Business Opportunities in Nigeria
Nigeria is Africa’s most powerful economy with the largest population. It is a prominent member of the Economic Community of West African States (ECOWAS). Hence, it enjoys the benefits of customs duty exemptions. Also, Nigerian firms can benefit from the ECOWAS’ 15 member nations’ free trade agreement.
Every year, Nigeria draws many international investments. According to the United Nations, despite the outbreak of COVID-19, Nigeria’s inflow of Foreign Direct Investment (FDI) grew by 4.3% in 2020. As the market grows, the government continues to implement legislation fostering a favorable business climate for national and foreign investors.
Benefits of Starting a Business in Nigeria
The Nigerian government encourages foreign investment, and hence, business owners can enjoy the following advantages of doing a business in Nigeria:
- Increasing business opportunities: Nigeria has a long history of being a gasoline-driven economy, with the world’s second-largest fuel reserve within its borders. However, new company sectors have emerged lately, with the consumer market enthusiastically adopting more unique businesses to simplify consumer lifestyle through outstanding products and services.
- Enhanced Networking options: Nigeria’s market has evolved into a collection of enterprises that work together to assure convergent industrial progress through cooperation. This trend has substantially influenced the networking habits of many companies across industries. A cooperative model creates a trust basis for partnerships, joint ventures, and large-scale investments in emerging start-up companies. Additionally, good networking facilities allow foreign entities to enter and socialize with diverse enterprises to develop a mixed economy.
- Government grants and subsidies: The government offers numerous beneficial incentives to foreign national enterprises and business owners to aid Nigeria’s short and long-term operations.
Requirements for Starting a Business in Nigeria
Launching a new business in Nigeria requires you to follow a step-by-step application and documentation process. The general requirements for starting a business in Nigeria are:
Company registration
Foreigners looking to start a business in Nigeria must form a corporation with a minimum share capital of N10 million. A business name or sole proprietorship registration is exempt from this share capital requirement.
Registering with the Nigeria Investment and Promotion Commission (NIPC)
Foreigners investing or participating in any investment in Nigeria must first register with the NIPC. NIPC’s mission is to encourage and organize investment in Nigeria.
Tax clearance certificate and tax registration
When setting up a business in Nigeria, it is essential to register for the tax clearance Certificate, tax identity number, and a value-added tax number with the Federal Inland Revenue Service. You can remit your business taxes using the tax identification number.
Business permit
A business permit is essential for foreigners starting a business in Nigeria. Every foreign-owned company must apply for a business permit with the Ministry of Interiors.
Expat quota
The expatriate quota will be necessary for foreigners planning to work for companies that employ ex-pats. Only corporations with a share capital limit can apply ex-pat quotas for their foreign employees.
Opening bank account
To start a business in Nigeria, you must first create a corporate bank account. Incorporation certificate and paperwork, valid identification proof, company’s board resolution document, Tax Identification Number, and bank verification number are prerequisites for opening a bank account.
Appointing auditors
You must fulfill the criteria for appointing auditors for your company in Nigeria. Corporations limited by shares must hire an auditor to prepare and audit company accounts.
Company Secretary
To comply with the rules of CAMA (Companies and Allied Matters Act), corporations limited by shares must appoint a company secretary. The company secretary has statutory and administrative responsibilities, including maintaining statutory books and making yearly reports.
Property acquisition for commercial operations
Business owners planning to start commercial operations in Nigeria must acquire a business location or property. A takeoff address is required for registering a foreign business in Nigeria. This condition applies to all company types in Nigeria.
Types of Business Structures in Nigeria
The primary law governing establishing a business in Nigeria is The Companies and Allied Matters Act (CAMA). In Nigeria, there are a variety of business entities that may be registered. Management, responsibility limits, cost, the difficulty of creation, tax consequences, purpose, capital, and continuous operation all determine the type of business to start.
In Nigeria, different types of business structures may be established; each structure has its own unique identity and set of requirements to meet the firm’s needs.
Sole Proprietorship
Sole Proprietorship is the most basic of the company structures offered. A sole proprietor is an individual controlling and running a business under his name. The company name does not have a separate legal identity from the owner. The debts of the firm are the exclusive responsibility of the sole proprietor. Traders, home enterprises, and other small firms can benefit from this company form.
Partnership
This business entity is a group of a minimum of two and a maximum of twenty people working together as a partnership under a company name. All partners are jointly liable for the business’s debts, just as they are in a Sole Proprietorship. Hence, it’s crucial to think carefully about who you are involved in a partnership with because all partners are equally accountable for their activities.
Limited Liability Partnership
Partnerships in Lagos State, Nigeria, can be registered as limited liability partnerships under the Partnership (Amendment) Law of Lagos State (2009). This business entity makes the partners liable only to the extent of their capital invested and partnership agreement. It gives the partnership a separate legal identity from its partners.
Company
A company can be a private corporation, a limited liability corporation, or an unlimited corporation. Companies in Nigeria exist independently of their members or shareholders. As a result, the shareholders’ responsibility is limited to the amount of their paid or unpaid shares. Incorporating a company in Nigeria requires a minimum of two people above 18 years.
Company Registration Process in Nigeria
The processes involved in registering a business, whether a private company limited by shares, a public company, or an unlimited corporation, are outlined below:
Step 1
The first step is to check the availability of business names. You must go to the CAC’s official website to confirm the availability of the proposed name. The CAC will only reserve your company name if it is available, i.e., an existing company does not use it.
Step 2
Complete the pre-registration forms by providing the following details:
- The approved company name and business type
- Description of the company’s activity or trade
- Details of the registered office address, e-mail id, and phone number
- Preparation of the Company’s Memorandum and Articles of Association document using the standard template provided by the Corporate Affairs Commission (CAC).
- Details of the individual exercising maximum control over the company
- Details of the company secretary. It is optional for small private companies to appoint a company secretary. However, private and public companies must appoint one company secretary.
- Details of the directors and shareholders, including name, address, nationality, gender, phone number, e-mail id, and date of birth.
- The issued share capital statement with detailed information like the number of shares issued to each individual, the dividend distribution ratio, and the ratio of capital distribution on company dissolution.
Step 3
Pay the filing fee and stamp duty. The Memorandum and Articles of Association are affixed with the electronic stamp after you clear the payment for filing and stamp duties.
Step 4
Prepare, scan, and upload necessary documents, such as identity proof of the director, shareholders, and witnesses, their signatures on plain white paper, certificate of incorporation, and company resolution document.
Step 5
The final step is submitting all documents for registration to the CAC for approval.
How Much Does it Cost to Incorporate a Company in Nigeria?
The minimum capital requirements for company incorporation in Nigeria are about NGN 27500.
The cost of incorporating a business in Nigeria includes registering a name, incorporation documents, payment of stamp duties, charges involved in the signing the declaration at the state High Court, incorporation fees, company seal, and registration of the business premises with the State Ministry of Commerce, Industry, Cooperatives, and Tourism.
Are Foreigners in Nigeria on Certain Passes Allowed to Start a Business?
Nigeria has a free-market economy, with no limitations on foreigners launching businesses there. According to Nigerian rules, a foreign individual or corporation can set up a wholly-owned firm in Nigeria and operate, hire expatriates, and repatriate earnings. Thus, starting a business in Nigeria is open to all foreigners.
Government Assistance for Foreign-owned Businesses in Nigeria
Nigeria is Africa’s most significant investment market. It provides investors with fiscal incentives, investment guarantees, and a stable political and legal climate, making it a haven for foreign investors.
Moreover, Nigeria has a low corporation tax rate, VAT rate, flexible labor market circumstances, and specific business registration requirements.
How Can Multiplier Help?
Nigeria has become a popular destination for starting a business because of its cheap labor, well-connected infrastructure, increasing population, and vibrant culture. It exhibits tremendous growth opportunities, attracting foreign investors to incorporate a business in Nigeria.
Setting up a business involves significant capital investment. Thus, to check the possibility and start the operations, investors should benefit from the services of global EOR companies such as Multiplier.
Multiplier would help the investors commence the business operations without actually incorporating a business in Nigeria. Our experts cover talent onboarding requirements, payroll management, and international team management. Plus, we ensure to draft work contracts and process employee payroll in compliance with Nigeria’s laws. Thus, you can test the Nigerian market and hire talented employees at a cheaper cost without worrying about compliance with regulations.