Foreign companies that make an entry into the Nigerian market usually mitigate their risk initially by partnering with a local agent or distributor. After the company has gained some traction in the market some companies expand their business presence in the country by incorporating a local entity to facilitate their business operations and growth.
Through incorporation, a multinational firm can take over more control of its brand, its marketing strategies and the long-term strategic trajectory of its business in Nigeria. The regulatory considerations for setting up a foreign-owned business is quite different from the regulatory considerations of working with a local distributor, agent or partner.
Here are the 5 mandatory steps required to incorporate a foreign company in Nigeria:
Step 1
Incorporation of a Limited Liability company with a share capital of N10m (Ten Million Naira) at the Nigerian Corporate Affairs Commission (CAC).
All companies intending to operate in Nigeria must be registered with the CAC. The minimum share capital which a company must have is N10,000. However, for Foreign-owned companies, the minimum share capital is N10,000,000 (Ten Million Naira). The process to register is fairly straightforward, and normally takes about 2-4 weeks.
Step 2
Obtain a Tax Identification Number and register for Value Added Tax at the Federal Inland Revenue Service – TIN and VAT Registration. The first action for every company after incorporation is to obtain a tax identification number. This number is what the company will use when paying for corporate tax and all other taxes. Also important is registering for VAT – companies are agents of the tax authorities when collecting VAT on goods and services. Also, companies are expected to file monthly VAT returns to the tax authorities. The process for tax registration takes between 1-2 weeks depending on the location of the tax office.
Step 3
Open Domiciliary Bank Account with a Commercial Bank in Nigeria and obtain Certificate of Capital Importation. Once a foreign company sets up in Nigeria, the next thing after registering for tax is to open a corporate bank account. This bank account is where the founders will pay the minimum paid up share capital. Once this is done, the company will need to obtain a certificate of capital importation from its bankers. This document certifies that the funds have been remitted into the bank account, and it is also necessary for future purposes when the company wants to repatriate profits of the company outside of the country. The documents required and timelines depend on the bank where the account is opened.
Step 4
Registration at the Nigerian Investment Promotion Council (NIPC). The NIPC is a body set up by the Federal Government of Nigeria with the aim of encouraging, promoting and monitoring foreign investment into Nigeria. It is in fulfilling this role of investment monitoring that the NIPC requires that all foreign owned companies in Nigeria should be registered with it.
Step 5
Obtain a Business Permit from the Nigerian Ministry of Internal Affairs. The final step for a 100% foreign owned company is that it needs to be registered with the Federal Ministry of Internal Affairs, and obtain a business permit. This permit is important not only because the company cannot commence trading without it, but also because it is a precondition for the company to obtain an Expatriate Quota and commence work permit applications if it intends to hire foreign workers.
And there you have it, the 5 steps to setting up a foreign owned business in Nigeria. Once this is done, the next phase is to ensure that you comply with all business operation regulations. For instance, depending on the nature of the business you have set up, you might be required to register with certain regulatory bodies. This will be specific to each business, and therefore it is impossible to cover all the regulatory procedures in this article.
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.
