Nigerian Business Environment
OVERVIEW OF NIGERIAN BUSINESS ENVIRONMENT
Nigeria is the strongest economy in Africa and one of the largest worldwide. It plays a leading role in Economic Community of West African States (ECOWAS) and benefits from the customs duty exemptions that this membership provides. This membership allows Nigerian companies to take advantage of the free trade agreement between the ECOWAS’ 15 member states.
The most populous country in Africa, Nigeria accounts for one-sixth of Africa’s population and the largest gross domestic product (GDP) in Africa. Focus is placed on the industrialization and diversification of the country’s economy to accommodate the non-oil sectors. Nigeria is a Federal Republic with thirty-six states and Abuja as the capital city.
ATTRACTIVE TO FOREIGN INVESTORS
Nigeria is the largest investment market in Africa. It is a safe haven for foreign capital and offers investors fiscal incentives, investment guarantees, stable political and legal environment.
Nigeria offers a low corporate tax regime, VAT rate and flexible labor market conditions, and simple procedures for establishing a business. Multinational companies are encouraged to start up operations under the Free Trade Zone (FTZ). The FTZ regime is the flagship of Nigeria’s export and investment promotion strategy. The Free Zone regime is a set of incentives and benefits granted by the Nigeria government to companies making investments in the country, as stated in the Nigeria Export Processing Zones Act and the Oil and Gas Export Free Zone Act.
COMPETITIVE ADVANTAGES OF NIGERIA
There are far-reaching action plans aimed at encouraging foreign participation in the Nigerian business environment. The variety of opportunities and competitive costs make Nigeria an excellent destination for investment. Nigeria is the top recipient of foreign direct investments (FDI) in Africa with a gross domestic product rate that averaged more than 6% over the last decade. This followed a deliberate attempt by government to diversify the economy and liberalize the Nigerian business environment to accommodate the private sector as the engine of growth while government remains the enabler.
Besides its exceptional location at the heart of Africa and long-standing tradition as an exemplary country for establishing African headquarters, the Nigerian business environment offers foreign companies a unique combination of:
Favorable tax incentives and investment guarantees
Largest population in Africa (over 180 million people)
Largest market in Africa ( nearly 400 billion USD dollars)
Accessibility from key locations abroad via air transportation and telecommunications networks;
Access to land and commercial farmlands
Affordable office and residential space
Low cost of living
TAX CREDITS AND INCENTIVES IN NIGERIA
The Nigeria government has ambitious targets for the agriculture, solid minerals, mining and manufacturing sectors. These sectors enjoy Pioneer Status with attendant tax exemption. There are large investment incentives bagged by enabling laws and supported through the Federal Ministry of Industry, Trade and Investment, Nigerian Investment Promotion Commission and the various Ministries. For a complete list of the incentives, please click here.
THE NIGERIAN BUSINESS ENVIRONMENT LEGAL FRAMEWORK
- Companies and Allied Matters Act (CAMA), Cap C59 Laws of the Federation 2004: The establishment and operation of all businesses in Nigeria is governed by the provisions of the Companies and Allied Matters Act (CAMA). Enterprises under various forms (business name, public or private liability company etc.) must be registered or incorporated with the Corporate Affairs Commission (CAC).
- The Nigerian Investment Promotion Commission (NIPC) Act, N117 Laws of the Federation 2004 establishes the legal framework for foreign participation in the nation’s economy. It is indeed a revolutionary legislation that aims at encouraging and sustaining inflows of foreign capital into the country’s economy. Every business entity in which there is foreign equity participation is required by law to register with NIPC after incorporation to benefit from investment incentives and other facilitation services. The NIPC Act provides for and guarantees the following:
LIBERALIZATION OF COMPANY OWNERSHIP STRUCTURE
The NIPC Act liberalizes the ownership structure of businesses in Nigeria. The implication of this is that foreigners can own one hundred percent (100%) shares in any company if they so wish without having any Nigerian shareholders.
REPATRIATION OF PROFITS OR TRANSFER OF CAPITAL
Under the provisions of the NIPC Act and the Foreign Exchange (Monitoring & Miscellaneous Provision Act, foreign investors are free to repatriate all their profits and dividends net of taxes unconditionally through an authorized dealer in freely convertible currency.
GUARANTEE AGAINST EXPROPRIATION
The Nigerian Investment Promotion Commission Act guarantees the none nationalization or expropriation of any enterprise or foreign-owned investment by any government in Nigeria. Grants judicial determination of the amount of compensation to which the investor is entitled in accordance with international standards.
The NIPC Act contains a dispute settlement clause that governs disputes arising between the authorities and/or both domestic and foreign investors. By virtue of Section 26 of the Act, investors have the right to resort to conciliation and arbitration to settle any investment dispute against the Nigerian authorities.
INCENTIVES FOR SPECIAL INVESTMENT
For the purpose of promoting identified strategic or major investment, the Nigerian Investment Promotion Commission shall, in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment as the Commission may specify.
INVESTMENT PROMOTION AND PROTECTION AGREEMENT (IPPA)
As part of additional effort to foster foreign investors’ confidence in the Nigeria economy, Government continues to enter into bilateral Investment Promotion and Protection Agreements (IPPAs) with countries that do business with Nigeria.
- The Foreign Exchange Monitoring and Miscellaneous Provision Act (FEMMP), Cap F34 Laws of the Federation 2004 establishes an Autonomous Foreign Exchange Market and provides for the monitoring and supervision of the transactions conducted in the market and for matters connected therewith. The FEMMP Act reinforces the NIPC Act as it eased restrictions in foreign exchange dealings and creates an autonomous Foreign Exchange Market. It guarantees the following:
- Overseas funds transfer without prior approval
- Foreign portfolio investment and open market activities at the Nigerian capital market, and repatriation of foreign exchange from Nigeria without hindrance
- Foreigners are thus allowed to invest in, acquire, dispose of, create or transfer any interest in securities and other money market instrument in foreign or local currency.
Other legislations on foreign participation in the Nigerian business environment:
- Central Bank Act Cap C4 LFN 2004 – Central Bank of Nigeria
- Immigration Act, Cap 1I LFN 2004 – Nigerian Immigration Service
- Investment and Securities Act 2007 – Securities and Exchange Commission
- Industrial Inspectorate Act Cap. I8 LFN 2004
- National Office for Technology Acquisition and Promotion Act, Cap N62 LFN 2004 – National Office for Technology Acquisition and Promotion
- National Agency for Food and Drug Administration and Control Act – National Agency for Food and Drug Administration and Control
- Standards Organisation of Nigeria Act – Standards Organisation Of Nigeria
PROTECTION OF INTELLECTUAL PROPERTY (IP) RIGHTS
Nigeria has developed a legal framework for protecting intellectual property rights. Intellectual property rights give businesses an incentive to invest in research and development and ultimately lead to the creation of innovative products. This is in addition to providing holders of right with the necessary confidence to share new technologies including in the context of joint ventures.
TRADE LIBERALIZATION SCHEME (TLS) OF THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)
This is a liberalization incentive that focuses on the ECOWAS sub-region. The Scheme is an incentive primarily geared towards free trade within the ECOWAS sub-region. The objective is to significantly expand the volume of intra-community trade and commerce in the sub-region via the removal of both tariff and non-tariff barriers to trade in goods originating from ECOWAS countries. This affords preferential access to the ECOWAS market for exports from Nigeria.
Establishing your regional headquarters or business in Nigeria is easy and cost-effective and very competitive.
PROXIMITY & CENTRALITY
Nigeria is situated at the heart of Africa market with more than 450 million consumers. The country has twenty-three local airports with five major international airports: Abuja, Calabar, Enugu, Lagos, Kano, Port Harcourt, Uyo. Nigeria has five seaports: Apapa, Calabar, Port Harcourt, Tin Can Island, Warri. Additionally, two seaports with free trade zone facilities are currently under construction at Ibaka and Lekki.
GUIDING YOU ALL THE WAY
Industrial Renaissance provides your company with a tailor-made solution for locating your business in Nigeria. We measure our success by how well we contribute to yours. So, if you are considering setting up business or expanding your activities in Nigeria, make us your first stop. Industrial Renaissance has the industry, insight and well-connected networks to advise you on every aspect of locating in Nigeria. Not only when you set up, but also as your business grows. Our tailor-made solutions include connecting companies with key local contacts, arranging fact-finding tours and providing analyses. We make sense of business laws and investment guarantees of locating in Nigeria in guaranteed full confidentiality.
Please download the main document on the Nigerian business environment here.
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