nigerian whether company or individual may invest and participate in the operation of any enterprise in Nigeria except those in the negative list. The negative list includes arms and ammunition; narcotic drugs and psychotropic substance; para-military and military wears and accoutre.
There are some considerations to be made to enable foreigner participate in Nigerian business. They are:
Company Registration: Any company with the intention of carrying out business in Nigeria must register with Corporate Affairs Commission (CAC).Meanwhile, every foreigner seeking to participate in Nigerian business by registering a company in Nigeria must register a company with the minimum of 10,000,000 authorized shares capital to be able to subsequently register with NIPC
Nigerian Investment Promotion Commission (NIPC): Every business with foreign participation must be registered with NIPC and obtain a certificate. CAC registration needed before this can be achieved.
Business Permit: Every company with foreign participation in Nigeria must secure this permit before commencing business activities
Tax Registration: An incorporated company is also to register with Federal Inland Revenue Service (FIRS) and obtain Tax Identification Number (TIN) which will be used to obtain other licences and register with State Inland Revenue Service.
Trademark Registration /Protection: Companies are adviced to register their trademark at the Trademark Industry.
Operating a Bank Account: Most commercial banks in Nigeria require Evidence of Company Registration, TIN of the company, Proof of registered address, Identity of company's directors before company an operate a bank account.
Sector Specific Licensing: Some sectors require specific licence for its operators to operate. So every foreign company must enquire into what license required to operate
Advertisement: A foreign company must ensure that it has the permit to advertise to its customers
Any investor seeking to do business in Nigeria must also consider about immigrating to the country or sending workers to the country from abroad. Therefore, foreign investors and offshore companies doing business or looking to establish in Nigeria must obtain Expatriate Quota from the Minister of Interior. It is the authorization to a company to employ individual immigrants to specifically approved job designations, and also specifying the permissible duration of such employment. The expatriate quota is the work permit for expatriate employees to fill the expatriate quota obtained by the employer company.
Immigrant workers are required to obtain residence permits that allow them to work in Nigeria and remit their salaries abroad if necessary .It is granted to a foreigner who visited Nigeria using the Subject to Regularization (STR) Visa. The foreigner is required to change his status from a visitor to a resident by obtaining a Residence Permit. Residence Permit has a validity period of two years and is renewable. However, a foreigner who has imported an annual minimum “threshold of capital” over a period of time may be issued a Permanent Residence Permit in so far as the investment capital is not withdrawn and the foreigner has complied with any other condition prescribed for the issuance of the Permanent Residence Permit.
CERPAC is the acronym for Combined Expatriate Residence Permit and Aliens Card. The Nigeria Immigration Service requires foreigners living in Nigeria to get the new CERPAC or they will be considered to be illegal residents and subject to repatriation from Nigeria.
Persons that qualify for this are Expatriates resident or working in Nigeria, and exempted persons are Diplomats, Government Official (GO’s), Niger-wives, Non-Governmental Organization (NGO’s) are to be issued CERPAC Gratis.
Incentives for Doing Business in Nigeria
The Nigerian Government has put in place a number of investment incentives for the stimulation of private sector investment from within and outside the country. Some of these incentives cover all sectors, others are limited to some specific sectors.
Easy immigration process put in place by the Nigerian government is one of them. Some of the other incentives for doing business in Nigeria include:
- Companies Income Tax: The Companies Income Tax Act has been amended in order to encourage potential and existing foreign investors and entrepreneurs.
- Pioneer Status Incentive: The grant of Pioneer Status to an industry is to enable the industry concerned to make a reasonable level of profit within its formative years The profit made is expected to be ploughed back into the business. Pioneer status is a tax holiday granted to qualified or (eligible) industries anywhere in the Federation for a period of 3 years (with additional 1 and 1 more years or 2 years straight).
Double Taxation Agreements: In the last few years, double taxation agreements have been entered into by Nigeria with a number of countries. These agreements are entered into to provide relief from double taxation in relation to taxes imposed on profit taxable in Nigeria and any taxes of similar character imposed by the law of the country concerned. The method of relief from double taxation under Nigeria’s tax treaties is by way of a “tax credit”.
Duty Drawback Scheme: Duty Drawback scheme provides for refunds of duties on raw materials including packing and packaging materials used for the manufacture of products upon the effective exportation of the final products. The new Duty Drawback scheme shall give automatic refunds (60%) on initial screening by the Duty Drawback Committee and upon the presentation of bond from a recognized Bank, Insurance Company or other financial institution.
Capital Importation and Repatriation: To fund their investments in Nigeria, foreigners are free, subject to money laundering restrictions, to bring in any recognized foreign currency into Nigeria.
In Conclusion, with the efforts if the government and from the provisions of relevant laws, Nigeria has been made conducive or foreigners to invest and carry out business.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
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