Nigeria is one of Africa’s biggest economies with a large population, rich natural resources, and many business opportunities. So it is not surprising that many foreign investors are eager to seize these opportunities.
To attract international capital and foster economic development, Nigeria’s national policy on foreign investment promotes open market access and encourages foreign participation across various sectors of the economy. However, there are legal, regulatory, and procedural requirements that every foreign company must understand and comply with before doing business in Nigeria. They are discussed below.
1. Mode of Foreign Investment in Nigeria
The two primary modes of investment are Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI), each with distinct characteristics, benefits, and regulatory implications.
a. Foreign Portfolio Investment (FPI)
Foreign Portfolio Investment refers to the purchase of financial assets in Nigeria’s capital markets, such as stocks, government bonds, treasury bills, and other securities, without gaining significant control over the issuing companies. This form of investment is preferred by investors seeking liquidity, diversification, and short-to-medium-term returns.
Key Features:
- No direct control or involvement in the management of the invested companies.
- Highly liquid and tradable assets.
- Allows investors to diversify risk across various sectors.
- Regulated by the Securities and Exchange Commission (SEC).
Requirements:
- Investors must register with a licensed broker or portfolio manager.
- Foreign investors must open a domiciliary and local bank account with a CBN-authorized bank to repatriate dividends and capital.
- Funds must be imported through an Authorized Dealer (usually a commercial bank), and a Certificate of Capital Importation (CCI) should be obtained to ensure the repatriation of capital and returns.
- The foreign company must comply with Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations.
- Register with the Securities and Exchange Commission (SEC).
b. Foreign Direct Investment (FDI)
Foreign Direct Investment involves establishing or acquiring a physical and operational presence in Nigeria. This includes setting up subsidiaries, joint ventures, or acquiring existing businesses. FDI is a long-term investment strategy that usually reflects significant influence or control over business operations.
Common Forms of FDI include:
- Wholly-Owned Foreign Enterprises: 100% foreign ownership of a newly incorporated Nigerian entity.
- Joint Ventures: Partnerships between foreign investors and Nigerian individuals or entities, often required in sectors with local ownership restrictions.
- Acquisitions and Mergers: Buying shares or full ownership of an existing Nigerian business.
- Franchise and Licensing Agreements: Where a foreign business model or brand is licensed for use by a Nigerian partner.
Key Features of Foreign Direct Investment
- Direct ownership and control over business decisions.
- Long-term commitment to the Nigerian market.
- Can lead to technology transfer, skill development, and infrastructure investment.
- Requires compliance with Nigerian company laws, sector-specific regulations, and local content policies.
Regulatory Steps:
- Incorporate the business with the Corporate Affairs Commission (CAC).
- Registration with the Nigerian Investment Promotion Commission (NIPC).
- Sector-specific licenses (e.g., CBN for banking, DPR for oil & gas, NCC for telecoms).
- Acquisition of Business Permit and, where necessary, Expatriate Quota for foreign staff.
- Obtaining a Certificate of Capital Importation (CCI) to allow for the repatriation of profits and capital.
2. Incorporation of a Foreign Company with the Corporate Affairs Commission (CAC)
The Companies and Allied Matters Act (CAMA), 2020, mandates that any foreign company intending to carry on business in Nigeria must incorporate a Nigerian subsidiary or register as a separate legal entity with the Corporate Affairs Commission (CAC).
Until this incorporation is complete, the foreign company is prohibited from establishing a physical place of business in Nigeria, except for receiving notices and documentation related to the incorporation. Incorporation also involves meeting the minimum share capital requirements, which vary by sector, and appointing directors (at least one must be resident in Nigeria).
The minimum share capital requirement for registering a foreign company in Nigeria is ₦100 million (One Hundred Million Naira). However, certain sectors like the oil & gas, banking, insurance, telecoms, etc, may have higher capital requirements set by specific regulators like the Central Bank of Nigeria (CBN), Nigerian Communications Commission (NCC), or others.
3. Registration with the Nigerian Investment Promotion Commission (NIPC)
The Nigerian Investment Promotion Commission (NIPC) plays a central role in facilitating, coordinating, and promoting foreign investments in Nigeria. To ensure legal entry and operation within Nigeria’s business environment, foreign companies must register and comply with several requirements as outlined by the NIPC and relevant laws.
Registration with the NIPC is crucial for obtaining a Business Permit and for eligibility to apply for investment incentives, such as the Pioneer Status (a tax relief program). After incorporation with the CAC, the foreign company must register with the NIPC with the following documentation.
- Certificate of Incorporation from the CAC
- Memorandum and Articles of Association
- Details of Directors and Shareholders
- Foreign investment details (nature and value)
- Evidence of minimum share capital
- Business plan or feasibility study (where required)
Once registered, the company is issued a NIPC Registration Certificate, which serves as formal recognition of its right to invest and operate in Nigeria.
4. Issuance of Business Permit for Foreign Companies
A Business Permit is a mandatory regulatory requirement for every company in Nigeria that has foreign participation, either wholly or partially. The permit is issued by the Federal Ministry of Interior and serves as official authorization for the company to commence business operations within Nigeria. The essence of this permit is to ensure foreign-owned companies comply with immigration, labor, and investment laws.
Requirements for Obtaining a Business Permit
To apply for a Business Permit, the following documents are generally required:
- Certificate of Incorporation issued by the Corporate Affairs Commission (CAC).
- Memorandum and Articles of Association of the company.
- NIPC Registration Certificate (showing approval as a foreign investor).
- Detailed Business Plan or feasibility report outlining business activities, capital outlay, projections, and socio-economic benefits to Nigeria.
- Shareholders’ Agreement (if applicable).
- Evidence of minimum paid-up share capital (often not less than ₦10 million, depending on the sector).
- Joint Venture Agreement (for companies with local and foreign partners).
- The company’s physical business address in Nigeria.
- Payment of prescribed application fees.
- Tax Identification Number (TIN)
- Evidence of Capital Importation (from the investor’s bank)
- Passport copies and CVs of directors (especially foreign directors).
5. Immigration Requirements and Expatriate Quota
Foreign companies intending to operate in Nigeria and employ foreign nationals are required to comply with Nigeria’s immigration regulations, which include obtaining Expatriate Quota Approvals from the Federal Ministry of Interior. These approvals govern the legal employment of foreign staff and executives and ensure that Nigerians are not displaced in jobs where qualified local talent is available.
Once quota positions are approved, the company must apply for a CERPAC (Combined Expatriate Residence Permit and Aliens Card) for each foreign staff. The CERPAC acts as both a work permit and residence permit. The staff member must also obtain a Subject to Regularization (STR) Visa from a Nigerian mission abroad before arrival in Nigeria.
6. Compliance with Sector-Specific Regulations
Depending on the industry, foreign investors may need additional licenses or regulatory approvals. For example:
- Investment in the Oil & Gas industry requires registration with the Department of Petroleum Resources (DPR) and compliance with the Nigerian Oil and Gas Industry Content Development Act, which mandates specific levels of local content and participation.
- Telecommunications requires licensing from the Nigerian Communications Commission (NCC).
- The Banking and Finance industry is regulated by the Central Bank of Nigeria (CBN) and other financial services authorities.
7. Tax Compliance and Fiscal Incentives
All companies operating in Nigeria, whether wholly foreign-owned or joint ventures, are required to comply with the country’s tax laws and remit appropriate taxes to the relevant authorities. Once incorporated in Nigeria, a foreign company is required to register with the Federal Inland Revenue Service (FIRS) and obtain a Tax Identification Number (TIN).
Companies are expected to pay corporate income tax on their profits, file annual tax returns, and remit taxes such as value-added tax (VAT), withholding tax, education tax, and stamp duties, among others. Proper record keeping, prompt filing, and remittance of taxes are critical to avoid penalties and maintain good standing with the authorities.
In addition to tax compliance, the Nigerian government provides a range of fiscal incentives to attract and retain foreign investment, especially in sectors seen as vital to economic development. One of the most significant incentives is the Pioneer Status Incentive, which grants eligible companies an income tax holiday for up to five years. This incentive is attractive to companies operating in sectors like ICT, pharmaceuticals, and manufacturing.
8. Acquisition of Certificate of Capital Importation (CCI)
Foreign investors bringing capital into Nigeria must obtain a Certificate of Capital Importation (CCI) through an Authorized Dealer Bank, usually a commercial bank licensed by the Central Bank of Nigeria.
This certificate serves as formal proof that the funds were imported through official channels and is a critical document for any foreign-owned business. The CCI not only legitimizes the foreign inflow but also ensures that the investor retains the right to repatriate profits, dividends, and the original capital without restrictions.
Additionally, it supports transparency and regulatory compliance, and is often required when applying for tax exemptions, government incentives, or processing foreign exchange transactions.
Conclusion
Investing in Nigeria presents vast opportunities for growth and profitability. However, doing business in Nigeria requires a good understanding of the legal and regulatory framework. From incorporation to regulatory compliance, licensing, taxation, and local content laws, it is important to understand and fulfill all statutory requirements.
Engaging the services of experienced lawyers and business advisors can help ensure compliance and smooth market entry. We can help you navigate the incorporation processes, regulatory compliance, investment structuring, tax planning, and sector-specific licensing to mitigate any risks.
