Laws And Regulatory Agencies That Govern Foreign Investment In Nigeria
The article contains the principal statutes, business laws and regulatory agencies that govern foreign investment in Nigeria. It features key Nigeria business laws and the investment regulatory agencies you will contact for a specific guide you need regarding stating or investing into a business in Nigeria.
Below is a list of 15 laws and regulatory agencies that govern foreign investment in Nigeria.
LAWS AND REGULATORY AGENCIES THAT GOVERN FOREIGN INVESTMENT IN NIGERIA
#1. Companies and Allied Matters Act (Chapter C20), LFN 2004 (“CAMA”)
This is the principal statute regulating the establishment and operation of companies in Nigeria. The CAMA establishes the Corporate Affairs Commission (“CAC”) as Nigeria’s companies’ registry, and the body responsible for the regulation and supervision of the formation, incorporation, registration, management and winding up of companies.
The CAMA also makes provision for the registration of business names and incorporated trustees. Foreign companies that wish to do business in Nigeria are required to do so through a locally incorporated entity.
Section 54(1) of the CAMA provides that every foreign company intending to carry on business in Nigeria must take steps necessary to incorporate as a separate legal entity with the CAC. Section 56 of CAMA empowers the Federal Executive Council to grant exemptions from the mandatory incorporation requirement to a limited category of foreign companies.
It is an offence for a foreign company to carry on business in Nigerian without being formally incorporated. There is presently a bill before the House of Representatives for the amendment of the Companies and Allied Matters Act (CAMA).
Read: The Companies and Allied Matters Bill 2018
#2. Nigerian Investment Promotion Commission Act (Chapter N117), LFN 2004 (“NIPC Act”)
The NIPC Act established the Nigerian Investment Promotion Commission (“NIPC”) as an agency of the Federal Government, responsible for encouraging and promoting investment in the Nigerian economy by both domestic and foreign investors.
The Act provides for various investment incentives and guarantees applicable to both foreign direct investments and foreign portfolio investments.
#3. Immigration Act 2015 (the “Immigration Act”)
Any foreigner wishing to take up employment in Nigeria (other than employment with the federal or a state government) is required to have a residence permit or a work permit issued by the Comptroller General of Immigrations.
Such persons are also required to apply for Visas at the appropriate diplomatic Nigerian Mission abroad. The required visas could be either a Subject to Regularization visa or a Combined Expatriate Residence Permit and Alien Card (CERPAC).
#4. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, (Chapter F34), LFN 2004, (the “FEMM Act”)
The FEMM Act sets out the rules and regulations which govern the operation of the foreign exchange market and provides a framework for the remittance of interest, dividends and principal payments in foreign currency by foreign investors.
#5. Investment and Securities Act No. 29 of 2007 (the “ISA”)
The ISA governs investments in the capital markets generally and provides for the establishment of the Securities and Exchange Commission (the “SEC”) as the apex regulatory authority for the Nigerian capital market.
Also relevant are the Securities and Exchange Commission Rules and Regulations (the “SEC Rules”) as amended in 2017, which are made by the SEC pursuant to powers which it has been granted by the ISA to regulate capital market activities and operators, including mergers, acquisitions, take-overs, and collective investment schemes.
#6. The Industrial Development (Income Tax Relief) Act, Chapter I7 LFN 2004 (“Tax Relief Act”)
The Tax Relief Act is the basis for the grant of Pioneer Industry Status (or “Pioneer Status”). The Pioneer Status Certificate is issued to exempt a company from payment of taxes for a period of 3 – 5 years.
In 2017, pioneer status was granted to 27 additional industries and the Federal Ministry of Industry, Trade and Investment issued new Application Guidelines for the issuance of Pioneer Status Incentives.
#7. Central Bank of Nigeria Act, Act No. 7 of 2007 (“CBN Act”)
The CBN Act established the Central Bank of Nigeria and conferred upon it the role and responsibility as the apex regulator of banks, the financial system as manager of Nigeria’s foreign currency reserve.
The CBN’s major function is to promote an efficient and effective financial system in Nigeria and to act as banker to the Federal and State governments and also to other banks. The CBN also provides economic and financial advice to the Federal Government.
SECTOR SPECIFIC REGULATIONS
#8. National Content Policy (Oil and Gas Sector)
A foreign consortium or a joint venture may obtain qualification acceptance, participate to tender and thereafter carry out and implement operations or transactions falling within the scope of the Nigerian oil and gas industry.
It is necessary to demonstrate local shareholding and compliance with the Nigerian local content policy applicable to the oil and gas industry. For ease of understanding, this will be discussed in two parts; (i) Local Content Policy (ii) Local Shareholding.
Read: Nigeria Local Content Policy & Shareholding
#9. Restrictions on Importation of Certain Goods
Although doing business in Nigeria has been greatly liberalized to ensure increased private sector participation, some goods are prohibited by the Nigerian government from being imported into Nigeria. They include: 1. Live or dead birds including frozen poultry; 2. Pork, beef, birds eggs, excluding hatching eggs; 3. Refined vegetable oils and fats (includes mayonnaise). Crude vegetable oil is NOT banned from being imported;
4. Cane or beet sugar and chemically pure sucrose, in solid form in retail packs; 5. Cocoa butter, powder, and cakes; 6. Spaghetti/noodles; 7. Fruit Juice in retail packs; 8. Waters, including mineral waters and aerated waters containing added sugar or sweetening matter or flavored, ice snow, other non-alcoholic beverages, and beer and stout (bottled, canned or otherwise packed, but excluding energy or health drinks (liquid dietary supplements); 9. Bagged cement;
5. Certain lists of Medicaments as indicated below: (1) Paracetamol tablets and syrups; (2) Cotrimoxazole tablets and syrups; (3) Metronidazole tablets and syrups; (4) Chloroquine tablets and syrups; (5) Haematinic formulations; ferrous sulphate and ferrous gluconate tablets, folic acid tablets, vitamin B complex Tablets (except modified released formulations); (6) Multivitamin tablets, capsules, and syrups (except special formulations); (7) Aspirin tablets (except modified released formulation and soluble aspirin); (8) Magnesium trisilicate tablets and suspensions; (9) Piperazine tablets and syrups; (10) Levamisole tablets and syrups; (11) Clotrimazole cream; (12) Ointments – penicillin/gentamycin; (13) Pyrantel pamoate tablets and syrups; and (14) Intravenous fluids (dextrose, normal saline, etc.); (15) Waste Pharmaceuticals.
6. Soaps and Detergents in retail packs only; 12. Mosquito Repellant Coils; 13. Sanitary Wares of Plastics and Domestic Articles and Wares of Plastics (but excluding Baby Feeding bottles) and flushing cistern and waterless toilets;
7. Rethreaded and used Pneumatic tires but excluding used trucks tires for rethreading of sized 11.00 x 20 and above; 15. Corrugated Paper and Paper Boards, and cartons, boxes and cases made from corrugated paper and paper boards, toilet paper, cleaning or facial tissue, excluding baby diapers and incontinent pads for adult use;
8. Telephone Re-charge cards and vouchers; 17. Carpets and other textile floor coverings; 18. All types of Foot Wears, Bags and Suitcases but excluding Safety Shoes used in oil industries, sports shoes, canvass shoes all Completely Knocked Down (CKD) blanks and parts;
9. Hollow Glass Bottles of a capacity exceeding 150mls (0.15 liters) of all kinds used for packaging of beverages by breweries and other beverage and drink companies; 20. Used compressors and used fridges/freezers; 21. Used Motor Vehicles above fifteen (15) years from the year of manufacture;
10. Furniture, but excluding baby walkers, laboratory cabinets such as microscope table, fume cupboards, laboratory benches, Stadium Chairs, height adjustments device, base sledge, seat frames and control mechanism, arm guide and head guides. Also excluded are; skeletal parts of furniture such as blanks, unholstered or unfinished part of metal, plastics, veneer, chair shell etc. Also excluded are Motor Vehicle seats and Seats other than garden seats or camping equipment, convertible into beds; and 23. Ball Point Pens and parts including refills (excluding tip).
Laws And Regulatory Agencies That Govern Foreign Investment In Nigeria
KEY BUSINESS AUTHORISATIONS AND APPROVALS
#10. Incorporating a Separate Entity
As noted above, CAMA requires a foreign company, which intends to do business in Nigeria, to be incorporated as a separate entity in Nigeria. An exemption can only be granted by the Federal Government of Nigeria and is usually only granted for specific government-related projects. The business incorporation process is now fully automated in twenty-one (21) states of the Nigerian Federation.
#11. Foreign Ownership of a Nigerian Company
Foreign investors may own 100% of the equity of a limited liability company. Accordingly, there is no requirement that the company to be established in Nigeria should have Nigerian shareholders. Similarly, other than certain matters set out in the “negative list” and regulated sectors like the broadcasting and oil and gas sectors, a Nigerian company that is 100% foreign owned may engage in the same businesses as a Nigerian company that is wholly or partially owned by Nigerians.
The negative list comprises sectors of investment prohibited to both foreign and Nigerian investors, which are: a. Production of arms, ammunition etc; b. Production of and dealing in narcotic drugs and psychotropic substances; c. Production of military and para-military wears and accoutrement, including those of the Police and the Customs, Immigration and Prison Services; and d. Such other items as the Federal Executive Council may, from time to time, determine.
#12. Foreign Investment Approvals
3.1. Business Registration (Companies with Foreign Participation)
The NIPC Act provides that all Nigerian companies with foreign participation in their shareholding structure should be registered with the NIPC following their incorporation.
3.2. Business Permit
Following the registration of the business at the NIPC, a company registered in Nigeria with foreign shareholders must apply for a Nigerian business permit in order to do business. This business permit authorizes the company to carry on business in Nigeria.
3.3. Expatriate Quota Approvals
A company intending to employ expatriates i.e. foreign nationals must comply with the Immigration Act by applying for expatriate quota positions for the relevant number of expatriate personnel it intends to employ. An expatriate quota is an authorization that establishes the maximum number of expatriates that a company may employ. The Federal Minister of Interior has the discretion to determine the number of quota approvals.
3.4. Resident Permits and Visas
After the grant of the expatriate quota positions, the expatriate employees of the company placed on the quota positions are required to obtain a Subject-To- Regularisation (STR) visa from the Nigerian Embassy/High Commission in their country of usual residence to enable them to come into Nigeria for the purpose of taking up employment.
3.5. Certificate of Capital Importation (“CCI”)
Nigerian law permits foreign investors to purchase any amount of foreign exchange for the purpose of remitting, for example, dividends and the free repatriation of capital subject to the provision of appropriate documentation.
One of such documents is the Certificate of Capital Importation (the “CCI”) to be obtained from an authorized dealer (a Nigerian bank or financial institution authorized by the Central Bank of Nigeria to engage in foreign exchange activities) as evidence that the investor has actually brought capital/funds into Nigeria e.g. for making its equity contribution to a Nigerian company.
The CCI is necessary to repatriate royalties, fees, and dividends. Physical CCIs have now been phased out by the Central Bank of Nigeria and the electronic CCI system took effect in September 2017.
3.6. National Office for Technology Acquisition and Promotion (“NOTAP”) Certification
If a foreign company intends to provide technical management or technical assistance to a Nigerian entity, it will be advisable for the foreign company to enter into a technical services, training or management agreement with the Nigerian company.
This agreement will have to be registered with NOTAP in accordance with the provisions of the National Office for Technology Acquisition and Promotion Act LFN 2004 (the “NOTAP Act”).
#13. Sector – Regulated Approvals
In addition to the authorizations and approvals discussed above, there are sector-specific approvals required in order to carry on business in some sectors. Some of such sectors include banking, securities, oil and gas, aviation, insurance, telecommunication, manufacturing of food and beverages and the hospitality sectors.
In the oil and gas industry, for instance, approvals are required from the Department of Petroleum Resources – which regulates the Nigerian oil and gas industry, and the Nigerian Content Development and Monitoring Board (the “NCDMB”) – which is the body that is responsible for the implementation of the provisions of the Local Content Act.
#14. Tax Registration
A company incorporated in Nigeria is required to be registered with the relevant tax authorities for tax purposes. Following the incorporation of the company, a Tax Payer Identification Number (TIN) is automatically generated for the new company. This TIN is to be used when remitting taxes due to the Federal Government. Taxes imposed by State Governments require separate taxpayer registration.
#15. Miscellaneous – opening a Bank Account
Although there is no legal requirement to do so, for practical purposes, it is advisable for the local company to open an account with a Nigerian bank. For instance, any capital in the form of cash that will be injected into the local company by any of its offshore partners through the official foreign exchange market will need to be paid into a bank account held with a Nigerian bank. Once the local company is incorporated, the process of opening an account with a Nigerian bank is relatively simple.
#16. Checklist to Setup a Company in Nigeria
The process for the registration of businesses in Nigeria is fully automated and requires online filling of the Application for Registration of a Company (Form CAC 1.1) and the upload of relevant documents. To incorporate a Private, Public or Unlimited Company Limited by Shares in Nigeria, the following are required:
- Information regarding: i. A primary choice of name and an alternative choice of name for your company; ii. The company’s share capital and details of share allotment; iii. The company’s registered office address; iv. Details of the company secretary; v. Details of the company’s first directors; and vi. Details of the shareholders.
- The company’s Memorandum and Articles of Association;
- Valid Means of Identification for the directors, shareholders, and the company secretary; and
- Residence Permit (where applicable).
To incorporate a company Limited by Guarantee, in addition to the information listed in (a) to (d) above, a Letter of Consent from the Attorney General of the Federation is also required.
The content of this article is sourced from Mondaq and it’s intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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