Great efforts have been expended in the world today, as organizations and individuals try to recover from the losses of the pandemic, and the economic consequences. As a result of these efforts, the new item on everyone’s agenda in business and corporate circles is a sustainable “Roadmap to Economic Recovery”. For the most part, these recovery efforts have been the encouragement from governments of almost every country that was hard hit by the pandemic, for the establishment of more businesses, and to attract foreign investors into their countries.
Nigeria is not left out of this scramble for a more stable and robust economy, post- COVID 19. In the aftermath of the pandemic and the consequent lock down, the government of Nigeria took concise steps to mitigate the losses of the pandemic by amending some Acts and Legislation that could ease the process of starting up a new business, or expanding an existing one. These steps were deliberate efforts to revamp the economy through Foreign Direct Investments (FDI).
In Nigeria, the procedure for registering a foreign company or a foreign-owned company is basically regulated by the Companies and Allied Matters Act (CAMA) LFN 2004 of the Corporate Affairs Commission, among other legislation. In 2020, following concerted efforts by the government to encourage local production that will revamp the economy, the Companies and Allied Matters Act (CAMA) 2020 was introduced.
The CAMA 2020 amendment is in line with the government’s vision to remove ambiguity, and to provide illumination on certain provisions of the Act, as well as provide incentives for businesses to assuage the losses caused by the COVID-19 pandemic. The newly revised Act guarantees a more effective process of the inventory and management of corporate mechanisms, which is expected to act as a respite for small and medium enterprises (SMEs). This Act also incorporates the need to ensure clarity in corporate mechanisms and stakeholder engagement, as well as to foster a more robust, stress-free business environment in Nigeria.
There are several legal frameworks that exist to guide the process of business registration in Nigeria, these include, but are not limited to companies, partnerships, as well as business name registration. Foreign businesses that seek to expand into Nigeria, by establishing an office, bureau, or subsidiary, are also expected to comply with these laws; and must also fulfill certain extant legal requirements before they can obtain the local incorporation of the Nigerian subsidiary. Thus, the only legal route through which a foreign company can own a local subsidiary in Nigeria, and legally carry out business operations, is the registration of the business with the CAC.
The following are simple holistic processes for registering a foreign-owned business in Nigeria:
Company Registration with CAC
The most important step in starting a foreign owned in business in Nigeria is to incorporate the business with the Corporate Affairs Commission. According to section 54 of the CAMA Act, every foreign national that seeks to establish any business in Nigeria must incorporate the company, except his undertakings fall under the purview of section 56 of the Act, which exempts foreign owned companies from incorporation, subject to the approval of the Secretary to the Government of the Federation. Since most businesses do not fall under these extreme exceptions, registration is strongly encouraged.
The concept of “authorized share capital” with “minimum issued share capital” was replaced in the new Act to reflect the minimum threshold of N100,000 for private companies and N2,000,000 for public companies. The modification of the Act will successfully improve the minimum nominal amount of share capital commensurate to stamp duties and filing fees at incorporation, from the N10,000 and N500,000 previously applicable. Furthermore, this amendment eradicates the requirement for companies, especially private and unlisted entities, to designate their authorized share capital in the Naira. This amendment would be an appealing system to empower foreign investors, and provide an avenue for them to preserve value in their Nigerian subsidiaries and shield their imported capital from local inflation until they are ready to deploy such funds into the business.
Similarly, where companies were also required to have a minimum of two directors and shareholders respectively, the new CAMA 2020 Act now makes provision for single member/shareholder private companies. These amended provisions were lauded as very progressive and a step towards a more sustainable business environment.
Registration with Nigerian Investment Promotion Commission (NIPC)
The Nigerian Investment Promotion Commission (NIPC) is the institution responsible for attracting Foreign Direct Investment (FDI) to the country. Almost every government in the world are dependent on investment promotion agencies, economic development boards, industrial development agencies, and other investment promotion commissions to compete globally for critical foreign investment and the development benefits it brings. In 1995, the Nigerian Investment Promotion Commission (NIPC) was established to enhance inflow of investment into the country. Foreign owned companies who wish to do business in Nigeria are thus required to register with the Commission, soon after registering their business with the CAC.
Business Permit and Expatriate quotas
Where applicable, foreign-owned companies that intent to establish and operate businesses in Nigeria are required to obtain business permits and licenses. A business permit is issued through the Department of Citizenship and Business, in the Ministry of Interior to enable foreign owned companies or foreign nationals carry out businesses in the country. An application for a business permit can only be processed after a company has already been incorporated with the Corporate Affairs Commission (CAC). Furthermore, even where the registered company is not wholly foreign owned, a business permit may still be necessary for the application of expatriate quota.
The number of foreign nationals available to business organizations wishing to establish or operate a business in Nigeria is referred to as Expatriate quota. The approval given to this particular business organization is called Expatriate quota. These quotas are given to companies registered in Nigeria, which allocate equal quotas to their employees.
Residence And Immigration Requirements Permit (CERPAC)
The Immigration Act 2015 as well as the Immigration Regulations 2017 are the main laws guiding the immigration process in Nigeria. The Nigerian Residence/Work permit is issued by the Ministry of Interior and only upon arrival of the foreign national to resume his/her designation. The main types of immigration permits issued to foreigners in Nigeria are Resident Permits and Temporary Work Permits (TWP)
Every foreign national seeking to work in Nigeria must possess the Combined Expatriate Resident Permit along with Alien Card (CERPAC). It is also referred to as the residence permit. The validity of a residence permit is determined by the validity of expatriate quota. A foreign national may also use a valid residence permits for direct re-entry into Nigeria.
TEMPORARY WORK PERMIT (TWP)
This is a visa that acts as an authorization for an immigrant to work in Nigeria within a specified time. TWP is typically given for a period of three months. The Comptroller of the Nigerian Immigration Service must approve each TWP cable visa.
Certificate of Capital Importation (CCI)
Every foreign investor in Nigeria understands the importance of Capital importation. For this reason, every foreign investor is mandated to obtain a Certificate of Capital Importation (CCCI). This Certificate is issued by any Nigerian bank, and it’s usually a document that shows the coherent inflow of foreign capital. This CCI is mandatory for wholly foreign-owned businesses importing any form of capital into Nigeria. The Central Bank of Nigeria (CBN) digitized the process of obtaining a CCI by the use of electronic CCIs (e- CCIs) in 2017. This process simplified the processing of transaction, tracking transactions, as well as making adjustments in a situation where an investor transfers investment in Nigeria to another investor.
Tax Registration and Tax Clearance Certificate
All companies established in Nigeria must be registered with the Federal Inland Revenue Service for Tax Clearance Certificate, Tax Identity Number, and Value Added Tax numbers. The Tax identification number would enable the company remit its taxes.
On the 31st of December, 2020, the government of Nigeria signed the Finance Act 2020 alongside the 2021 Appropriation Act into law. This reaffirmed the commitment of the Federal Government of Nigeria to enact forward-thinking fiscal policies needed to drive sustainable growth and development. The Finance Act 2020, took effect on 1st of January 2021, and it amended the provisions of 14 tax and fiscal related legislation, namely:
Capital Gains Tax Act (CGTA), Companies Income Tax Act (CITA), Industrial Development (Income Tax Relief) Act (IDITRA), Personal Income Tax Act (PITA), Tertiary Education Trust Fund (Establishment etc.) Act, Customs and Excise Tariff, etc. [Consolidation] Act (CETA), Value Added Tax Act (VATA), Stamp Duties Act (SDA), Federal Inland Revenue Service (Establishment) Act (FIRSEA), Nigeria Export Processing Zones Act (NEPZA), Oil and Gas Export Free Zone Act (OGEFZA), Companies and Allied Matters Act (CAMA), Fiscal Responsibility Act (FRA), Public Procurement Act (PPA).
The Finance Act 2020 was geared towards complimenting the 2021 Federal Government’s Budget of Economic Recovery and Resilience.
Foreign investors have been encouraged to see the Nigerian government’s concerted efforts geared towards making “ease of doing business” a reality, and not something on paper. Many international fiduciary institutions have lauded the CAMA 2020 and Finance Act 2020 legislations as a step in the right direction for promoting Nigeria, and making the country a safe haven for investor funds.
According to the recent “World Bank Ease of Doing Business Index”, Nigeria ranks 131 out of 190 countries, having moved up 15 places from the 146th position it occupied in the 2019 report. This is due to the efforts of the government through various flagship projects like the Presidential Enabling Business Environment Council (PEBEC), headed by the Vice- President himself, to ensure that foreign investors do not need to deal with a lot of red-tapes and bureaucracy, when it comes to establishing a business.
By 2023, Nigeria is expected to rank among the top 70 in the World Bank’s Ease of Doing Business Index. This target is in line with the forecasts of the federal government’s Economic Recovery and Growth Plan (ERGP 2017- 2020). The Nigerian government supports foreign investors through a plethora of incentives and policies, as Nigeria needs investors to accelerate its growth and development. Finally, it is prudent for an individual or organization wishing to do business in Nigeria to seek legal advice and consult with individuals or organizations that have coherent and extensive knowledge of the terrain they wish to venture into.