How to start a business in Nigeria

  

Question: I’m looking at opening a branch for my printing business in Nigeria but have no idea about how to approach this. Please help! Dane, Portugal

Nigeria can be a complex market to business and it is a good idea to take on a local partner that knows the operating environment.

Nigeria can be a complex market to do business and it is a good idea to take on a local partner that knows the operating environment.

Answer: There are no hard-and-fast rules on how to enter the Nigerian market but by looking at how other foreign companies did it, How we made it in Africa would suggest the following:

  • Do extensive research. The internet can be used but many Nigerian company websites are of a low standard and not regularly updated. The best source of information is generally Nigerian newspapers, most of whom have websites that are updated daily. Type in your search terms in Google News as the content of most Nigerian newspapers show up on this service.
  • Make use of any contact you have in Nigeria. Try and talk to business people from your own country that are successfully doing business in Nigeria. Nigeria has bilateral chambers of commerce with many countries in the world. These organsations should be able to greatly assist any would-be investors or business people and provide one with usable contacts.
  • Once you have decided on a rough plan of action, you should contact prospective business partners in the country. Taking on local partners are not always essential, but highly recommended.
  • Depending on your line of business, it is sometimes advisable to discuss the venture with the Nigerian Investment Promotion Commission (NIPC) in the capital Abuja. Visiting the NIPC is not necessary if you only want to trade with Nigeria, but essential for any company that wants to invest in fixed assets. The NIPC has set-up a one stop investment centre (OSIC) to simplify and fast track the process of investing in Nigeria. According to the NIPC, “the establishment of the OSIC is a major public sector reform initiative based on investment facilitation mechanism, where relevant government agencies and ministries are brought to one location, coordinated and streamlined to provide efficient and transparent services to investors. This is achieved by re-engineering agencies’ processes, procedures and requirements for granting business entry permits, licences and authorisations, making them simpler, shorter, transparent and responsive to the needs of investors.” The NIPC should also put you in contact with the relevant state government officials – something that is almost impossible for the individual.
  • The next process would be to register your business. The Corporate Affairs Commission (CAC) is the government agency charged with the responsibility of the registration of companies, business names and incorporated trustees. CAC’s head office is in Abuja but it also has smaller offices in some other states which offer the same services.

According to the Doing Business 2010 report it requires eight procedures and takes 31 days for a standard small to medium sized company to start operations legally. Out of 183 countries, Nigeria ranks 108 for the ease and cost of starting a business. For those who don’t want to go through the effort of registering a company themselves, some law firms and other organisations provide the service. Be sure to first check the credentials of firms offering such services.

According to the Doing Business 2010 report, the following procedures need to be taken to set-up a business in Lagos State (procedures may vary from state to state).

Procedure 1
Check the availability of company name with CAC online

Time to complete: two days
Cost to complete: ₦200 (US$1.3) application form

Comment:
The CAC Online System was commissioned in June 2005. The system envisaged an online search of unique company names immediately upon the purchase of an e-payment card from an accredited bank. Although this service is widely advertised by CAC, until now the system is not fully operational either because of power fluctuation or because of lack of availability of the pre-paid cards necessary to conduct the on-line transaction. In most cases, the applicants have to go to the CAC office to complete this procedure.

Procedure 2
Prepare the requisite incorporation documents and pay the stamp duty

Time to complete: seven days
Cost to complete: stamp duty included in Procedure 4

Comment:
To prepare the requisite incorporation documents, the incorporators must complete the necessary statutory forms, prepare and print the memorandum and articles of association, and have them stamped by the Federal Board of the Inland Revenue Service.

Procedure 3
Notarise the declaration of compliance (CAC 4)

Time to complete: one day
Cost to complete: ₦200 (US$1.3)

Comment:
The declaration by the barrister or solicitor engaged in the formation of the company may be sworn to at either the State High Court for a fee of ₦200 (US$1.3) or at the Federal High court for a fee of ₦20 (US$0.13).

Procedure 4
Register the company with CAC and pay fees at the bank desk of CAC

Time to complete: eleven days
Cost to complete: ₦60,000 (US$402) legal fees + ₦500 (US$3.3) incorporation forms + ₦10,000 (US$67) incorporation fees (an extra ₦50,000 (US$335) for same-day processing) + 0.75% stamp duty paid on capital + ₦500 (US$3.3) for each additional copy of Memorandum and Articles of Association stamped + ₦3 (US0.02)

Comment:

To register the company with CAC, the following incorporation documents need to be submitted:

  • Name reservation and availability form
  • Memorandum and Articles of Association, stamped by the commissioner for stamp duties (two copies)
  • Form CAC 3, notice of registered address
  • Form CAC 7, particulars of directors
  • Form CAC 2, statement of share capital and return of allotment of shares

Incorporation fees are:

  • ₦10,000 (US$67) for a company whose nominal share capital does not exceed ₦1,000,000 (US$6,711) and ₦10,000 (US$67) for every ₦1,000,000 (US$6,711) thereafter.
  • ₦500 (US$3.3) incorporation forms
  • 1.5% stamp duty paid on capital
  • ₦500 (US$3.3) for each additional copy of Memorandum and Articles of Association stamped
  • ₦3,000 (US$20) for certified true copy of Memorandum and Articles of Association
  • ₦2,000 (US$13) for certified true copy of particulars of directors
  • ₦2,000 (US$13) for certified true copy of particulars of shareholders. Moreover, ₦60,000 (US$402) is the approximate cost of company incorporation conducted by professionals (lawyers, charted accountants of charted secretaries) accredited by CAC. The payment can be done at the bank desk at CAC.

Procedure 5
Register with the Federal Board of Inland Revenue Department of the Ministry of Finance

Time to complete: four days
Cost to complete: no charge

Comment:
The Federal Inland Revenue Service (FIRS) requires the applicant to complete tax registration forms for corporate income tax registration as well as VAT. The company submits an application letter to the tax authority for a tax clearance certificate and, for income tax purposes, registers at the integrated tax office.

The registration process requires submitting a completed tax office-issued application (taxpayer registration input form, TRIF/2006/001 COYS) and the following documents:

  • Completed FIRS questionnaire
  • Memorandum and Articles of Association (copy)
  • Certificate of Incorporation (copy)
  • Directors’ names and addresses
  • Tax advisor’s name and address
  • Letter of appointment of a tax advisor and corresponding letter of acceptance
  • The date the company commenced business
  • Names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses
  • Other sources of income of the chairman and the promoters of the company
  • Name and addresses of the principal officers of the company including the chairman, managing director, legal advisor and accountant

To register, the company must submit the taxpayer registration input form in triplicate, and the original certificate of incorporation must be presented for review by the controller. Upon the completed taxpayer registration input form and all other documents being received, a tax reference number is allocated. An application must be filed for the tax clearance certificate; its issuance is not automatic.

Procedure 6
Register for personal income tax PAYE at the State Tax Office

Time to complete: two days, simultaneous with previous procedure
Cost to complete: no charge

Comment:
All employers shall register with the relevant state tax authority for income tax withholding. Once the application is filed, with a copy of the certificate of incorporation attached, a reference file is opened for the company.

Procedure 7
LSSAA signage inspection

Time to complete: seven days, simultaneous with previous procedure
Cost to complete: no charge

Comment:
The Lagos State Government has developed a new state law which entitles it to impose signage fees. This law is much more developed than most other state laws. The local government was divested of the power to carry out this function in January 2007 to the Lagos State Signage and Advertising Agency (LSSAA).

LSSAA regulates outdoor display in business premises in Lagos State. Any company that is doing business in Lagos State that has an outdoor display in the form of advertisement at the premises or any vehicle of the company must register the display with the agency. LSSAA issues the questionnaire regarding the application to erect a signboard outside business premises, etc. This questionnaire is completed by newly established businesses within the state and submitted to LSSAA, who will scrutinise the completed questionnaire and arrange for an inspection of the signboard at its location. The registration is done in two phases:

  • Pre-scrutiny stage: the applicant pays the sums of ₦8,500 (US$57) and ₦6,500 (US$43) as initial fees for assessment and survey respectively.
  • Formal application: the application fee is ₦2500 (US$16). In addition a copy of the gazzette on the LSSAA is attached to the application form for a fee of ₦1,000 (US$6.7). After the above, the application will be forwarded to the billing and assessment department of the agency to determine the fee payable for the issuance of the permit. The amount of fee is determined by the dimension and location of the outdoor display. In most other states in Nigeria signage and related compliance issues are handled by the local government council.

Procedure 8
Pay signage fees at a designated bank

Time to complete: one day
Cost to complete: ₦18,500 (US$124)


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