A lot of international firms especially those new to the market, usually mitigate their risk by working with a local partner and distributor in Nigeria. The company leverages the distributor’s local knowledge and expertise to properly navigate the business landscape in Nigeria. In such working arrangements, the international firm may not need to setup a legal entity to carry out its operations in Nigeria. However there are still some legal requirements that the company has to consider.
Here are some regulatory considerations when working with a local distributor in Nigeria.
Once your company has gone through the painstaking task of finding credible distributors, the first thing you want to do is to verify that the local partner is registered as a legal entity to do business in Nigeria. You can start by performing a quick and free public search here. This search only gives you the name of the company, the address, and the year the company was registered. To get a more detailed search report on the company, a paid search can be carried out by accredited agents. A paid search can take 1-7 days to complete.
This requirement varies and is dependent on the product that your company wants to distribute in Nigeria. However, if the company is bringing in a branded product, they would have to register the trademark for the brand in Nigeria and in order to do that they will need to sign a Power of Attorney. This trademark registration is also needed as a pre-requisite for other regulatory approvals.
Some products have to be registered at the National Agency For Food And Drug Administration And Control NAFDAC before they can be legally sold in Nigeria. If your company is distributing food, drugs, cosmetics, medical devices, bottled water or chemicals, then your product will have to be registered with Nafdac. One of the things that NAFDAC asks for as a pre-requisite is evidence that your trademark has already been registered in Nigeria.
Once your firm has chosen its distribution model it will sign a contract with its distributor or franchisee. This agreement is a legally binding contact between the owner of the products and the distributor. This agreement specifies the rights, costs and responsibilities of the parties in relation to the distribution of the products. Depending on the nature of the distribution, the agreement might have to be registered with an organization called NOTAP (National Office for Technology Acquisition and Promotion). This extra registration step is needed when a franchise agreement is signed.
Letter of credit
When it comes to payment, a lot of distributors in Nigeria use a letter of credit to facilitate payments with international companies. A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Understanding the proper terms of payment with your distributor ahead of time, will speed up your process of partnership with the local distributor.
These are some of the common legal frameworks to familiarize yourself with as you consider working with credible distributors in Nigeria. To make sure you are properly mitigating your risk, get guidance from a credible lawyer in Nigeria that can assist with appropriate regulatory approvals.
We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.