Multinational companies that are entering the Nigerian market are typically firms that have experienced success in their home country and in other international markets. Therefore, as a business executive of a company looking to enter the Nigerian market, you probably read this title and exclaimed that you already know how to start a business.
However, starting a business in Nigeria is a unique experience given how different the market is compared to other emerging and established markets. Whether you are working with a local business partner or incorporating a local entity in Nigeria, there are specific setup requirements you should adhere to as you build your organization’s presence in the Nigerian market.
As you already know, setting up a business so that you can legally conduct operations in any area can be a very time-consuming process. Therefore, learning how to start a business in Nigeria by understanding the requirements ahead of time can help get your organization up and running faster. Gaining an understanding of what is required of your business can also give you a competitive edge in the Nigerian market.
Listed below are the steps you should take when setting up business operations in Nigeria.
- Decide on a business model.
There are two different paths that most companies take to establish and grow their business in Nigeria. Most international organizations choose to either incorporate a local entity in Nigeria to maintain ownership and control over daily operations or to partner with a local business that will use their local market knowledge to handle most of the company’s “on-ground” operations. Nevertheless, both options have their pros and cons that should be taken into account before making your decision.
- Hire your first employee.
If you decide to incorporate a local entity you will be in charge of hiring staff to oversee operations in your office in Nigeria. Your first hire will most likely be a business manager who will serve as the person to champion your business priorities on a daily basis. Therefore, hiring the right employee is essential to your business’s success in this country.
Although hiring great employees is a necessity, finding quality staff members have also proven to be a challenge when it comes to conducting business in Nigeria. To prepare yourself for this task, seek out advice and guidance from local experts to help the process move quickly and efficiently.
- Know the rules and regulations in place.
Learning how to start a business in Nigeria should include gaining an understanding of the local rules and regulations in place in regards to commerce. Product registration can seem like an opaque process, however, there are two major governmental agencies that you should be aware of when it comes to registering your merchandise. Those agencies are the National Agency for Food and Drugs Administration and Control (NAFDAC) and Standards Organization of Nigeria (SON).
If you are importing products into Nigeria, then your product will have to go through pre-shipment certification, which is conducted by SON, as well as NAFDAC registration. The SON Conformity Assessment Program (SONCAP) was put in place so that Nigeria imports can be verified and tested in the country from which they were supplied before they are shipped. By obtaining a SONCAP Certificate, which is issued by the agency, you are demonstrating that your products meet Nigeria’s applicable standards and regulations.
- Learn the local taxation laws.
Whether you decide to pursue the incorporation route or partner with a local entity to conduct business in Nigeria, you will need to know the local tax laws and how they will affect your business. If you choose to incorporate in Nigeria, you should familiarize yourself with the federal taxes (Corporate Income Taxes) that your company will have to pay. However, if you decide to work with business partners in Nigeria, understanding the import tariffs for products that you will be shipping is important as you take cost into account while developing a pricing strategy for your products.
- Set up a bank account for your business.
Setting up a bank account in Nigeria will allow your company to remit funds as needed between your parent bank account so that you can operate efficiently as an incorporated entity or alongside a local business partner. You can set up a bank account using the local Nigerian currency, Naira, or a domiciliary account with a foreign currency, such as the Dollar or Euro. Keep in mind that to set up a corporate bank account you have to be incorporated in Nigeria and get a tax identification number to begin the bank registration process.
While helpful information is provided in this article as to how to start a business in Nigeria, the advice listed only highlights the fundamentals. You should still seek legal guidance and more information on Nigeria’s regulatory landscape before setting up your business in this country. Every corporation is unique, so once you have selected a good corporate lawyer to assist you, your company will be well on its way to securing a place in the Nigerian market.