THE LEGAL FRAMEWORK FOR FOREIGN COMPANIES DOING BUSINESSIN NIGERIA

Nigeria is a leading economy in Africa and a key focus market for

several American, European and Asian businesses and enterprises.

Apart from its diverse mineral and natural resources, the nation

occupies an enviable position as the leading economy in Africa and the

preferred destination for foreign investors. In a bid to attract foreign

investors to Africa’s most populous country, the Federal Government

enacted several regulations and has provided incentives to ensure a

conducive environment for their investments.

Foreigners whether individuals or corporate entities may invest in and

participate in the operation of any enterprise in Nigeria except those

listed in the negative list in the Companies and Allied Matters Act 2004

(CAMA), for which special consent must be sought and obtained.

Foreign investors including companies incorporated outside Nigeria

desiring to carry on business in Nigeria must first register their

business with the Corporate Affairs Commission, except where exemp-

tion from incorporation is obtained from the Federal Government.

However, investors could hold portfolio of investments in Nigeria

without necessarily registering a local entity. Under CAMA, a legal

entity may be an incorporated company, incorporated trust or a

business name (i.e. sole proprietorship). An incorporated company

may either be a private company or a public company and may have

limited or unlimited liability status.

There are primarily two modes of foreign participation depending

on the area of interest. These are: Foreign Direct Investment and

Foreign Portfolio Investment.

FOREIGN DIRECT INVESTMENTa)

Foreigners may participate directly in business in Nigeria by incorporat-

ing a company solely or jointly with Nigerians partners. In this situation,

the foreigner forms the Company and participates in the management

of the Company. Foreign Direct Investment showcases a measure of

foreign ownership of productive assets, such as factories, mines and land.

As earlier noted, a foreigner may do any business in Nigeria except those

listed in the negative list1.

FOREIGN PORTFOLIO INVESTMENTb)

A foreigner may elect to participate indirectly in business in Nigeria by

buying shares in Nigerian companies. Here the foreigner purchases

stocks and bonds usually through a stockbroker, via private placement or

direct application for allotment. This form of investment basically involves

the passive holding of securities, none of which entails active manage-

ment or control by the investor.

Key legislation governing foreign participation in business in Nigeria are

discussed below:

The Nigerian Investment Promotion Commission Act (NIPC ACT) created

the Nigerian Investment Promotion Commission ("NIPC") to advice the

Federal Government on policy matters designed to promote the industri-

alization of Nigeria, identify specific projects and invite interested

investors to participate in those projects.. The NIPC was also established

THE NIGERIAN INVESTMENT PROMOTIONCOMMISSION ACT, CAP N117, LFN 2004

Digest

1The negative list includes arms and ammunition; narcotic drugs and psychotropic substance; para-military and military wears

Foreign companies invited to Nigeria with the approval of the

Federal Government to execute a project.

THE COMPANIES ANDALLIED MATTERS ACT

One of the principal laws governing the formation and regulation of

business enterprises in Nigeria is the Companies and Allied Matters Act.

This Act establishes the Corporate Affairs Commission. By Section 54(1) of

CAMA every company incorporated outside Nigeria which desires to

carry on business in Nigeria shall take all steps necessary to obtain

incorporation as a separate entity in Nigeria for that purpose. Until so

incorporated, the foreign company shall not carry on business in Nigeria

or exercise any of the powers of a registered company and shall not have

a place of business or an address for service of documents or processes in

Nigeria for any purpose other than the receipt of notice and other

documents, as matters preliminary to incorporation under this Act.

CAMA however provides for certain categories of entities which may be

exempted from incorporation. These include:

INVESTMENT ANDSECURITIES ACT 2007

The Investment and Securities Act 2007 (“ISA”) makes comprehensive

provisions on issues relating to securities and investments in Nigeria. The

ISA further provides for the obligatory maintenance of accounts for

clients’ funds by market operators, dealers, amongst others, separate

from their business accounts. The ISA also covers the public offer and sale

of securities and investments to the public, mergers, takeovers and

acquisition, investment schemes, registration of securities and registra-

tion of interests in securities and capital market operators, amongst

others.

as a one-stop-shop to maintain a liaison between investors and

ministries, government departments and agencies, institutional

lenders and authorities concerned with investment. Section 18 of

the Act provides that non-Nigerians may invest and participate in

the operation of any enterprise in Nigeria except those listed in the

negative list. For the purpose of promoting identified strategic

investments, the NIPC is empowered to, in consultation with appro-

priate Government agencies, negotiate specific incentive packages.

A foreign investor, before commencing business is required to

register with the NIPC by virtue of Section 20 of the NIPC Act. To

circumvent the avalanche of regulations that need to be complied

with by foreigners desirous of doing business in Nigeria, the NIPC set

up a “One-Stop Investment Centre” to ease company set-up and

procurement of relevant permits and licenses.

"Nobody has a more sacred obligation to obey thelaw than those who make the law."

-Sophocles

Quote

a.

Foreign companies which are in Nigeria for the execution of a

loan project on behalf of a donor country or international

organization.

b.

Foreign government owned companies engaged solely in

export promotion activities.

c.

Engineering consultants or technical experts engaged in any

project under contract with a government, any of its agencies

or any person where such a contract has been approved by the

Federal Government.

d.

BUSINESS PERMIT

OTHER REQUIREMENTS RELATINGTO FOREIGN PARTICIPATION INBUSINESS IN NIGERIA

Companies with foreign interest must obtain a Business Permit before

beginning their business or trade in Nigeria. This permit allows for the

local operation of a business with foreign interest and is issued by the

Federal Ministry of Interior.

EXPATRIATE QUOTA

Where a company either local or foreign intends to employ expatriates

and immigrants, it must apply for Expatriate Quota positions for the

relevant number of expatriate personnel and job designation it intends to

employ. This approval is granted by the Federal Ministry of the Interior

and is usually sought and obtained along with the Business Permit if the

business is fully or partly foreign owned. The Nigerian Immigration Act

2015 empowers the Nigerian Immigration Service and the Nigerian

Ministry of Interior to regulate the migration of foreigners into Nigeria.

RESIDENCE PERMIT

This permit is granted to a foreigner who is employed by a local Nigerian

entity and enables the expatriate to reside and work in Nigeria. The

expatriate employee is first issued the Subject to Regularization (STR)

Visa which allows him/her entry into Nigeria. The STR Visa is regularized

into a Residence Permit called Combined Expatriate Residence Permit

and Alliens’ Card (CERPAC). Residence Permit has a validity period of two

years and is renewable. However, a foreigner who has imported an

annual minimum “threshold of capital” over a period of time may be

issued a Permanent Residence Permit in so far as the investment capital

is not withdrawn and the foreigner has complied with any other condi-

tion prescribed for the issuance of the Permanent Residence Permit.

This is the primary foreign exchange control legislation. It estab-

lished an Autonomous Foreign Exchange Market and liberalized

dealings in foreign exchange. The Act guarantees foreign investors

unconditional repatriation of funds relating to their investment in

Nigeria subject to the payment of relevant taxes etc., provided the

funds were imported into Nigeria through an authorized dealer. By

virtue of Section 15 of the Act, a Certificate of Capital Importation

shall be issued to any person who imports capital into Nigeria

through an authorized dealer (banks licensed by the Central Bank of

Nigeria to deal in foreign exchange) as evidence that their invest-

ment has been brought into Nigeria and to enable the Investors

access the official foreign exchange market.

THE FOREIGN EXCHANGE (MONITORINGAND MISCELLANEOUS PROVISIONS)ACT CAP F34, LFN, 2004

The National Office for Technology Acquisition and Promotion Act

Cap N62, LFN, 2004 Act requires contracts between foreign investors

and Nigerians for transfer of technology to be registered with the

National Office for Technology Acquisition and Promotion (NOTAP)

not later than 60 days from the execution of the agreement. The

NOTAP issues a Certificate of Registration to evidence the registra-

tion.

It is pertinent to point out that the Federal Ministry of Finance, the

Central Bank of Nigeria and other licensed banks in Nigeria are

barred from making payments due under a contract or agreement

involving transfer of technology, unless the Certificate of Registra-

tion is presented by the party or parties concerned together with a

copy of the Contract or Agreement certified by NOTAP.

NATIONAL OFFICE FOR TECHNOLOGYACQUISITION AND PROMOTION ACT(NOTAP ACT) LFN 2004.

The NIPC Act guarantees unrestricted transferability of investment

and proceeds thereon from Nigerian when desired by Investors,

subject only to the payment of appropriate taxes. Thus, foreign

investors can transfer their capital, profits and dividends (less taxes)

attributable to their investments, in any convertible currency uncon-

ditionally through an authorized dealer. Funds can be repatriated

abroad to the place from which they were imported to Nigeria

through the appropriate channels upon provision of relevant Certifi-

cate of Capital Importation (CCI).

In addition to the above, it is necessary and indeed mandatory to

obtain specific licenses before being allowed to participate in certain

sectors e.g. Banking, Oil & Gas

, Insurance, Lottery, Telecommunications, Exporting etc. Applica-

tions should therefore be made to relevant regulators for considera-

tion and approval to obtain the appropriate license.

REPATRIATION OF FUNDSBY INVESTORS

Different regulations and measures have been put in place to

encourage and simplify the ease of doing business in Nigeria, most

commendably the One Stop Investment Center (OSIC), established

by the Nigerian Investment Promotion Commission, which reduces

the time and resources expended in setting up local entities as well

as providing access to many available incentives. Yet another

initiative of the Federal Government in improving the ease of doing

business is the Presidential Enabling Business Environment Council

(PEBEC). PEBEC was set up to to remove bureaucratic constraints to

doing business in Nigeria and make the country a progressively

easier place to start and grow a business. The PEBEC is currently

working with the Corporate Affairs Commission and other agencies

to review the framework of doing business in Nigeria with a view to

making same simpler and supportive of foreign investments.

Without a doubt, Nigeria is indeed ready for business.

BRING IT ALLTOGETHER

The Nigerian Content Act is a law targeted at promoting local partici-

pation in the oil and gas industry. The Act provides exclusive consid-

eration for Nigerian indigenous service companies which demon-

strate ownership of equipment, Nigerian personnel and capacity to

execute jobs in the Nigerian oil and gas industry. The major objective

of the Act is to promote local participation in the oil and gas industry

for the overall benefit of the Nigerian economy. The overall goal is to

domicile a greater spend of the industry in Nigeria. Hence, there is a

restriction in the sector for all indigenous oil and gas Companies

which must have at least 51% Nigerian ownership.

THE NIGERIAN CONTENT ACT

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Witty Corner

NIKE TAIWOSenior Consultant,

Training Unit

TEMI TUOYOAssociate Consultant

Training / Company Secretarial Unit.

A doctor, a lawyer, a little boy and a priest

were out for a Sunday afternoon flight on a

small private plane. Suddenly, the plane

developed engine trouble. In spite of the

best efforts of the pilot, the plane started to

go down. Finally, the pilot grabbed a

parachute, yelled to the passengers that

they had better jump, and then he bailed

out.

Unfortunately, there were only three

parachutes remaining. The doctor grabbed

one and said "I'm a doctor, I save lives, so I

must live," and jumped out.

The lawyer then said, "I'm a lawyer and

lawyers are the smartest people in the

world. I deserve to live." He also grabbed a

parachute and jumped.

The priest looked at the little boy and said,

"My son, I've lived a long and full life. You are

young and have your whole life ahead of

you. Take the last parachute and live in

peace."

The little boy handed the parachute back to

the priest and said, "Not to worry, Father.

The 'smartest man in the world' just took off

with my back pack!"

SMARTEST PERSON IN THE WORLD