DOING BUSINESS IN NIGERIA IN 2023
Since 2003, Healy Consultants Group has assisted both global entrepreneurs and multinationals with company registration solutions in Nigeria. Services provided by our experts include i) business registration in Nigeria ii) license registrations iii) assistance to find joint venture partners iv) corporate bank account opening v) work visa application vi) human resource strategies and vii) office rental solutions.
|Compare different Nigeria entities||LLC||Fast setup||Free zone LLC||LLP||PLC||Branch office||Rep office|
|Best use of company||All products and services||Close deals faster||Manufacturing & trading||Professional services||Secure public funds||Import/export||Marketing & research|
|How soon can you invoice Clients/sign sales contracts?||6 weeks||1 week||7 weeks||6 weeks||7 weeks||6 weeks||No|
|How soon can you hire staff?||6 weeks||1 week||7 weeks||6 weeks||7 weeks||6 weeks||3 months|
|How soon can you sign a lease agreement?||6 weeks||1 week||7 weeks||6 weeks||7 weeks||6 weeks||3 months|
|How long to supply corporate bank account numbers?||9 weeks||1 week||10 weeks||9 weeks||10 weeks||9 weeks||9 weeks|
|How long to supply company registration/tax numbers?||6 weeks||1 week||7 weeks||6 weeks||7 weeks||6 weeks||6 weeks|
|Corporate tax rate on annual net profits?||30%||30%||0%||0%||30%||30%||0%|
|Limited liability entity?||Yes||Yes||Yes||Yes||Yes||No||No|
|Government grants available?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Resident legal representative required?||No||No||No||No||No||Yes||Yes|
|Sponsorship by a local citizen required?||No||No||No||No||No||Yes||Yes|
|Minimum paid up share capital?||US$1||US$1||US$500,000||US$1||US$1,600||None||None|
|Can bid for for Government contracts?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Corporate bank account location?||Stanbic IBTC||FirstBank||Standard Chartered||Access Bank||Zenith Bank||Citibank Nigeria||Guaranty Trust Bank|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|VAT payable on sales to local customers?||7.5%||7.5%||Yes||7.5%||7.5%||7.5%||None|
|Average total engagement costs?||US$20,700||US$29,610||US$25,600||US$19,400||US$22,803||US$19,400||US$21,800|
|Average total engagement period?||15 weeks||18 weeks||18 weeks||15 weeks||15 weeks||15 weeks||15 weeks|
|Accounting and tax considerations||LLC||Fast setup||Free zone LLC||LLP||PLC||Branch office||Rep office|
|Statutory corporate tax payable?||30%||30%||0%||0%||30%||30%||0%|
|Legally tax exempt if properly structured?||No||No||Yes||Yes||No||No||Yes|
|Must file an annual tax return?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Must appoint an auditor?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Withholding tax on payments to shareholders?||10%||10%||0%||10%||10%||10%||0%|
|Company registration||LLC||Fast setup||Free zone LLC||LLP||PLC||Branch office||Rep office|
|Minimum number of directors/managers?||2||2||2||2||2||2||2|
|Minimum number of shareholders/partners?||2||2||2||2||2||Parent company||Parent company|
|Maximum shareholding for foreigners?||100%||100%||100%||100%||100%||100%||100%|
|Shelf companies available?||Yes||Yes||No||No||No||No||No|
|Time to incorporate a new entity?||5 weeks||None||6 weeks||5 weeks||6 weeks||5 weeks||5 weeks|
|Can easily convert to a PLC?||Yes||Yes||Yes||Yes||Yes||No||No|
|Can have preference shareholders?||Yes||Yes||Yes||No||Yes||No||No|
|Business considerations||LLC||Fast setup||Free zone LLC||LLP||PLC||Branch office||Rep office|
|Good entity for trademark registration?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Can secure an import and export license?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Must file annual financial statements?||Yes|
|Resident director/partner/manager required?||No|
|Sponsorship by a local citizen required?||No|
|Our Client needs to travel to Nigeria for business set up?||No|
|Temporary physical office solutions available?||Yes|
|You need a local resident as bank signatory?||No|
|Can be wholly foreign owned?||Yes|
|The entity will likely be regulated by?||Corporate Affairs Admission|
|Monthly VAT reporting to the Government?||Yes|
|Must sign an office lease agreement during incorporation?||Yes|
|Shareholders and directors documents to be translated?||No|
|Shareholders and directors documents to be attested?||Yes|
|Each foreign director needs a personal income tax number?||No|
|Foreign director needs a residence visa?||No|
|Maximum number of staff allowed?||No maximum number|
|Expatriate to local staff ratio?||None but need to get government approval|
|Can secure residence visa for business owner?||Yes|
|Other useful information|
|Government approval required for foreign owners?||Yes|
|Security deposit to be kept with government?||No|
|Public register of shareholders and directors?||Yes|
|Group HQ tax incentives?||None|
|What will be included in my customer sales invoice?||(click link)|
|This country has signed free trade agreements?||Yes|
|This country is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||No|
|Average customs duties suffered?||50%|
|Average monthly office rental? (US$ per sq m)||32|
|Minimum statutory monthly salary?||US$57|
|Average monthly US$ salary for local skilled employees?||US$562|
|Deposit interest rate? (1-year average)||9.48%|
|Overseas remittance currency controls?||Yes|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Average|
|Crowd funding available in this country?||Yes|
Nigeria business setup summary
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Advantages and Disadvantages
Advantages of Nigeria company registration
- Nigeria is a gateway to Africa because:
- The country has bilateral investment treaties with China, Finland, France, Germany, Italy, the Netherlands, South Korea, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.
- Nigeria is Africa’s largest economy with a local consumer market hungry, for example, for i) luxury goods ii) branded clothes iii) cars iv) designer furniture v) the latest smartphones and IT items and vi) white goods.
- Because 50% of Nigeria’s population is under 30, and because by 2030, average income will be three times higher by 2030, multi-national Clients’ investment opportunities include:
- Education services. Demand for quality education services is increasing faster than the government can supply.
- Telecommunications, including cell phones and software applications and other e-commerce business.
- FinTech and other financial services, including mobile payment solutions and digital banking.
- Nigeria has enormous resources, most of which are yet to be fully exploited. Multi-national Clients are attracted to investment opportunities in i) mineral resources including gold, lead, coal, tin, iron ore and ii) cash crops including groundnuts, palm oil, cocoa and coconut iii) leather and textiles and iv) oil and gas. The country’s agriculural sector is inefficient and lacks equipment, while land is underutilised. Nigeria has 36.8 billion barrels of proven oil reserves, which will require technologies to extract.
- The government actively promotes foreign investment in i) agriculture ii) oil and gas production iii) mining and iv) export industries, in particular in the form of tax incentives. Covid-19 is likely to accelerate the growth of e-commerce and digital banking in Nigeria in 2021 and beyond.
- Export-focused businesses enjoy attractive tax incentives. For example:
- Profits made on goods exported from Nigeria are legally tax-exempt if the profits are repatriated to Nigeria and used exclusively to buy raw materials, plant equipment and spare parts.
- Only a withholding tax of 10% is deducted on repatriation of profits in the form of i) IP ii) Head Office management fees iii) overseas technical service fees and iv) international consulting fees. This is an excellent way to legally minimise Nigerian corporation tax.
- Profits of companies whose products are primarily used by export-focused manufacturers in Nigeria do not suffer corporation tax.
- A three-year tax holiday (with a possible two-year extension) is available to multi-national Clients’ engaged in sectors including i) agriculture ii) mining iii) manufacturing iv) food processing v) deep-sea fishing vi) printing vii) mining of solid minerals viii) hotels ix) road infrastructure development x) downstream gas utilisation operations and xi) glass manufacture xii) fertilisers and xiii) steel manufacture.
- Nigeria’s 20 Special Economic Zones are attractive for foreign manufacturing investments because:
- Projects enjoy federal, state and local government tax holidays.
- Imports of raw materials and other goods from overseas are duty-free.
- Capital, profits and dividends can be freely repatriated from Nigeria without restriction, unlike an ‘onshore’ Nigerian LLC.
- Unlike LLCs elsewhere in Nigeria, a special economic zone company does not need a licence to import or export, and there are no quotas on getting visas for foreign workers.
- Special economic zone authorities are easier to deal with than government departments. Most authorities issue licences and can incorporate companies under one roof.
- Nigeria’s very low monthly average salary of US$890 is attractive for labour-intensive businesses, for example manufacturing. Because unemployment is high at 8%, there is ample cheap labour available.
- 100% foreign ownership is allowed in Nigeria. The exception is oil and gas, where foreign investors must enter joint venture agreements with local partners.
- With a population of 200 million, Nigeria is by far Africa’s largest domestic market. Despite the negative impacts of the Covin-19 pandemic on Nigeria’s economy, spending power among ordinary Nigerians is rising. For example, in 2021 disposable personal income is expected to be US$51.5 billion. An expanding middle class is boosting demand for consumer goods such as electronics, cars etc.
- English is widely spoken in Nigerian government offices, banks and tax departments. Marketing campaigns and networking are easy for foreign investors.
- Lagos is a major air transport hub, providing connections to most major African cities. It is therefore a useful business base, particularly for West Africa.
- Although it is a difficult place to do business, our Clients do not need to travel to Nigeria to complete set up formalities. This includes opening a Nigeria multicurrency corporate bank account, which can normally be opened within two weeks of company formation. For multinational Clients looking to fast secure a government contract in Nigeria, we also offer a fast Nigeria business set up solution.
Disadvantages of Nigeria company registration
- Multi-national Clients’ investments in Nigeria are unprotected because:
- Enforcement of intellectual property ownership remains a problem, despite the existence of copyright laws and enforcement efforts.
- Poorly ranked 131 out of 190 countries by the World Bank, Nigeria is one of the world’s most difficult places to do business. For example:
- The health of the economy is dependant on the price of oil.
- Power supplies in Nigeria are erratic.
- There are shortages of foreign exchange.
- The country suffers high inflation and currency volatility.
- There are excessive and unpredictable regulations.
- There is a high threat of kidnapping and terrorism. Organised crime is widespread, including in cyber crime, drug trafficking, human trafficking and kidnapping for ransom.
- There are many steps to take to start a business.
- Signing up for utility supplies is time consuming.
- It is difficult to register property.
- Dealing with the tax authority and paying taxes is challenging.
- Using a Nigeria company to trade globally is inefficient.
- Foreign investors find it difficult to enforce contracts.
- Nigeria infrastructure is deficient.
- With a shockingly poor rating of 146 out of 180 on the Corruption Perceptions Index, corruption is a way of business life in Nigeria. Multinational Clients should expect:
- Opaque contract bid procedures.
- Unfair contract awards, with favouritism shown to local or well-connected companies and business people.
- To pay bribes and kickbacks to business people, judges and government officials to secure contracts, licences and other privileges.
- Little protection in local courts when trying to resolve disputes.
- Little protection for intellectual property. Copyrights, patents and trademarks are rarely protected, so there is little incentive for Clients involved in innovation, tech of R&D to invest in Nigeria.
- To have to pay a ‘fixer’ who will liaise with government departments to complete what should be simple tasks.
- Because of currency controls, it is challenging for multinational Clients to repatriate funds from Nigeria. In addition, we recommend Clients minimise the funds held in Nigerian banks due to concerns about balance sheets and the stability of the sector.
- The security situation in Nigeria is volatile. Multinational Clients should build in multiple security costs to business budgets, including:
- Armed protection for key foreign workers.
- Sophisticated security and surveillance systems for company premises.
- Systems to protect against corporate fraud and embezzlement.
- For decades, Nigeria has suffered economic mismanagement and underinvestment. As a result:
- Infrastructure is poor by any standards. This hampers the movement of goods and people, disrupting business. Traffic in big cities like Lagos is regularly gridlocked. Cities frequently suffer power cuts, and telecoms networks are unreliable.
- There is widespread distrust of government. It is hard for foreign investors to get comfort that strategic plans will be efficiently progressed or completed. For example, although the government has promised to invest heavily in physical and industrial projects, in reality most are prone to heavy delay, or cancelled altogether.
- Nigeria also suffers from a large budget deficit. Government coffers have been decimated by the Covid-19 pandemic, lockdowns, a downturn in trade and low oil prices.
- Because of the above, Nigeria’s economy is considered one of the world’s least competitive.
- Nigeria is a high tax country outside the special economic zones. A Nigerian LLC suffers 30% corporate income tax, 10% withholding tax and 7.5% value added tax (VAT). Furthermore, Nigeria has a very limited network of double tax treaties, none of which materially reduce withholding tax.
- It is difficult and expensive to get visas for expatriates. To hire two expat staff, the company must have at last US$90,000 in share capital, and even then must apply to the government for a visa quota for expat staff.
- Entering joint venture agreements with local partners is risky. During disputes, the local partner will likely receive more favourable treatment in arbitration courts, and there is a risk that the joint venture partner will not adhere to contractual obligations.
- There are legal restrictions on setting up a company in Nigeria. For example:
- On average, it takes five weeks to register a company in Nigeria, for even a simple incorporation. Registration must be completed with various government bodies, including i) the Corporate Affairs Commission ii) Nigerian Investment Promotion Commission and iii) Federal Inland Revenue Services.
- Depending on the company’s activities, a licence may be necessary. This can take up to six months and will involve lengthy and frustrating dealings with inefficient government departments.
- Foreign investors are barred from taking majority stakes in companies related to i) aviation ii) oil and gas iii) shipping iv) real estate and v) telecommunications.
- Business set up costs in Nigeria are high. For example:
- To get a licence in an export processing zone, a company must have a minimum US$62,000 share capital. These funds must be deposited into a corporate bank account or spent on capital goods for the business before the licence is granted.
- Nigerian inflation is rising, so the costs of living and doing business are rising and challenging to predict.
- Nigerian government departments are bureaucratic, and processes inconvenient. For example:
- Most documents must be submitted to government departments and the tax office etc in hard copy.
- Although in theory bodies like the Nigeria Investment Promotion Commission (NIPC) exist to streamline investment procedures for multinational Clients, in reality they are difficult to deal with.
- Unrest and violence can easily derail projects and hamper the smooth completion of business set up procedures. For example, in 2020 during civil unrest it took three months for overseas couriers sent by Healy Consultants Group to be received by the recipient in Nigeria.
- Although large, Nigeria’s workforce is inefficient, and there is a skills shortage in some sectors.
- Nigeria is a gateway to Africa because:
Best uses for a Nigeria company
- Easy access to African markets
- Through rail, road, sea, and air, Nigeria’s location allows entrepreneurs starting a company in Nigeria an easy access to the lucrative West African and sub-Saharan Africa markets. From Nigeria, a business person can fly to anywhere in Africa in under 6 hours;
- English is the official business language and is spoken by the majority of educated business persons in the country, making it easier for foreign companies to start a business in Nigeria through subsidiary company registration;
- Nigeria boasts the lowest production costs in Africa, with skilled labor costs in particular being significantly cheaper than other African countries;
- There is no minimum share capital requirement to register a Nigeria limited liability company;
- Nigeria is an active member in the Organisation of Islamic Cooperation (OIC) trading bloc, minimizing tariffs when trading with any of the 57 member countries, including Saudi Arabia, UAE, and Malaysia;
- Traveling around Nigeria is inexpensive, with taxi fare and petrol costing significantly less than in other African countries.
- Easy access to African markets
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Useful links for Nigeria
Government and public authority websites:
- Central Bank of Nigeria
- Nigerian Stock Exchange
- Nigerian Investment Promotion Commission (NIPC)
- Nigeria airports