DOING BUSINESS IN NIGERIA IN 2021
Since 2003, Healy Consultants Group PLC 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$19,100||US$29,610||US$25,600||US$19,400||US$21,403||US$19,400||US$20,400|
|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
- Tax exemption through Special Economic Zones
- The country boasts 20 operational special economic zones, offering foreign companies registering a new business in Nigeria several incentives including i) a tax holiday on all taxes including federal, state, and local government taxes ii) duty free import and iii) 100% repatriation of capital, profits, and dividends;
- These zones allow companies to export manufactured products to foreign markets. Such companies are also exempt from all import and export licensing and all expatriate quotas, and one-stop approval is available for permits, operating licenses, and incorporation;
- Registering a Nigerian company in a special economic zone also allows our Clients to sell their goods into the domestic Nigerian market, provided import duty is paid on manufactured goods sold domestically;
- Land is rent-free for the first 6 months, for any construction project undertaken in the zone.
- A rapidly growing business environment
- Because it sits on the 8th largest proven oil and gas reserves on the planet according to OPEC world crude oil reserves 2018, Nigeria ranks 1st in GDP (nominal) ranking in Africa at 2.29%, and 144th in the world. This is a super attractive location for foreign investors to register their companies;
- The Nigerian banks possess cheap assets, with an average price/earnings ratio of just 5.92. Coupled with recent reforms designed to improve security and reliability, the financial sector is an attractive investment opportunity;
- The government has recently made the development of physical and industrial infrastructure a priority, with several large-scale projects. Investors can expect dramatic improvements in the quality of transportation, communications, electricity, and water supply over the next 5 years;
- Companies profits in respect of goods exported from Nigeria are exempt from tax provided the proceeds are repatriated to Nigeria and used exclusively for the purchase of raw materials, plants equipment and spare parts;
- Profits of companies whose output is primarily imputed to the manufacturing of products for exports are excluded from local corporation tax.
- The minimum wage of Nigeria is very low at less than US$1000 per annum, which makes hiring employees extremely affordable, especially by foreign entrepreneurs.
- The process of filing an annual return is immediate.
- English is the official language in Nigeria, and is widely spoken in government offices, banks and tax departments, making communication easier and clearer.
Disadvantages of Nigeria company registration
- Taxation burden
- Outside free zones, Nigeria is a high tax country. Corporate income is taxed at 30%, withholding tax rate of 10%, and a VAT rate of 5%;
- Nigeria boasts only 12 double taxation avoidance treaties. None of them materially reduce local withholding tax.
- Business challenges
- When running a business in Nigeria, companies may only hire expatriate workers if they have a minimum share capital of US$30,000 and are successful in applying for an expatriate quota. US$90,000 in share capital is required to guarantee two positions for foreign workers;
- The country suffers from i) a lack of a steady power supply ii) poor quality roads iii) slow internet for supporting a smooth running of business in Nigeria;
- Bribes are a common practice in many facets of doing business in Nigeria. The country is indeed poorly ranked as the 144th most corrupt country worldwide, according to the 2018 corruption perceptions index. Any dealings with the Nigerian judicial system are mired by executive interference and corruption throughout all levels of the judiciary;
- Intellectual property rights are poorly protected and copyrights, patents, and trademarks are not enforced. Prosecuting intellectual property theft is a waste of time;
- Nigeria has one of the world’s least efficient property registration systems. Acquiring the rights to property and proving those rights in the eyes of the Nigerian court system is difficult.
- Company law challenges
- Registering a company in Nigeria is time-consuming, requiring an average of 5 weeks to complete. In addition, depending on the industry, obtaining the proper licensing to do business can take up to an additional 14 weeks to complete;
- Industries with restrictions on foreign ownership include i) aviation and petroleum ii) shipping and real estate iii) telecommunications;
- Obtaining a license to do business in an export processing zone requires a minimum of US$62,000 in share capital for the company. These funds must be deposited in to a corporate bank account or spent on capital goods for the business prior to the license being granted;
- Following company registration, each wholly foreign owned entity must secure i) Nigerian Investment Promotion Commission (“NIPC”) registration ii) a business permit from the Ministry of Internal Affairs iii) a Certificate of Capital Importation from the Nigerian bank iv) an Expatriate Quota from the Ministry of Internal Affairs and v) Register with Tax Authorities and Obtain First Tax Clearance Certificate.
- Safety concerns
- Security and safety are main issues faced by entrepreneurs willing to hire expats in Nigeria. While the homicide rate is below the average for Africa, it is still ten times higher than the UK rate. Investors will likely need to spend additional money on security and insurance of their foreign employees;
- Malaria, hepatitis A, dengue fever, yellow fever, and African sleeping sickness occur commonly in Nigeria.
- The macroeconomic environment has made the business environment of Nigeria an unattractive and uncertain one. Some macroeconomic challenges are:
- The macroeconomic conditions of Nigeria are worsening since the inflation of the economy is ballooning at 14.2% along with a high budget deficit and fragile institutions;
- These challenges have made the Nigerian economy rank poorly on the 116th position (out of 141 countries) in terms of its Global Competitiveness in the Global Competitiveness Index 2019.
- Nigeria suffers from a lack of access to good technology. Confirmations and acknowledgements of submissions to tax departments and government offices must be sent in hard copy. This increases the lead time of an engagement.
- In addition to the above, the local Covid-19 situation and periodic protests in Nigeria in 2020 meant the courier of filing confirmations took more than three months to be received.
- The inflation rate in Nigeria was at its highest in November 2020, resulting in a further 1.6% increase in costs. This makes it more expensive to do business in Nigeria now.
- It is complex to set up a company. Registration must be completed with various government bodies to set up a business in Nigeria. These registrations include with i) the Corporate Affairs Commission, ii) Nigerian Investment Promotion Commission and iii) Federal Inland Revenue Services.
- The unreliability of power supply in Nigeria forces companies in the commercial and industrial sectors to utilise power generated through the use of petrol and diesel. This increases air and land pollution, making the country less attractive, or feasible, for agriculture.
- Tax exemption through Special Economic Zones
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
- Time to incorporate: Five weeks
- Cost to set up: US$19,100
- Minimum capital: US$60,000
- Physical office required: Yes
- Shareholders: 2
- Directors: 1
- Company secretary: Yes
- Resident director: No
- Corporate tax rate: 30%
- Corporate tax base: Worldwide
- Shelf companies: Available
- Main company type: Limited company
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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
- PWC Paying taxes 2020
- 2019 Nigeria Outlook – KPMG
- Why Invest In Nigeria?
- Investment Policy Review – UNCTAD