With a current population of over 200 million, Nigeria has been projected to become the fourth most populous country by the year 2050. The large population and the business-friendly policies introduced by the current government have made Nigeria a destination of choice for investors worldwide.
The AfCFTA Agreement which came into effect on the 1st of January 2021, creates new opportunities for businesses that already have their eyes on the country. To put this in context, Nigeria contributes an estimated 76% of total trading volume in the ECOWAS region. This is made possible due to the ECOWAS treaty, which allows the free movement of people and goods throughout 15 West African countries. The AfCFTA provides access to 54 African countries with a population of 1.2 billion and a market worth a combined $2.6 trillion in GDP.
Despite these opportunities, expanding your business into Nigeria is not without its challenges. Having successfully partnered with various international organisations to expand their business into Nigeria, we have put together crucial 11 steps that businesses planning to expand into Nigeria have to undergo to set up their business in Nigeria successfully. We hope you find this list useful.
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How to Successfully Set Up a Company in Nigeria
Incorporate your company with CAC
The first requirement for foreign companies willing to start a business in Nigeria is to register the company with the Corporate Affairs Commission (CAC).
Foreign-owned companies must commence registration of the company with a minimum of N10,000,000 authorised share capital. The business certificate of incorporation from the CAC should be available within five working days after submitting all the required documents.
Obtain a tax identification number (TIN)
After incorporation, the next requirements are to obtain a Tax Identification Number (TIN) and Value Added Tax (VAT) registration with the Federal Inland Revenue Service.
A tax clearance certificate (TCC) is also a crucial document issued by Federal Inland Revenue Services (FIRS) or States Inland Revenue Service showing that the applicant’s tax affairs are in order. A company registered in Nigeria is subject to a number of tax obligations which include: Company Income Tax, Capital Gains Tax, Education Tax, Value Added Tax (VAT), and Withholding Tax.
Open a local bank account
The next step for foreign companies setting up in Nigeria is to open a corporate bank account where the minimum required share capital will be paid. Once this is done, the company will also need to obtain a certificate of capital importation from its bankers.
The certificate of capital importation allows the foreign investor access to the official foreign exchange market to remit its dividends or to repatriate its capital in the event of the partial or complete sale of its investment. The documents required and timelines for this process is largely dependent on the bank where the account is opened.
Register with the Nigerian Investment Promotion Commission (NIPC)
Foreign companies are required to register with the Nigerian Investment Promotion Commission (NIPC) before carrying on business in Nigeria. The Commission coordinates, monitors, encourages, and provides necessary assistance and guidance for the establishment and operation of enterprises in Nigeria. Registration with the NIPC is a prerequisite for a business permit.
Obtain a Business Permit
Foreign companies that wish to set up their business in Nigeria require a business permit which is issued by the Ministry of Interior. A business permit is essential not only because the company cannot begin trading without it, but it is also a prerequisite for the company to obtain an Expatriate Quota and begin work permit applications if it intends to hire foreign workers.
Obtain a Nigerian expatriate quota
All foreign companies that intend to employ foreigners in Nigeria must have an expatriate quota, which refers to the allowable number of foreigners that can be employed by international businesses that wish to operate in Nigeria. In Nigeria, there are two types of expatriate quota approvals, the Permanent Until Reviewed (PUR) and Temporary Expatriate Quota.
Get acquainted with the immigration and residence permit requirements in Nigeria
The Ministry of Interior issues residence permits in Nigeria to immigrants that wish to reside in the country. The immigration permits available to foreign companies or their employees include Resident or Work Permits, Temporary Work Permit (TWP) and Subject to Regulation Visa (STR).
Obtain a specialised operating license if your business needs one
For companies that intend to carry out operations in specialised sectors, there is the need to obtain relevant licenses and permissions from the relevant authorities. Some of these industries include; Oil & Gas Sector, Telecommunications Sector, Financial Sector, Solid Minerals Sector, Pharmaceuticals and Food sector, among others.
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Obtain an export certificate if your business needs one
Obtaining an export certificate is essential for companies that intend to export goods or raw materials out of Nigeria. The two government agencies that grant export licenses or certificates are The Nigeria Export Promotion Council (issues out export licenses for agricultural products and manufactured goods) and The Federal Ministry of Solid Minerals Development (grants licenses for extraction and exportation in Nigeria).
Understand the local labour law requirements
The Labour Act in Nigeria requires that all employers must give their employees a written agreement within three months of the commencement of employment, adequately stating the employee’s position and job description, the terms and conditions of the contract, confidentiality clauses, intellectual property rights, hours of work, remuneration, holiday and holiday pay, etc.
Partner with a reliable local service provider
Foreign companies that wish to expand their business into Nigeria are at risk of unknowingly flouting local compliance requirements that can lead to adverse legal and reputational consequences. Partnering with a domestic Professional Employer Organization (PEO) helps international companies mitigate the risks of expanding into the country.
Nigeria as a target for business expansion is difficult to ignore; however, despite the best intentions, expanding into any new market comes with a significant amount of risk if approached incorrectly, potentially resulting in wasted investments of time and money.
Partnering with capable local companies can be invaluable; their understanding of the local terrain, laws, insight into the domestic consumer market, and partner network can give your business the required advantage that assures your success in Nigeria. This strategy has been by far the most widely adopted by investors and heads of multinational companies operating in Africa.
If you need a trusted One-Stop PEO Strategic partner with a track record of providing world-class services to support your business expansion into Africa, African Ally can be of help. As a leader in the PEO industry, African Ally is uniquely positioned to help foreign companies seeking to enter the African market navigate the challenges of setting up and establishing successful businesses in Africa. Click here to have a quick chat with us.