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A GUIDE TO PROSPECTIVE FOREIGN INVESTMENT IN NIGERIA

By: Uwemedimo Essien (Esq.)

Nigeria has rich and abundant natural resources and most of these resources are untapped. The enviable and strategic position of Nigeria as the most populous country in Africa with a population of about 200 million people thus ranking among the emerging economies like China, India South Africa etc.

This write up therefore aims at guiding the prospective foreign investors of the basic legal and regulatory rules for doing business in Nigeria as well as other legal measures for protecting their investments.

WHO IS A FOREIGNER?

A foreigner or Alien refers to a person who is not a citizen or national of the State in which such a person resides. A foreigner can be natural or legal (artificial) person. Natural and legal persons such as (companies) may be considered foreigner. While natural persons refer to individuals, legal or artificial persons refer to registered companies.

The emergence of globalisation occasioned by the networks of communications, increase in foreign investment and the growth of international trade has made nationals of countries to seek business opportunities outside their  shores. The consequence is that national boundaries have given way to increase in cross boarder commercial transactions and foreign investors. The 1999 Constitution (as amended) in S. 17, 18 and 19 recognises citizenship either by birth, registration or naturalisation.

Formation of Company In Nigeria by a Foreign

The first step for starting a business in Nigeria a foreigner is to register or incorporate a company. Section 20 (4) of the Companies and Allied Matters Act (CAMA) (2016) provides, “Subject to the provisions of any enactment regulating the rights and capacity of aliens to undertake of participate in trade or business, an alien or foreign company may join in forming a company”. Here an alien is defined as, ‘a person or association whether corporate or unincorporated other than a Nigerian citizen or association. With these provisions, a foreigner or an alien is legally protected to carry on business ventures in Nigeria through formation of companies.

Types of Incorporated Companies In Nigeria

A foreigner desirous of investing in Nigeria can register or incorporate any of the following type of companies;

a. Private Limited Liability Company:

This type of company has a minimum of two and a maximum of fifty members. As its name implies, the liability of members is limited to the  amount unpaid on the shares held in the company. There is restriction in transfer of shares.

b. Company Limited by Guarantee:

The sole purpose of this type of company is not to make profit but to promote research, arts, culture, education and charity.

c. Partnership;

Where two or more individuals agree to establish business enterprise. There is no limit to the number of partners that can form a general partnership. In the case of limited partner, the maximum is twenty persons. Partnership may be general or limited partnership. The liability of general partnership is unlimited, while the liability of the limited partnership is limited to the value of the capital contributed at the time of entering into the partnership. The income of the partners is taxed just like that of the sole proprietor who can also use his personal assets to settle his debts.

d. Such investor may chose to invest in a Public Limited Liability Companies by buying shares that are traded on the floor of the Nigerian Stock Exchage (NSE). The liability of members is limited to the amount unpaid in respect of its shares. This type of company has minimum of two with no limit to the maximum. The income of the business is taxed on the company.

Nature or Effect of Incorporated Companies

A company once incorporated becomes an artificial person and a legal personality separate and distinct from the members that form it. An incorporated company is a body corporate with perpetual succession and a common seal. The headquarters of a registered company shall be situated in Nigeria. It has power to hold land; it can sue and can be sued in its registered name. Individual members or directors of the company are not personally liable for the acts or debts of the company. However, where the directors use the company to perpetrate fraud, any of the directors will be personally liable for the acts under the doctrine of lifting the veil of incorporation.

Procedure for Incorporation of Companies In Nigeria

a. Availability and Reservation of Name:

A foreign investor wishing to incorporate a company in Nigeria should enter the proposed name in the Corporate Affairs Commission (CAC) online Name Availability and Reservation of name and pay the prescribed fee. The selected name could be rejected if it is similar with the existing name. Were it is approved CAC will reserve the name for sixty days for the promoters to register it

b. Submission of relevant documents of the promoters such as valid means of identification of the directors, duly tamped Memorandum and Articles of Association which states the nature of the business. In accordance with S. 35 (5) (e), the CAC may require professional certificates depending of the type of company; Residence permit if the directors are resident in Nigeria; Full address of the corporate Headquarters; Two passports photographs ifit is a Business Name.

c. Payment of prescribed fee and issuance of ‘Certificate of Incorporation which is prima facie evidence that all the requirements have been fulfilled.

Corporate Affairs Commission Building, Abuja
Corporate Affairs Commission Building, Abuja

Exemption from Registration of a Foreign Company

There are exemptions to the rule that all foreign registered companies doing business in Nigeria must be registered. These exemptions include;

a. Companies invited to Nigeria by or with the approval of the Federal Government to execute specified individual projects;

b. Companies which are in Nigeria to execute specific loan project on behalf of donor country or international organisation

c.         Foreign government owned  companies engaged solely in export promotion activities

d. Engineering consultants and technical experts engaged in any of its agencies or any other body or person, where such contract has been approved by the Federal Government.

Such exemptions are usually granted for a fixed term of years and the President of Nigeria has power to revoke the exemption. In the event of a foreign company contemplating a long business presence in Nigeria, it is advisable for such foreign company to incorporate a local company.

Procedure for Obtaining Exemption from Registration

In accordance with Section 56 (2) of CAMA, a foreign company can apply for exemption from incorporation in Nigeria. Such application shall be addressed to the Secretary to Government of the Federation stating among others things;

i. The Name and place of business of the foreign company outside Nigeria,

ii. Name and place of proposed name and place of business of the foreign company in Nigeria,

iii.        The name and address of each Director, Partner or Principal officer of the company,

Abuja International Conference Centre
Abuja International Conference Centre

iv. A certified copy of the character, 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 English language, a certified translation,

v. Names and address of someone or persons resident in Nigeria authorised to accept on behalf of the foreign company service of process and any notices required to be served on the company,

vi. The business or proposed business in Nigeria of the foreign company and the duration of such business,

vii.       Particulars of any project previously carried out by the company as an exempted foreign company,

viii.      Such other particulars as may be required by the Secretary to Federal Government.

If the President upon receiving the application for exemption is of the view that such exemption could be granted, then subject to such conditions as maybe prescribed,  exempt the foreign company from obligations imposed by CAMA.

Other Issues To Settle: Immigration Matters

Among other issues a prospective foreign Nigerian investor will need to settle is an immigration issue by obtaining necessary visa and entry permits to avoid being deported as a prohibited immigrant. The following type of visa/entry permit is available;

  1. Transit Visa: This is granted to persons on transit with onward destination to another country,
  2. Business Visa: This is granted to persons visiting Nigeria on business trips
  3. Visa-On-Arrival: This is issued to applicant at the point of entry with prior approval of the Comptroller General of Immigration.
  4. Residence Permit: A prospective investor may enter Nigeria and stay for a short while as may be approved by Nigerian Immigration Service without residence permit otherwise he must obtain a residence permit which allows an expatriate to live and work in Nigeria on a long term basis.
  5. Temporary Work Permit: This permit is issued by Nigerian Embassy or Consular office in the country of residence of the intending employee. It is essentially issued to companies employing expatriates fora short period of time for services like installation, erection, repair or maintenance or services. It could also be granted for purposes of carrying out feasibility studies, research or other professional work. It should be noted that citizens of Economic Community of West African States (ECOWAS) can freely enter, reside and establish business in any member State subject to possessing; Valid Country’s Passport or ECOWAS Travel Certificate; Admission through approved Port of entry; Procurement of residence card which is valid for five years subject to passport validity.

Nigeria’s Efforts in encouraging investment in the country

The Federal Government of Nigeria introduced a policy with the aim of reducing reliance on oil by establishing the Nigeria Investment Promotion (NIPC) in 1995 to promote industrialisation of the country. Among the incentives provided by NIPC includes granting Pioneer Status Incentives which enables a registered company in Nigeria to enjoy tax holiday for up to 7 years. This is to encourage investors to make reasonable profit within their formative years and put back the profit into their business. Also a foreign investor having registered with NIPC is guaranteed unconditional transfer of dividends or profits attributed to the investment. In regards NIPC advices the Federal Government on policy matters designed to promote industrialization and create investment friendly environment for investors.

The NIPC provides services for grant of business entry permits, licenses, authorization and incentives in a one-stop shop environment. The One Stop Investment Centre offers general information and data on the Nigerian economy; facilitates post  entry approvals, licenses and permits with government agencies on profitable investment opportunities including matching investor’s requirements with opportunities available in the 36 States of the Federation and the Federal Capital Territory.

More so, the Nigerian government inaugurated the Presidential Enabling Business Environment Council (PEBEC) as an initiative to reform the business environment and attract investments. This among other reforms helped Nigeria to move from the 168th position in World Bank’s Ease of Doing Business Index in 2017 to 145th position in the 2018 report. Nigeria also joined Open Government Partnership which is aimed at improving ease of doing business among countries.

It is worthy to note that government has put a mechanism in place such that in event of any dispute between an investor and the Government in respect of investments, it is to be settled by negotiation between the parties. The last resort is to submit to arbitration at the option of the aggrieved party. These and other measures are aimed at making Nigeria a business investment destination for both local and foreign investors.

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