The Federal Government of Nigeria has provided many investment opportunities in many sectors of business. The following are some of the priority areas identified by the Government. First find out about incorporating business in Nigeria.
Incorporating a Business Enterprise & Legal Requirements
It is a legal requirement that all business enterprises must be registered with the Registrar-General of the Corporate Affairs Commission (Registrar of Companies). It is essential that a foreign investor wishing to set up business operation in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary. Business activities may be undertaken in Nigeria as a:
Where exemption from local incorporation is desired, a foreign company may apply in accordance with Section 56 of the Companies Act, to the National Council of Ministers for exemption from incorporating a local subsidiary if such foreign company belongs to one of the following categories:
The application for exemption from disclosing certain details about the applicant is to be made to the Secretary of the Government of the Federation (SGF). If successful, the request of the applicant is granted upon such terms and conditions as the National Council of Ministers may deem fit.
Foreign companies may set up representative offices in Nigeria. They only serve as promotional and liaison office. As a rule, a representative officer has to be registered with the Corporate Affairs Commission.
Principal Laws Regulating Foreign Investments in Nigeria
The principal laws regulating foreign investments in Nigeria are: The Nigerian Investment Promotion Commission Decree No. 16 of 1995 and the Foreign Exchange (Monitoring Miscellaneous Provisions) Decree No. 17 of 1995.
Deregulation of Equity Structure in Nigeria Enterprises
The Nigerian Enterprises Promotion (Repeal) Decree No.7 of 1995 has abolished any restrictions, in respect of the limits of foreign share holding, in Nigeria registered/domiciled enterprises. The only enterprises, which are still exempted from free and unrestrained foreign participation, are those involved in:
Provisions Relating to Investments
Notable amongst the provision relating to investments are the following:
Priority Areas of Investment
The NIPC issues guidelines and procedures, which specify priority areas for investments and prescribed incentives and benefits, which are in conformity with Government policy.
Incentives for Special Investment
For the purpose of promoting identified strategic or major investments, the NIPC may in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment.
Investment Incentives and Guarantees
The Federal Government has made available tax holidays for pioneer companies-those producing for export, establishing new industries or expanding production in sectors vital to the economy. The Government also grants non-tax incentives to non-pioneer firms. In addition, the Government offers a number of general and industry-specific incentives.
Nigeria Export Processing Zones
The Nigeria Export Processing Zones Authority was set up under the Nigeria Export Processing Zones Decree 63 of 1992.
The Authority has the mandate to grant all requisite permits and approvals for operators within the zones, to the exclusion of other government bodies and agencies.
Any company, person or group of persons wishing to carry out approved activity within a zone shall apply to the Nigerian Export Processing Zones Authority (NEPZA) using the prescribed forms and shall submit such documents and information in support of the applications. The forms shall specify the application fees and such other details as the Authority may stipulate from time to time. A feasibility study in respect of the investment project, which the applicant wishes to undertake in the zone, shall be attached as an annex to the application and shall contain the following among others:
Application to undertake approved activity in the zone duly received, shall be considered by the Authority within 30 days of receipt and the Authority shall notify the applicant in writing of its decisions to grant the said approval or otherwise. The approval shall be subject to such terms and conditions as may be imposed by the Authority.
If the application is approved the investor may proceed to carry out the following:
Construction must be completed within a period of one year, which can be extended for another 6 months. A plan of the building shall be submitted to the Authority for approval. The land lease contract shall be signed within 2 months after allocation of land. The area occupied by such building shall be between 60%-70% of the leased land and construction shall start within 3 months after signing the lease contract.
With condition(s) in (iii) fulfilled, the investor may proceed to carry out the following:
Areas of industrial investment which receive the bulk of government industrial incentives include:
Mining and Mineral Processing
This sector offers tremendous opportunities for interested investors. The Federal Government of Nigeria welcomes investor in the following areas:
Certain enterprises require approvals and/or licenses to operate whether they are owned by Nigerians or not. Examples of the sectors where licenses are needed are banking where a:
The detailed regulations identifying the various licenses available and stating what is required to obtain each of them are numerous. It is therefore important to check with the relevant body.
The old and cumbersome, restrictive exchange control laws have been repealed by the Government. Foreign investors are free to bring in capital for investment, and they are free to repatriate both the income and capital proceeds on such capital.
Monies brought in or taken out may be so dealt with under either of two schemes:
The Autonomous (now interbank) Foreign Exchange Market (AFEM), a relatively free market in which both the Central Bank of Nigeria (CBN) and the Authorised Dealers participate as traders.
Debt Conversion Programme (DCP). Under this scheme the foreign investor buys Nigeria debt stock with hard currency and then sells the stock to the CBN in return for naira to be invested in Nigeria. The CBN benefits by getting Nigeria’s foreign debt stock reduced, and the foreign investor gets an exchange rate better than available on the AFEM. For details visit CBN website http://www.cenbank.org
Companies income tax rate is 30%. There is an additional education tax of 2% on the income of companies. Withholding tax of 5% is chargeable on unearned income. For foreign investors, the 10% withholding tax on dividends is the final tax on dividends. The top personal income tax rate is 25%.
Value added tax (VAT) is chargeable on goods and services at 5%. The Capital Gains Tax rate is 10%, and shares in companies are exempt from capital gains tax. This is a very significant tax relief for investors. Stamp duty is chargeable on various documents at various flat and ad valorem rates, depending on the nature of the instrument, up to a maximum of 2% of the value involved. There are Pay-As-You-Earn income tax regulations, and various social insurance-type contributions are compulsory.
There are also a tax holiday and tax allowance incentives for investors. For example, tax holidays for up to five years may be granted to investors in the manufacturing and gas utilisation sectors. Companies operating in Nigeria’s export processing zones are exempted from all taxes including both import and export duties.
Further, import duty relief may be obtained on certain machinery, and there are tax allowances for using local raw materials in manufacturing, being a labour-incentive (and therefore employment-generating) business, expenditure on training, infrastructure, research and development and in economically disadvantaged areas.