LawCare Nigeria

Nigeria Legal Information & Law Reports

HOW TO CONDUCT BUSINESS IN NIGERIA

HOW TO CONDUCT BUSINESS IN NIGERIA

Doing business in Nigeria has become much easier due to the rapid advancement of technology. With its rich natural resources and diverse population, Nigeria offers vast opportunities for entrepreneurs aiming to launch or expand their ventures.

However, to run a business in Nigeria, one must have a deep understanding of the local market, cultural differences, and the ability to tackle unique challenges. Since the ultimate goal of any business is to make profit and achieve success, it is important to learn the essential requirements to operate effectively, especially in a complex market like Nigeria.

This article discusses practical strategies to help entrepreneurs and business owners build and grow successful businesses in Nigeria while ensuring regulatory compliance. Let’s get started.

1. Research and Plan

Before starting any business venture, it is important to conduct in-depth market research. Focus on identifying market gaps, understanding consumer preferences, and studying your competitors. Nigeria presents numerous investment opportunities across various sectors, including agriculture, technology, manufacturing, and services. Therefore, choosing the right niche is critical to building a successful business.

You must also create a detailed business plan that defines your goals, strategies, and financial forecasts. Incorporate a market analysis, marketing strategies, operational plans, and a budget. This plan will act as a strategic guide to direct your business toward success.

2. Register the Business Structure

When entering the Nigerian market, you must decide whether to start a new business or acquire an existing one. To operate legally in Nigeria, you must register your business with the Corporate Affairs Commission (CAC). The CAC is the official government agency responsible for registering all businesses in the country. 

To establish a new business, you must select the appropriate business structure. The options available for registration include sole proprietorship, partnerships, incorporated trustees, and companies. Your choice will influence the costs, taxes, legal requirements, regulatory obligations, and financial risks. Consulting a corporate lawyer may be beneficial to ensure you make the right decision for your business needs.

Businesses in Nigeria can be registered under the following structures:

  • Company Limited by Shares (Ltd or Plc)
  • Company Limited by Guarantee (Ltd/Gte)
  • Unlimited Liability Company (Ultd)
  • Business Name (registered as a Sole Proprietorship or Partnership)
  • Incorporated Trustees (typically for non-profit or charitable organizations)

To verify and register your business with the CAC, you must first choose a name for your company. After your business name is approved, the Commission will provide you with a form to fill out. Ensure the form is completed accurately and submit it with the required fees. The CAC will then begin processing your application, which may take three (3) to four (4) weeks to be completed. Once approved, you can proceed to the next step. 

Another approach to entering the Nigerian market is acquiring an existing Nigerian company. Mergers and acquisitions in Nigeria are regulated by the Securities and Exchange Commission (SEC). Prospective investors must submit a formal bid, subject to SEC approval and sanctioning by the Federal High Court.

3. Register for Taxes

The third step is to register your business with the tax authorities. The Federal Inland Revenue Service (FIRS) and the State Board of Internal Revenue oversee tax collection in Nigeria, with FIRS handling corporate taxes and the State Board managing personal taxes.

All companies, business names, and incorporated trustees must register with FIRS to obtain a Tax Identification Number (TIN), which will be required for all tax-related transactions, and a Value Added Tax (VAT) number. Additionally, businesses are required to file Annual Returns with the Corporate Affairs Commission (CAC) using the prescribed forms within the specified deadlines.

Financial returns must be filed within 18 months of incorporation or registration. After the Annual General Meeting (AGM), the returns must be completed and submitted within 42 days. While a financial year can begin on any date, businesses must comply with these timelines to avoid penalties.

Tax defaults or evasion carry criminal liability. So it is best to consult a lawyer or accountant who can provide valuable guidance on taxation and compliance requirements. 

4. Obtain All Necessary Permits

It is important to secure the necessary licenses and comply with health, safety, environmental, and other regulatory requirements to avoid penalties and legal liabilities. So, you must register your business with the organization responsible for overseeing your industry.

Every business falls under the supervision of a specific regulatory body, including the National Agency for Food and Drug Administration and Control (NAFDAC), Nigerian Investment Promotion Commission (NIPC), National Office for Technology Acquisition and Promotion (NOTAP), Nigerian Copyright Commission (NCC), Nigerian Customs Service, and the Central Bank of Nigeria (CBN), among others.

Additionally, find out about any required fees and other obligations that must be met before starting operations. Non-compliance can result in financial penalties and legal issues, as courts do not excuse ignorance. Ensure you pay all required fees and follow the prescribed guidelines to avoid complications.

5. Register Your Patent and Trademarks

Your business may own valuable intellectual assets such as inventions, designs, brand names, logos, or unique content. Protecting these assets is essential to safeguard your competitive advantage and prevent unauthorized use or infringement.

To ensure proper protection, you will need the expertise of an Intellectual Property Lawyer or agent. They can help you register these rights under the appropriate categories, including:

  • Patents and Design: For inventions or innovations that are new, useful, and non-obvious.
  • Trademarks: For brand identifiers such as names, logos, slogans, or symbols that distinguish your business.
  • Copyrights: For original works of authorship, including written, artistic, and digital content.

Proper registration provides legal recognition and protection and allows you to take legal action against any infringements. Without it, your business risks losing control over its unique assets, which could result in financial and reputational harm.

Additionally, IP laws vary by jurisdiction, so it is important to ensure compliance both within Nigeria and internationally if your business operates beyond the local market. Proactively protecting your intellectual property is a strategic investment in your business’s future.

6. Find a Business Location

If you plan to acquire or lease a business or office location, a property lawyer can guide you through the available options. In Nigeria, the acquisition and development of land are finalized at the state or local government office where the property is located. 

Approval processes, assessments (such as environmental and structural evaluations), and other regulatory requirements may vary across state jurisdictions. Once you have secured a location, you can furnish and design the space to align with your personal style and business needs. 

7. Fulfill Administrative Obligations

It is mandatory to submit annual accounts and tax returns to the Federal Inland Revenue Service (FIRS) and file a statement of affairs or annual returns with the Corporate Affairs Commission (CAC). Missing deadlines or submitting inaccurate information can result in fines.

Additionally, there are various statutory requirements to comply with, including those under the Companies and Allied Matters Act, Labour Act, Insurance Act, and Pension Reform Act. An accredited solicitor can provide guidance and help ensure compliance with these obligations.

Requirements to be Fulfilled by Foreign Companies Operating in Nigeria

Foreign investors and offshore companies are allowed to hold 100% equity in Nigerian companies. However, any foreign company seeking to establish operations in Nigeria must first incorporate a Nigerian subsidiary as a separate entity. 

Without incorporation, a foreign company cannot conduct business or exercise the rights of a registered company in Nigeria. If you are a foreigner looking to operate a business in Nigeria, our law firm offers professional assistance for the incorporation of Nigerian affiliates or subsidiaries.

We also assist foreign investors and companies in securing Business Permits and Expatriate Quotas from the Nigerian Investment Promotion Commission (NIPC) and the Nigerian Immigration Service.

  • Business Permit: This authorizes the operation of a business with foreign capital, whether as a parent company or a subsidiary.
  • Expatriate Quota: This grants approval to a company to employ specific expatriates for designated roles and specifies the permissible duration of such employment. It serves as the basis for expatriates to obtain work-related residence permits, enabling income remittances abroad.

Expatriate personnel do not require separate work permits but must obtain residence permits in line with their employer’s needs quota.

Conclusion

Starting a business in Nigeria offers opportunities for growth and success, thanks to the country’s vast market, and dynamic economy. The Nigerian government actively encourages both local and foreign direct or portfolio investments. 

However, navigating the regulatory environment, securing appropriate permits, and ensuring compliance with statutory obligations are critical steps for long-term sustainability. Whether you are a local entrepreneur or a foreign investor, thorough planning and legal guidance can help build a thriving business in Nigeria. Ready to start your business journey in Nigeria? Then consult the professional firm of Resolution Law Firm for proper guidance.