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This is for the investor with business interests in Nigeria


Businesses run at a loss due to lack of information on the best structure for their investments. In Nigeria, many business owners do not understand the basic and fundamental principles, and so tend to run their limited liability companies as sole traders. Naturally small and medium scale businesses face many challenges that limit their long-term survival and rate of development. This is further compounded where there is a lacuna in the business promoters’ knowledge base.

There are currently many high-profile initiatives and training programs available to empower and support these businesses. Unfortunately, many entrepreneurs are not aware, or do not have the skills or network to take advantage of these initiatives. As you can imagine, where the promoter of a business is cash rich but knowledge and experience poor, the likelihood of the business succeeding is slim.

In this article, I will briefly run through important considerations when thinking about doing business in Nigeria.

But first, why Nigeria?

This is a question that resonates amongst Nigerians who have been living away from Nigeria for years, and investors, who are wary about the uncertainty of the business climate.

To this my answer is always: –

  1. Nigeria has the largest population in Africa, thus a relatively cheap labour force and a large market for initial sales;

  2. We have abundant natural resources (not just oil and gas, coal, copper, livestock, poultry etc.);

  3. We have vast and fertile land for agricultural projects;

  4. There are significant government incentives for small and micro businesses, as well as for foreign investors;

  5. We have the largest economy in Africa and have been identified by Goldman Sachs as being amongst the “next eleven” economies.

Things to Consider

The following are things to consider when setting up a business in Nigeria

a. Incorporation

Local incorporation is compulsory in most instances. Investors may consider registration of a business name or forming a private limited liability company. There are pros and cons to either option. The final choice will largely depend on the nature of business you wish to set up. Where you decide to incorporate a private limited liability company, it would be advisable to outsource the companies secretarial and accounting needs. This tends to be menial, but the correlation to the success of the business is unquantifiable.

b. Importation of Capital

This may be done by either importing the raw cash, or done in kind (i.e. equipment, plant, machinery). Either way, prior to the importation of the required capital, business promoters should research and obtain a Certificate of Capital Importation (“CCI”). The CCI is required by investors who plan to remit profits for either non-resident shareholders, or loan and interest repayments attributable to the investment. It enables the holder (by presenting the CCI), to purchase foreign currency from the official foreign exchange market.

c. Registration with NIPC

Any enterprise in which there is foreign participation (foreign here means a non-Nigerian national) must be registered with the Nigerian Investment Promotion Commission (“NIPC”). NIPC provides services and facilitates the grant of business permits, licenses, authorizations and incentives.

d. Business and immigration permits

These are necessary where there is foreign participation in the undertaking of any business in Nigeria. The relevant companies would also need an expatriate quota for each expatriate it wishes to employ. This could be either a Temporary Work Permit for expatriates engaged in short term assignments, or a Combined Expatriate Residence Permit and Aliens Card for expatriates wishing to stay in Nigeria for longer periods of time.

e. Industry permits and registrations

The type of permits and registrations one would typically apply for is determined by the nature of the proposed business. I would advise that the applicable permits and registrations be thoroughly researched beforehand to avoid unnecessary governmental intervention. Tax registrations are necessary at both federal and state level, and a Tax Clearance Certificate tends to be a prerequisite for most applications for regulatory approvals.

Key Investment Issues

In some sectors, a company is required to have a certain percentage of Nigerian ownership to be eligible for certain government incentives. These include the oil and gas sector, as well as the Nigerian maritime sector. When intending to partner with a foreigner for any project, it is important to research if the proposed venture is caught within these statutory requirements and discuss ways around it.

Other investment issues which most people do not factor into their business plans, are the mandatory contributions required by eligible organisations.

These are specifically: –

  1. Industrial Training Fund – 1% of payroll for organisations with more than 5 employees and an annual turnover in excess of ₦50,000,000 (Fifty Million Naira);

  2. Pension fund – applicable where the employer has up to three employees in any sector. The employer is to contribute 7.5 – 10%, and the employee is to contribute 7.5 – 8.5% of the employee’s monthly emolument;

  3. Employee Compensation Fund – the minimum monthly contribution of 1% of the total monthly payroll;

  4. National Health Fund – An employer with a minimum of 10 employees is to contribute at a rate of 10% whilst the employee pays 5%, thus representing 15% of the employees’ basic salary; and

  5. National Housing Fund – A Nigerian worker earning an income of ₦3,000 (Three Thousand Naira) and above per annum in both the public and the private sectors of the economy shall contribute 2.5% of his basic monthly salary to the Fund

Lastly, an often neglected business need is insurance. Many Nigerians don’t believe in insuring their business against losses. ‘Insurance companies don’t pay out’, they say. This is a popular misconception; insurance companies do.


Failure of businesses has often been attributed to a shortage of cash flow caused by a refusal by debtors to repay the business sums due to the business. This is not completely true. Mismanagement and lack of information on the best way to structure a business is largely responsible for business failures.


Ivie Omoregie is a commercial lawyer licensed to practice law in England and Wales, and Nigeria. She has an in-depth knowledge of complex commercial, corporate, and lending transactions. Ivie has previously rendered advice on regulatory, legal, operational, and financing issues to international and domestic companies with business interests in Nigeria and the Sub Saharan region.

#Nigeria #Businesspermit #insurance

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