Being a corporate administrator at Company Formation Nigeria, I receive a number of inquiries from non-Nigerian citizens who seek to set up remote companies in Nigeria.
For obvious reasons such as the proliferation of technology start-ups, advancement in electronic communication tools, unrest and security challenges prevalent in Nigeria and the recent Covid-19 pandemic, the demand for establishing remote Nigerian companies by foreigners have shored up. May I add also that setting up a remote company may have proven to be cheaper than establishing a fully-fledged physical office.
There are a number of reasons you may consider if you are planning to incorporate a Nigerian company without necessarily having to set-up big offices and employ expatriates like most Nigerian companies owned by foreign nationals. Chief amongst these is the nature of the business.
These days, companies rely so much on communication tools such as WhatsApp, Zoom, Team Viewer or AnyDesk to interact with one another and work from anywhere in world. Except the business revolves around importation and exportation of physical goods, or the business needs some sort of physical interaction with the local market, foreign business owners are increasingly seeing no reason they should spend so much on a physical office or mass recruitment.
What do you need to set-up a fully operational Nigerian company that you can manage anywhere in the world?
- Statutory Company Registration. Forming a Nigerian company as a foreigner begins with the actual company registration at the nation’s Corporate Affairs Commission, CAC. The CAC is the Federal Government agency that registers all companies in Nigeria. Nigeria allows a wholly-owned foreign ownership of the company provided you are not doing business in the Oil and Gas, and maritime industry where locals are favoured to having at least 51% ownership. The recently published Companies and Allied Matters Act 2020 requires that a company can be formed by at least One Director and One Shareholder (but not more than fifty) of any nationality. The shareholder can be a corporate body nonetheless. A minimum authorised share capital of N10 million Naira is required (but may be higher depending on the business activity of the proposed Nigerian company). Whatever the authorised share capital is, it doesn’t have to be paid up at the point of incorporation.
- Local or Nominee Director. The concept of a local or nominee director is not new; and over the years, business owners do engage locals or nominee directors in the formation of an overseas company – such as in Nigeria. Although reasons for appointing one could vary, company (beneficial) owners appoint local directors to meet a statutory requirement in the host country or so that the newly formed company can benefit from the knowledge and experience of the local director in maneuvering the laws, policies and rules of the land – especially with the government and financial institutions. The appointed Director understands that he has been appointed to serve the interests of the beneficial owner(s) and a contractual agreement is often signed.
- Registered Business Address. You need a business address to be able to form a Nigerian company. This could be a permanent, temporary, virtual or even shared business address. Talk to your consultant about providing you one if you are yet to have a permanent address for your new Nigerian company. Business details such as your registered address can always be changed by a simple application for a change in business address to the CAC.
- Tax Compliance and Registration at the Federal Inland Revenue Service (FIRS) and State tax office. Irrespective of the fact whether your Nigerian company will be remotely managed or not, the newly incorporated company like every other are liable to register and remit taxes to the government – Federal, State and Local. As a strategy towards improving tax administration, compliance and remittance in Nigeria, the FIRS introduced TaxPro-Max to enable seamless registration, returns filling, payment of taxes and automatic credit of taxes to tax payers’ accounts. Nigerian companies are taxed on company income, personal income, and capital gains. Others include value added tax, director’s assessment, education tax, information technology development levy. It is advisable to engage a professional tax consultant for your Nigerian company.
- Licenses, Permits and Approvals – NIPC Registration, Business Permits, Expatriate Quota and Work/Resident Permit. Nigerian Investment Promotion Commission (NIPC) was established by Nigerian Investment Promotion Act Chapter N117 Laws of the Federation of Nigeria 2004 to encourage, promote and co-ordinate investments in the Nigerian economy. Securing NIPC certificate precedes applying for a Business Permit. The Business Permit authorizes a foreign-owned Nigerian company to do business in Nigeria. The expatriate quota is an approval granted to Nigerian companies seeking to employ non-Nigerians (either as Directors or regular employees). Additionally, a work/resident permit shall be obtained for every non-Nigerian visiting the country to live and take up employment.
- Bank Account opening. The Nigerian banking industry, like any other financial industry around the world, is a highly regulated one. The Central Bank of Nigeria (CBN) controls and monitors the activities of these financial institutions. Opening a bank account as a foreigner can be a difficult one especially when the directors are not resident or the business activity is a highly regulated one requiring the provision of additional documentation. In addition, all Directors (some banks require the shareholders also) to register and provide a Biometric Verification Number. The BVN was introduced by the CBN as a unique identifier (like a Social Security Number) to identify every bank customer. Also, a non-Nigerian Director must possess a resident permit to be appointed a signatory to the business bank account. This is a fundamental reason beneficial owners appoint a local or nominee director who will be appointed a signatory also. The beneficial owners can then manage the bank accounts via Internet Banking available exclusively to them.
- Other Licenses, Permits and Approvals. Depending on your business activity or industry, you may be required to apply for certain other licenses, permits and approvals before the commencement of your Nigerian business. These may include: Export Permit – for businesses engaged in exportation activities; Department of Petroleum Resources, DPR License – for companies in the oil and gas sector; National Food and Drug Administration Control, NAFDAC Approvals – for companies who import or manufacture food, skin care, drugs, etc. So, you need to discuss this aspect with your consultant in detail.
To be honest, Nigeria is a difficult place to do business! Nigeria is ranked 131 among 190 economies in the ease of doing business, according to the 2020 World Bank annual ratings. The rank of Nigeria improved to 131 in 2019 from 146 in 2018. Over the past few years, Nigeria has been characterized by unfavourable government policies; delays in issuing government documents; lack of basic amenities such as power supply (most companies run on generators frequently), lack of unified national database, market information and data; and lack of trust among a few Nigerians. However, Nigeria has one of the best economies in Africa. Nigeria has a relatively stable political environment. Nigeria has a strong banking and financial sector. Nigeria has a population of over 200 million people – the largest in Africa – with about 42.54 that are youth.
In order to reduce the stress and the bureaucratic hurdles during and after incorporation, you need to engage an experienced company formation agency is key. You might experience some glitches in the course of your business set-up, but you will be happy to know someone who understands the terrain is handling your company formation in Nigeria.
©Ayokunle Bankole, 2021. CEO at Citizens & Expats Agency Limited. www.companyformation.ng