Nigeria: Doing Business In Nigeria

1. Legal framework

1.1 Does your jurisdiction have a civil law system, a common law system or a hybrid system?

Nigeria operates the English common law system, which can be traced back to its colonial history. Nigeria was colonised by Britain and the common law system is a legacy of English colonialism.

1.2 Which legislative and regulatory provisions primarily govern the establishment and operation of enterprises in your jurisdiction?

• Companies and Allied Matters Act, 2020 (CAMA): This is the principal law that governs the registration, incorporation, management, compliance and winding up of enterprises in Nigeria. It provides for the establishment of various types of enterprises, including:
• • sole proprietorships;
  • partnerships;
  • private and public limited liability companies; and
  • not-for-profit entities.
• Business Facilitation (Miscellaneous Provisions) Act 2023 (BFA): This law is a legislative intervention by the Presidential Enabling Business Environment Council (PEBEC) aimed at enhancing the ease of doing business in Nigeria. It amends 21 business-related laws and removes bureaucratic constraints to doing business in Nigeria.
• Companies Income Tax Act (Cap C21 Laws of the Federal Republic of Nigeria (LFN) 2004): This law regulates the taxation of companies in Nigeria.
• Consolidated Rules and Regulations of the Securities and Exchange Commission (SEC) 2013 (as amended): These rules provide supportive and additional legislation for capital markets operators in Nigeria on their operations in the Nigerian capital markets.
• Copyright Act, 2022: This law regulates the protection and exploitation of copyrightable works in Nigeria.
• Federal Competition and Consumer Protection Act, 2018: This is the principal law governing consumer protection and competition regulation in Nigeria.
• Investment and Securities Act, 2007: This law establishes the Nigerian SEC to regulate the issuance of securities and the Nigerian capital markets for the protection of investors.
• Labour Act (Cap L1, LFN 2004): This law regulates the relationship between employers and employees in Nigeria and sets out the minimum terms and conditions of employment.
• Nigerian Investment Promotion Commission (NIPC) Act (Cap N117, LFN 2004): This law establishes the NIPC and regulates the promotion and facilitation of foreign investments in Nigeria.
• National Office for Technology Acquisition and Promotion Act (Cap N62, LFN 2004): This law regulates the transfer of technology to Nigeria.
• Nigeria Startup Act, 2022: This law provides for the creation and development of an enabling environment for technology-enabled start-ups in Nigeria.
• Patents and Design Act (Cap P2, LFN 2004): This law regulates the registration and proprietorship of patents and designs in Nigeria.
• Trade Marks Act (Cap T13, LFN 2004): This law regulates the registration and protection of trademarks in Nigeria.

1.3 Which bodies are responsible for drafting and enforcing these provisions? What powers do they have?

The body responsible for drafting laws in Nigeria is the legislature, comprising the Senate and the House of Representatives. The following regulatory authorities are responsible for enforcing compliance with the laws on the establishment and operations of enterprises in Nigeria:

• Corporate Affairs Commission (CAC): The CAC enforces the CAMA. The CAC oversees the registration, regulation, formation, incorporation, management and winding up of companies, business names and incorporated trustees.
• PEBEC: This is a specialised agency set up by the president of Nigeria to promote the ease of doing business in Nigeria through legislative reforms and policies. The BFA is a legislative intervention of PEBEC.
• Federal Inland Revenue Service (FIRS): The FIRS ensures compliance with the Companies Income Tax Act. The FIRS primarily assesses, collects, accounts and enforces the payment of taxes as may be due to the federal government or any of its agencies.
• SEC: The SEC enforces:
• • the Investments and Securities Act 2007; and
  • the Consolidated Rules and Regulations of the SEC 2013.
• It regulates investments and securities business in Nigeria – particularly all offers of securities by public companies and registers – and regulates corporate and individual capital markets operators in Nigeria.
• Nigerian Copyright Commission (NCC): The NCC regulates, administers and enforces copyright matters under the Copyright Act 2023.
• Federal Competition and Consumer Protection Commission (FCCPC): The FCCPC is responsible for consumer protection in Nigeria. It enforces the Federal Competition and Consumer Protection Act, 2018. It protects consumers from:
• • unfair trade practices;
  • false or misleading advertising; and
  • substandard goods and services.
• The FCCPC also reviews and approves M&A transactions to ensure that they do not result in a concentration of market power that could harm competition or consumers.
• Federal Ministry of Labour and Employment: This ministry is responsible for the formulation, implementation and enforcement of policies and regulations relating to labour and employment in Nigeria.
• NIPC: The NIPC enforces the Nigerian Investment Promotion Commission Act. The NIPC's primary function is to encourage, promote and coordinate investment in the Nigerian economy.
• National Office for Technology Acquisition and Promotion (NOTAP): The NOTAP enforces the NOTAP Act. Its primary function in Nigeria is to regulate, promote and coordinate the acquisition, development and transfer of foreign technology to Nigeria.
• National Council for Digital Innovation and Entrepreneurship (NCDIE): The NCDIE enforces the Nigeria Start-up Act 2022. It has the power to formulate policies for the implementation of the Nigeria Start-up Act and reviews policies of ministries, departments and agencies relating to start-ups.
• Trade Marks, Patents and Designs Registry: This registry is responsible for enforcing the Trade Marks Act and the Patents and Designs Act.

2. Types of business structures

2.1 What are the main types of business structures in your jurisdiction and what are their key features?

The main types of business structures in Nigeria are private companies and public companies. These businesses are further divided into:

• private companies limited by shares;
• private companies limited by guarantee;
• private unlimited companies;
• public companies limited by shares;
• public companies limited by guarantee; and
• public unlimited companies.

The key features of private companies are as follows:

• The members do not exceed 50, except members who are in bona fide employment by the company;
• They do not invite members of the public to buy their shares;
• The minimum issued share capital is NGN 100,000;
• They can hold their general meeting electronically (virtually);
• They can be formed by a minimum of one person;
• The appointment of a company secretary is not mandatory; and
• They are not mandated to keep statutory books.

The key features of public companies are as follows:

• The number of persons who can be members of the company is unlimited;
• They invite members of the public to subscribe to their shares;
• The minimum issued share capital is NGN 2 million;
• They cannot hold their general meeting electronically;
• They can be formed by a minimum of two persons;
• The appointment of a company secretary is mandatory; and
• They are mandated to keep statutory books.

2.2 What capital requirements apply to these different types of business structures?

The minimum issued share capital for a private company is NGN 100,000. The minimum issued share capital for a public company is NGN 2 million.

2.3 What is the process for establishing these different types of business structures? What procedural and substantive requirements apply in this regard? What is the typical timeline for their establishment?

The process for establishing private or public companies in Nigeria is as follows:

• Conduct a name search and reservation: The person intending to register a company must provide two proposed names and search for their availability on the Corporate Affairs Commission (CAC) portal. If either of the names is available, it will be reserved by the CAC for a 60-day period.
• Complete the relevant incorporation documents: These include:
• • the particulars of directors and shareholders;
  • the objects of the company;
  • the share capital; and
  • other required documents.
• Pay filing fees and stamp duty.
• Submit the application for registration.
• Await the approval of the CAC.

The registration process can take between one and two weeks, provided that all necessary documentation is in order and there are no complications.

At the conclusion of the registration process, the following documents will be issued by the CAC:

• a certificate of incorporation;
• the memorandum and articles of association; and
• a status report.

2.4 What requirements and restrictions apply to foreign players that wish to establish a business directly in your jurisdiction?

The requirements for foreign players to be able to do business in Nigeria are as follows:

• Company incorporation: According to the Companies and Allied Matters Act (CAMA), any foreign company intending to conduct business in Nigeria must incorporate a company in Nigeria. The following foreign companies are not required to incorporate a company in Nigeria before they conduct business, but must obtain an exemption from the minister of trade and investment:
• • foreign companies that are invited into Nigeria by or with the approval of the federal government to execute a specified individual project;
  • foreign companies which are in Nigeria to execute a loan project on behalf of a donor country or international organisation;
  • foreign-government owned companies engaged solely in export-promotion activities; and
  • engineering consultants and technical experts who contract with any of the governments of the federation or any of their agencies – or with any body or person, provided that such contract has been approved by the federal government – to engage in an individual specialist project.
• Registration with the Nigerian Investment Promotion Commission (NIPC): Upon incorporation of a company in Nigeria, the company should register with the NIPC.
• Permit from the Ministry of Interior: A business permit should be obtained from the Ministry of Interior. If the company intends to employ foreigners in Nigeria, it is necessary to obtain an expatriate quota from the Ministry of Interior. A Combined Expatriate Residence Permit and Aliens Card is issued to permit foreign employees to live and work in Nigeria.
• Certificate of capital importation: Further to the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act (Cap F34, Laws of the Federal Republic of Nigeria 2004), a registered company should also obtain a certificate of capital importation from an authorised dealer as evidence of capital importation.

Restrictions on businesses to be engaged in by foreign players: Generally, in Nigeria, there are no restrictions on foreigners wholly owning and operating companies in the country, save in a few sectors. However, a company with foreign shareholders cannot be a small company and as such must have a minimum share capital of NGN 10 million.

Nigerians and foreigners are prohibited from engaging in businesses listed on the negative list outlined in the Nigerian Investment Promotion Commission Act. The prohibited business activities include:

• the production of arms and ammunition;
• the production of and dealing in narcotic drugs and psychotropic substances;
• the production of military and para-military wear and accoutrements, including those of the Police and the Customs, Immigration and Prison Services; and
• such other business activity as the Federal Executive Council may, from time to time, determine.

2.5 What other opportunities, using people/entities not connected with the main person, are there to do business in your jurisdiction (eg, agency, resale); and what requirements and restrictions apply in this regard?

Business name: A business name need not be registered, except where:

• in the case of a firm, the name does not consist of the true surnames of all partners without any addition other than the true first names of the individual partners or the initials of such first names;
• in the case of an individual, the name does not consist of his or her true surname without any addition other than his or her true first name or the initials; or
• in the case of a company, whether or not registered under CAMA, the name does not consist of its corporate name without any addition.

A foreign company may not register as a business name, as a business name does not possess separate legal personality.

Franchising: This involves licensing a business model and brand to local operators to run a franchise business in Nigeria. The requirements and restrictions for franchising in Nigeria usually depend on the specific terms of the franchise agreement and applicable laws and regulations.

Free trade zones: Companies operating in free trade zones in Nigeria are not required to incorporate a company with the CAC. However, such companies must obtain an operating licence from the Nigeria Export Processing Zones Authority.

Joint ventures: Foreign companies can enter into joint ventures with Nigerian companies to pursue business opportunities in the country. This allows for the sharing of resources, expertise and risks. The requirements and restrictions for joint ventures will depend on the specific terms of the joint venture agreement and applicable laws and regulations.

Partnerships (limited partnerships; limited liability partnerships): Through a limited partnership or a limited liability partnership, foreign companies can:

• conduct business in Nigeria; and
• invest in other companies.

A limited partnership has at least one general partner and at least one limited partner. A limited liability partnership is a hybrid business form that combines two types of structures:

• a partnership; and
• a limited liability company.

3. Directors and management

3.1 How is management typically organised in the different types of business structures in your jurisdiction?

The management structure of different types of business structures in Nigeria can vary depending on the specific business and its legal form:

• Sole proprietorship: In a sole proprietorship, the owner or the proprietor:
• • is typically the only one involved in the management of the business; and
  • is responsible for making all business decisions and, in most cases, handling all aspects of the business.
• Partnership: In a partnership, the management structure can be either equal or hierarchical, depending on:
• • the terms of the partnership agreement; and
  • the type of partnership.
• If the partners have equal ownership and decision-making power, they may jointly manage the business. If one partner has a greater share of ownership, such partner may act as the managing partner, having more decision-making power and taking a more dominant role in managing the business.
• Company: A private and public limited liability company is usually managed by a board of directors, its shareholders and executive officers. The board of directors is responsible for setting the overall strategy and direction of the company; while the executive officers are responsible for implementing the strategy and managing the day-to-day operations of the company. The shareholders of a company have the right to participate in the management of the company by attending general meetings and expressing their opinions on matters affecting the company.

3.2 Is the establishment of specialist committees recommended or mandated for certain types of enterprises? If so, which areas should they cover?

Other than sector-mandated committees for certain regulated entities, depending on the sector in which an enterprise operates, the establishment of specialist committees is not mandated but recommended for all types of enterprises (ie, private and public companies) under the Nigerian Code of Corporate Governance (NCCG), 2018. Under Principle 11 of the NCCG, the committees are as follows:

• Nomination and governance committee: This committee nominates members to the board and performs oversight functions on governance matters.
• Remuneration committee: This committee is charged with responsibility for:
• • determination of the remuneration policy and its application to executive management;
  • performance evaluation;
  • the adoption of incentive plans; and
  • various governance responsibilities related to remuneration.
• Audit committee: This committee performs audit functions.
• Risk management committee: This committee performs an oversight role on matters relating to risk management.

Certain sectors have regulator-mandated committees, the most prominent of which is the financial sector, whose regulators include:

• the Central Bank of Nigeria;
• the Nigerian Securities and Exchange Commission;
• the National Insurance Commission; and
• the National Pension Commission.

The mandated committees typically include those recommended under the NCCG.

3.3. Is the appointment of corporate directors permitted in your jurisdiction?

In Nigeria, a company cannot appoint a corporate director to its board of directors, as a corporation is disqualified from being a director of a company. The Companies and Allied Matters Act (CAMA), however, permits a corporation to designate its representative to serve on the board of another company for a given term.

3.4 What requirements and restrictions apply to the appointment of directors, in terms of factors such as number, residence, independence, diversity etc?

The following are recommended practices by the CAMA and the NCCG on the appointment of directors.

Number of board members: According to the CAMA, every company, except a small company, must have at least two directors. The following factors should be considered in determining the requisite number of the board members:

• knowledge, skills and experience, including the business, commercial and industry experience needed to govern a company;
• a combination of executive, non-executive and independent non-executive members such that a majority of the board are non-executive directors. It is desirable that some of the non-executive directors be independent. The amendments introduced by the Business Facilitation (Miscellaneous Provisions) Act to the independent director provisions of the CAMA require public companies to have a number of independent directors equivalent to one-third of the total number of directors;
• the need for a sufficient number of members that qualify to serve on the committees of the board; and
• applicable laws and regulations.

Diversity: The board should promote diversity in its membership across a variety of attributes relevant for promoting better decision making and effective governance. These attributes include:

• knowledge, skills and experience; and
• age, culture and gender.

Competence and skill: The board should approve the criteria for appointing directors, as recommended by the committee responsible for nomination and governance.

Independence: No individual or small group of individuals should dominate the board's decision making. It is also not recommended for persons who are not directors to exercise control over members of the board. Additionally, an independent non-executive director must be truly independent.

3.5 How are directors selected, appointed and removed? Do any restrictions or recommendations apply to their tenure?

The appointment of directors can be categorised as follows:

• Appointment of first directors: First directors are appointed as directors at the incorporation of the company. They are appointed by the subscribers to the memorandum of association. Their names are contained in the memorandum of association or in the articles of association.
• Appointment of subsequent directors: Subsequent directors are appointed after incorporation. They are appointed by members at the annual general meeting (AGM) of the company.
• Appointment of directors to fill a casual vacancy: A casual vacancy occurs when a director dies, resigns, retires or is removed. In this instance, the board of directors appoints a new director, who is approved at the next AGM.

For public companies, a director who is 70 years old or more who is to be appointed or has been appointed must disclose his or her age to the shareholders. A director with multiple directorships in other public companies must also disclose this fact.

Removal of directors: A company can, through an ordinary resolution, remove a director before the expiration of his or her office.

Tenure of directors: Except as otherwise stated in a company's articles of association, the CAMA requires all directors of a company to retire at a company's first AGM. At subsequent AGMs of a company, the rotation of directors principle is employed, where one-third of the company's directors are required to retire at such meetings. To determine the directors to retire every year, the longest-serving directors since the last election are required to retire.

3.6 What are the directors' primary roles and responsibilities, and how are these exercised?

Based on the provisions of CAMA, the primary roles and responsibilities of directors in Nigeria are:

• to act in the best interests of the company and its stakeholders;
• to oversee the management of the company;
• to ensure compliance with applicable laws and regulations; and
• to provide strategic guidance and direction to the company.

Directors exercise these responsibilities through:

• attending regular board and committee meetings;
• actively engaging in the affairs of the company; and
• reviewing periodic management and financial reports of the company to ascertain its performance.

3.7 Are the roles of individual directors restricted? Is this common in practice?

Directors may be subject to certain restrictions imposed by a company's governing documents (i.e., its articles of association or shareholders' agreement).

It is common for directors to hold multiple directorships, but:

• they must ensure that they can fulfil their fiduciary duties to each company they serve; and
• they may be held personally liable for any breach of their duties.

Additionally, the CAMA imposes a limit on multiple directorships of public companies, stating that no person can be a director in more than five public companies at the same time.

3.8 What are the legal duties of individual directors? To whom are these duties owed?

According to CAMA, the directors of a company owe the following duties to the company, its members and other stakeholders:

• a duty of utmost good faith towards the company in any transaction with the company or on its behalf;
• a duty to act in the best interests of the company in a manner that:
• • preserves the company's assets; and
  • advances the business and the purpose for which the company was created;
• a duty to protect the interests of the company's employees and its members;
• a duty to exercise power for the right purpose and not for collateral purposes;
• a duty not to fetter discretion to act in a particular way;
• a duty not to abdicate duty when a director delegates power;
• a duty not to make secret profit or gain from using company property; and
• a duty of care and skill.

3.9 To what civil and criminal liabilities are individual directors primarily potentially subject?

The general rule is that:

• any act of the members in general meeting, the board of directors or a managing director, while carrying on the business of the company in the usual way, will be treated as an act of the company itself; and
• the company will be criminally and civilly liable to the same extent as if it were a natural person.

In this case, the director is not liable for acts done in the usual course of business of the company.

However, the company will not incur civil liability to any person if that person:

• had actual knowledge at the time of the transaction that the general meeting, board of directors or managing director;
• • had no power to act; or
  • had acted in an irregular manner; and
• by virtue of its relationship:
• • ought to have known that the managing director, board of directors or managing director had no power to act; or
  • knew about the irregularity.

Where a person not duly appointed as a director acts as such on behalf of the company:

• his or her act does not bind the company; and
• he or she will be personally liable for such action.

However, where it is the company which holds him or her out as director, the company is bound by his or her acts.

Additionally, where the directors receive secret profits, they are bound to give account of the secret profits to the company.

4. Shareholders/members

4.1 What requirements and restrictions apply to shareholders/members in your jurisdiction, in terms of factors such as age, bankruptcy status etc?

In Nigeria, shareholders of a company can be:

• individuals;
• corporate bodies; or
• a combination of both.

While there is no express provision of the law that prevents minors from being shareholders of a company, a person under the age of 18 years shall not be counted for the purpose of determining the legal minimum number of shareholders of a company.

The following persons do not have the capacity to be shareholders of a company:

• a person of unsound mind who has been declared so by a court in Nigeria or elsewhere;
• an undischarged bankrupt; or
• a corporate body in liquidation.

The following restrictions may also apply to shareholders of a company in Nigeria:

• Foreign ownership restrictions: Certain sectors in Nigeria – such as security services, media and broadcasting, aviation and telecommunications – have restrictions on the percentage of shareholding that a foreigner can have in companies operating within them. These restrictions aim to protect strategic sectors and promote local participation.
• Share transfer restrictions: Private companies in Nigeria have restrictions on the transfer of shares by their shareholders. These restrictions are usually specified in the company's articles of association or in a shareholders' agreement. Existing shareholders of a private company also have pre-emptive rights which give them the right to purchase shares for sale before they are offered to third parties.
• Insider trading restrictions: Shareholders that have access to non-public information about a public company may be restricted from trading shares based on that information. Insider trading regulations aim to prevent unfair advantages in the stock market.

4.2 What rights do shareholders/members enjoy with regard to the company in which they have invested?

• Voting rights: Shareholders have the right to vote at general meetings of a company, including annual general meetings (AGMs) and extraordinary general meetings (EGMs).
• Right to receive dividends: Shareholders have the right to receive dividends declared by the company. Dividends are usually paid out of the company's profits and are distributed to shareholders in proportion to their shareholdings when declared by the board of directors.
• Pre-emption rights: A shareholder of a private company that intends to transfer its shares to a third party must first offer the shares to the existing shareholders of the company.
• Information rights: Shareholders have the right to access information about a company, such as:
• • financial statements;
  • annual reports; and
  • other relevant information.
• The company must make this information available to shareholders upon request.
• Right to transfer shares: Shareholders have the right to transfer their shares to other parties, subject to any restrictions imposed by the company's articles of association or other governing documents.
• Right to institute legal action: Shareholders have the right to bring legal action against the company or its directors where they believe that:
• • their rights have been violated; or
  • the company has engaged in wrongful conduct.
• Participation in management: Shareholders have the right to participate in the management of a company by attending general meetings and expressing their views on matters affecting the company.

4.3 How do shareholders/members exercise these rights? Do they have a right to call shareholders' meetings and, if so, in what circumstances?

According to the Companies and Allied Matters Act (CAMA), shareholders exercise their rights through voting rights exercised at the meetings of a company.

Companies must hold an AGM once in every calendar year, and EGMs may be called by the board of directors or on the request of shareholders that hold at least 10% of the paid-up capital of the company. The request must:

• be made in writing to the board of directors; and
• specify the purpose of the meeting.

If the board fails to convene the meeting within 21 days of receiving the request, the shareholders may convene the meeting themselves.

Additionally, shareholders in Nigeria may exercise their rights by:

• proposing resolutions on certain matters;
• asking questions;
• voting; and
• making recommendations at general meetings.

4.4 What influence can shareholders/members exert on the appointment and operations of the directors?

Shareholders in Nigeria can exert a significant degree of influence on the appointment and operations of the directors of a company in the following ways:

• Election of directors: Shareholders have the right to elect directors at general meetings of the company. Shareholders can propose candidates for appointment to a company's board and can vote for or against the election of individual directors.
• Removal of directors: Through the passing of an ordinary resolution, shareholders have the right to remove directors from a company's board before the expiration of their term of office.
• Approval of directors' remuneration: Shareholders must approve the remuneration of the directors at the AGM.
• Approval of key decisions: Subject to applicable laws and a company's governing documents, shareholders must approve certain key decisions made by the directors of a company as well as a company's management, such as those relating to:
• • major capital expenditures;
  • mergers and acquisitions; and
  • the sale/transfer of intellectual property and other assets of a company.

4.5 What are the legal duties/responsibilities and potential liabilities, if any, of shareholders/members?

Some of the key duties and liabilities of shareholders in Nigeria include the following:

• Payment for shares: Shareholders have a duty to pay for the shares they have subscribed to in the company. Failure to pay for the shares may result in the shares being forfeited.
• Duty to act in good faith: Shareholders have a duty to act in good faith and in the best interests of the company.
• Liability for company debts: In a company limited by shares, the liability of shareholders is limited to the extent of their shareholdings in a company. Shareholders of companies limited by guarantee may be liable for a fixed amount or for the full amount of the company's debts.
• Liability for insider trading: Shareholders that engage in insider trading or other illegal activities related to their ownership of shares may be subject to civil or criminal penalties.

4.6 To what civil and criminal liabilities might individual shareholders/members be subject?

The following are some of the civil and criminal liabilities to which individual shareholders may be subject in Nigeria:

• Liability for company debts: For companies limited by shares, shareholders are generally liable only to the extent of their shareholdings; while shareholders of companies limited by guarantee may be liable for a fixed amount or for the full amount of the company's debts.
• Liability for breach of fiduciary duties: Shareholders that are also directors or officers of the company may be held liable for breach of their fiduciary duties, including duties of loyalty, care and good faith. This may include liability for actions that harm the company, its shareholders or other stakeholders.
• Liability for insider trading: Shareholders that engage in insider trading or other illegal activities related to their ownership of shares may be subject to civil or criminal penalties.
• Liability for false statements: Shareholders that make false or misleading statements in connection with the sale or purchase of shares may be subject to civil or criminal liability.
• Liability for anti-competitive behaviour: Shareholders that engage in anti-competitive behaviour, such as price-fixing or market allocation, may be subject to civil or criminal penalties under Nigeria's competition laws.

4.7 Are there rules governing the issuance of further securities in a company? Do rights of pre-emption exist and, if so, how do they operate? Can they be circumvented? If so, how and to what extent?

The rules governing the issuance of further securities in a company are set out in:

• the CAMA;
• the Investment and Securities Act 2007 (ISA); and
• the Rules and Regulations of the Nigerian Securities and Exchange Commission (SEC).

Under the CAMA, a company must obtain the shareholders' approval for the issuance of new securities, which may include:

• shares;
• bonds;
• debentures; or
• other types of securities.

Shareholder approval is generally required at a general meeting of the company and the terms of the securities being issued must be disclosed to shareholders in advance.

Generally, under the CAMA, the ISA and the SEC rules, only a public company can issue securities to the public or invite the public to acquire its securities. Before doing this, a public company must register with the SEC, providing the SEC and other members of the public with a prospectus and information about the offering. However, the recently passed Business Facilitation (Miscellaneous Provisions) Act amends the ISA to provide that private companies may allot shares to the public, subject to the provisions of regulations to be issued by the SEC. Currently, the SEC is yet to issue any such regulation.

The CAMA provides for pre-emption rights. These rights make it compulsory for the company to give existing shareholders of a class the opportunity to purchase any new securities being issued by the company in that class before they are offered to third parties. The pre-emption rights of shareholders are typically set out in the articles of association and shareholders' agreement, where one exists.

The usual way in which pre-emption rights can be circumvented is by obtaining the shareholders' approval of the waiver of their pre-emption rights during the issuance of securities to new investors or other shareholders.

4.8 Are there any rules on the public disclosure of levels of shareholding and/or stake building?

The rules on the public disclosure of levels of shareholding and stake building in Nigeria are set out in the CAMA, the ISA and the SEC rules.

Under the CAMA, substantial shareholders in public companies that, either by themselves or by their nominees, hold shares entitling them to at least 5% of the unrestricted voting rights at any general meeting must notify such companies in writing within 14 days of becoming aware of their substantial shareholder status. A public company must notify the Corporate Affairs Commission of a substantial shareholder within 14 days of receiving notice of such a shareholder.

Under the ISA, any person or group of persons that acquires a certain percentage of shares in a public company must disclose the acquisition to the SEC and the stock exchange on which the shares are listed. The percentage threshold for disclosure is 5% or any multiple of 5% thereafter. The disclosure must be made within 48 hours of the acquisition.

In addition, the SEC rules require public companies to disclose the level of shareholding of their major shareholders in their annual reports and other public disclosures. 'Major shareholders' are defined as those holding 5% or more of the company's shares.

The SEC also requires any person that acquires 10% or more of the shares of a public company to make a public announcement of the acquisition within 14 days. The announcement must include information on:

• the person's identity;
• the number and percentage of shares acquired; and
• the purpose of the acquisition.

Failure to comply with the disclosure requirements may result in penalties and other sanctions.

5. Operations

5.1 What are the main routes for obtaining working capital in your jurisdiction? What are the advantages and disadvantages of each?

The main routes for obtaining working capital in Nigeria include the following:

• Shareholder capital: This is the common source of working capital in Nigeria, through which the shareholders of a company subscribe and purchase shares in a company.
• Bank loans: This form of working capital usually entails a straightforward process. Except where the loan requires collateral, individuals and companies need not necessarily exchange any asset or shares to obtain loans. Bank loans may have high interest rates, making them difficult to obtain for small and medium-sized enterprises, and may require collateral or a personal guarantee.
• Private investments: Companies usually raise this type of financing from:
• • family and friends;
  • angel investors;
  • venture capitalists; and
  • private equity firms.
• This type of financing in most cases requires companies to give a portion of their shares to the investors and may result in the dilution of the shares of the existing shareholders.
• Trade credit: This involves purchasing goods or services on credit from suppliers. The advantages of trade credit include flexibility and the ability to negotiate favourable terms. However, relying too heavily on trade credit can put a strain on supplier relationships and may lead to cash-flow issues if payments are delayed.
• Invoice financing: Invoice financing involves selling unpaid invoices to a third-party finance provider in exchange for immediate cash. The advantages of invoice financing include fast access to cash and no need for collateral. However, invoice financing can be expensive, with high interest rates and fees.
• Public markets: Companies listed on the Nigerian Exchange Group can raise capital through the sale of their securities to the public.

5.2 What are the main routes for the return of proceeds in your jurisdiction? What are the advantages and disadvantages of each?

The main routes for the return of proceeds in Nigeria include the following:

• Capital appreciation: Through the increase in the value and market price of an asset (eg, shares, real property, intellectual property), companies, investors and other stakeholders can obtain a return on their investment from the sale of their asset.
• Dividends: Upon a company declaring dividends, shareholders can share in the profits of a company in proportion to their shareholding.
• Liquidation: Investors also repatriate funds through the liquidation of their investments. This involves selling off their investments in a company. This is usually a straightforward process. However, the disadvantage is that it may take longer and be more complex than other routes.
• Royalties on IP licensing: Through the licensing of intellectual property, companies and individual owners of intellectual property can commercially exploit their intellectual property and receive royalties from the licensees.

5.3 What requirements and restrictions apply to foreign direct investment in your jurisdiction?

Some of the key requirements and restrictions include the following:

• Company incorporation: Foreign direct investment usually involves:
• • establishing a business enterprise in Nigeria; or
  • owning substantial shares in a Nigerian company.
• Foreign companies intending to do business in Nigeria (except for exempted companies) must:
• • be incorporated as a separate entity in Nigeria; and
  • comply with any sector-specific capital requirements.
• Registration with the Nigerian Investment Promotion Commission (NIPC): All companies with foreign equity participation in Nigeria must be registered with the NIPC. The registration process is designed to encourage transparency and facilitate the monitoring of foreign investment inflows.
• Registration with regulatory bodies: A foreign company establishing a company in Nigeria may, depending on the nature of its business, require business licences from certain regulatory bodies such as:
• • the Central Bank of Nigeria (CBN);
  • the National Agency for Food and Drug Administration and Control; or
  • the Nigerian Communications Commission.
• Sector restrictions on foreign ownership: While foreign ownership of companies is allowed in all industries in Nigeria, some share acquisition restrictions apply in certain sectors. Foreign investors must comply with restrictions on foreign ownership, which can include limits on the percentage of foreign ownership or bans on foreign ownership, some of which are listed below:
• • A licensed broadcasting company must be substantially owned and operated by Nigerians and show that it is not representing foreign interests.
  • Only advertising agencies where Nigerians own 74.9% equity can advertise in Nigeria.
  • A foreigner cannot hold equity in or be a director of a Nigerian private security guard company.
• Local content requirements: Foreign investors must comply with local content requirements for operating in certain sectors, such as oil and gas, which can include:
• • the use of local labour; and
  • the sourcing of goods and services locally.
• Exchange control regulations: Foreign investors must comply with any exchange regulations in place, for the time being. Currently, there are foreign currency control measures in place by the CBN due to inflation which include:
• • multiple exchange rates; and
  • a ban on importers of certain products from accessing dollars at the official CBN rate.

5.4 What exchange control requirements apply in your jurisdiction?

Exchange control requirements in Nigeria are regulated by the CBN and are designed to manage the inflow and outflow of foreign currency. Some of the exchange control requirements in Nigeria include the following:

• Foreign currency domiciliary accounts: Corporate bodies, individuals and firms can maintain and operate domiciliary accounts in any internationally convertible currency in any bank in Nigeria.
• Conducting transactions in Naira: The CBN Act:
• • recognises the naira as the legal tender in Nigeria; and
  • forbids anyone from refusing to accept the naira as a means of payment in Nigeria.
• Capital importation requirements: Foreign investors must:
• • register their investments with the NIPC; and
  • obtain a certificate of capital importation (CCI) from the CBN through authorised dealers. The CCI is required for the repatriation of both capital and profits.
• The NIPC Act guarantees foreign investors the unrestricted transferability of dividends or profits (net of tax) attributable to foreign investment in Nigeria and capital repatriation in the event of liquidation.
• Export proceeds: Exporters must repatriate at least 50% of their export proceeds within 90 days (for oil exports) or 180 days (for non-oil exports) of the shipment date. This requirement is designed to manage the inflow of foreign currency into Nigeria.
• Foreign exchange market: The CBN operates a foreign exchange market to manage the inflow and outflow of foreign currency. The market is subject to various controls and regulations, including:
• • multiple exchange rates (depending on the party conducting the exchange and purpose); and
  • restrictions on the amount of foreign currency that can be purchased and sold.

5.5 What role do stakeholders such as employees, pensioners, creditors, customers and suppliers play in shaping business operations in your jurisdiction? What other influence can they exert on an enterprise?

Stakeholders such as employees, pensioners, creditors, customers and suppliers play an important role in shaping business operations in Nigeria. These stakeholders influence an enterprise in the following ways:

• Employees: Employees provide labour, skills and expertise. They:
• • influence the workplace culture;
  • interface with and manage customers; and
  • provide feedback on business processes and practices.
• In certain business sectors, labour unions can exert significant influence on business operations through collective bargaining and strikes.
• Pensioners: Through retirement benefits, pensioners can exert influence on business operations. Pension funds are an important source of long-term capital for businesses, and pensioners can influence investment decisions and corporate governance through their voting rights as shareholders.
• Creditors: In Nigeria, banks and other financial institutions play a critical role in providing financing to businesses. Creditors influence business operations through:
• • the availability of credit; and
  • their participation in debt restructuring and other financial transactions.
• Customers: Customers keep a business viable and influence business operations through their purchasing decisions and feedback.
• Suppliers: Suppliers can influence business operations through the availability and cost of goods and services.

Other stakeholders that can influence enterprises in Nigeria include:

• government agencies;
• regulatory bodies; and
• the media.

5.6 What key concerns and considerations should be borne in mind with regard to general business operations in your jurisdiction?

Key considerations include the following:

• General and sector-specific regulations: Business operations in Nigeria are regulated and the laws and regulations that apply to a business and its sector must be complied with in order to operate legally in Nigeria.
• Applicable taxes: Companies and their stakeholders are subject to corporate and individual taxes, including:
• • companies income tax;
  • personal income tax;
  • value-added tax; and
  • withholding tax.
• Local content requirements: Nigeria has local content requirements in various sectors, including oil and gas, telecommunications and construction. Companies operating in these sectors must comply with these requirements, which can impact their procurement processes and workforce composition.
• Corruption: Corruption is a challenge in Nigeria and can affect business operations in various ways, including:
• • regulatory compliance;
  • procurement processes; and
  • contract negotiations.
• Companies operating in Nigeria should have robust compliance programme and conduct due diligence on business partners to minimise corruption risks.
• Infrastructure: Nigeria's infrastructure is inadequate in many areas, including power generation, transportation and telecommunications. Companies should plan for these infrastructure deficiencies and factor in the costs of providing their own infrastructure, such as backup power and transportation arrangements.

6. Accounting reporting

6.1 What primary accounting reporting obligations apply in your jurisdiction?

The primary reporting obligations in Nigeria that apply to different entities and industries include the following:

• Companies: Companies in Nigeria must prepare and file annual financial statements with the Corporate Affairs Commission (CAC) within 90 days of the end of their financial year. These financial statements must comply with the requirements of the Companies and Allied Matters Act (CAMA) and with International Financial Reporting Standards (IFRS). Additionally, companies must file their annual returns with the CAC to notify the CAC that their business is still a going concern.
• Taxpayers: Taxpayers in Nigeria must file various tax returns with the Federal Inland Revenue Service and applicable state internal revenue services on or before their due dates. These tax returns include:
• • value-added tax;
  • personal income tax; and
  • companies income tax.
• Securities and Exchange Commission (SEC): Companies that issue securities to the Nigerian public must make periodic disclosures to the SEC. These disclosures may include financial statements, annual reports, and interim reports.
• Central Bank of Nigeria (CBN): Banks and other financial institutions in Nigeria are required to submit various reports to the CBN, including:
• • monthly financial statements;
  • quarterly prudential reports; and
  • annual audited financial statements.
• Nigerian Exchange Group: Companies listed on the Nigerian Exchange Group must comply with the NSE's listing rules, which include disclosure requirements such as:
• • financial statements;
  • annual reports; and
  • interim reports.
• Nigerian Financial Intelligence Unit (NFIU): Financial institutions and certain designated non-financial institutions are expected to make periodic reports on financial transactions to the NFIU for anti-money laundering purposes.

6.2 What role do the directors play in this regard?

Generally, directors ensure that a company's reporting obligations are met and regulatory requirements are complied with. The specific roles that directors play include:

• the preparation of financial statements (Section 377(1) of the CAMA);
• execution of a company's annual returns (Section 421(1) of the CAMA); and
• recommendation of dividends to a company's general meeting (Section 426(1) of the CAMA).

6.3 What role do accountants and auditors play in this regard?

• Preparation of financial statements: Accountants are responsible for preparing accurate and reliable financial statements that comply with the relevant accounting standards and regulations. They must ensure that all financial transactions are properly recorded in a company's financial statements. This is important because financial statements serve as the primary source of information for many of the reporting obligations in Nigeria. All companies must prepare their financial statements in accordance with the rules of the Financial Reporting Council of Nigeria, which are currently the IFRS Accounting Standards.
• Audit of financial statements: Auditors are responsible for reviewing and auditing the financial statements prepared by the accountants to ensure that they provide a true and fair statement of the financial position of the company. Companies with small company status are exempt from auditing their financial statements. A 'small company' is a company that meets the following criteria:
• • It is a private company with liability limited by shares;
  • It has a turnover that does not exceed NGN 120 million;
  • It has assets whose net value does not exceed NGN 60 million;
  • It has no foreign shareholders;
  • It has no shareholders which are a government, a government agent or a government nominee as shareholder; and
  • Its directors hold at least 51% of the equity share capital.
• Compliance with tax regulations: Accountants and auditors play a crucial role in ensuring compliance with tax regulations in Nigeria. They must ensure that the company is correctly calculating, filing and paying all applicable taxes. Failure to comply with tax obligations can result in penalties for a company.
• Reporting to regulatory bodies: Accountants and auditors may be required to report to regulatory bodies such as:
• • the Corporate Affairs Commission;
  • the Securities and Exchange Commission; and
  • the Central Bank of Nigeria.

6.4 What key concerns and considerations should be borne in mind with regard to accounting reporting in your jurisdiction?

• Compliance with statutory reporting requirements;
• Knowledge of regulators and other key stakeholders in the industry;
• Engagement of skilled and competent professionals to manage the reporting activities of a company; and
• Timely and accurate reporting.

7. Executive performance and compensation

7.1 How is executive compensation regulated in your jurisdiction?

The remuneration of directors is regulated by a range of general and sector-specific laws which contain provisions for the determination of the executive compensation of directors.

The key provisions on the regulation of executive compensation are found in the following general and sector-specific legislation:

• the Companies and Allied Matters Act 2020 (CAMA);
• the Nigerian Code of Corporate Governance, 2018;
• the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Services Banks;
• the Investment and Securities Act 2007;
• the Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses, 2014;
• the National Pension Commission (PENCOM) Code of Corporate Governance for Licensed Pension Operators, 2008; and
• the National Insurance Commission (NAICOM) Code of Corporate Governance for the Insurance Industry in Nigeria, 2021.

7.2 How is executive compensation determined? Do any disclosure requirements apply?

In Nigeria, executive compensation is determined by the provisions of the laws which regulate businesses. The prominent provisions in this regard are:

• the CAMA; and
• the Nigerian Code of Corporate Governance, 2018 (NCCG).

By virtue of the provisions of the CAMA, shareholders determine the remuneration of the directors of the company. The CAMA provides that directors of the company will determine the remuneration to be received by the managing director. Additionally, companies must disclose the details of the remuneration of directors in their annual reports.

The NCCG requires companies to:

• disclose the remuneration policy; and
• make disclosures of the remuneration earned by directors in the annual report of the company.

The NCCG also recommends that executive compensation be linked to performance, taking into account the company's financial and non-financial performance. It suggests that executive compensation should include a mix of fixed and variable pay, with the variable pay component tied to the achievement of performance targets.

7.3 How is executive performance monitored and managed?

The regulations that legislate executive compensation also contain provisions focused on ensuring compensation is performance-based. The CAMA requires directors, ahead of their reappointment, to make disclosures of their attendance at meetings in the preceding year. The NCCG also provides that remuneration should be linked to the company's performance as well as the individual performance of directors.

7.4 What key concerns and considerations should be borne in mind with regard to executive performance and compensation in your jurisdiction?

• Knowledge of the general and sector-specific requirements for determining executive compensation and the disclosure obligations to stakeholders and regulators.
• There should be a clear process for setting executive compensation, and the process should be overseen by a remuneration committee composed of independent directors. The committee should be accountable to shareholders and should ensure that executive compensation is reasonable and fair.
• Executive compensation should be balanced and include a mix of fixed and variable components, such as:
• • base salary;
  • short-term and long-term incentives; and
  • equity-based compensation.

8. Employment

8.1 What is the applicable employment regime in your jurisdiction and what are its key features?

The employment regime in Nigeria is governed by various laws and regulations, including:

• the Constitution of the Federal Republic of Nigeria, 1999 (as amended);
• the Labour Act (Cap L1, Laws of the Federal Republic of Nigeria 2004);
• the National Health Insurance Scheme Act, 2004;
• the National Housing Fund Act, 2004;
• the Trade Unions Act, 2005 (as amended);
• the National Industrial Court Act, 2006;
• the Employee's Compensation Act, 2010;
• the Personal Income Tax Act, 2011;
• the Industrial Training Fund Act, 2011 (as amended);
• the Pensions Reform Act, 2014;
• the HIV and AIDS (Anti-Discrimination) Act, 2014;
• the National Minimum Wage Act, 2019; and
• the Business Facilitation Act, 2023.

Under Nigerian law, employment is a contractual relationship between an employer and an employee with terms and conditions detailed in an employment contract. However, there are certain minimum standards and requirements that must be met by employers in Nigeria, which are outlined in the relevant laws and regulations.

Some of the key features of the employment regime in Nigeria include:

• Minimum wage: The minimum wage in Nigeria is set by the federal government and is currently set at NGN 30,000 per month.
• Working hours: The standard working hours in Nigeria are 8 hours per day and 40 hours per week. However, some industries may have different working hour requirements.
• Leave: Employers must provide employees with paid annual leave, sick leave and maternity leave.
• Payment of employment benefits: This includes making pension contributions on behalf of a company's employees.
• Health and safety: Employers must provide a safe and healthy working environment for employees and are liable for any injuries or illnesses that occur on the job.
• Termination of employment: Employers must follow certain procedures when terminating an employee and may be liable for severance pay in certain circumstances.

8.2 Are trade unions or other types of employee representation recognised in your jurisdiction?

Trade unions and other forms of employee representation are recognised in Nigeria.

The Trade Union Amendment Act of 2005 provides for the registration of trade unions, which allows them to legally represent workers in collective bargaining and other employment-related matters. The major objective of the act is:

• the provision of democratisation and liberalisation of the unions and labour; and
• guarantee the freedom of association of workers in Nigeria.

Additionally, the Labour Act recognises other forms of employee representation, such as workers' committees and staff associations. These employee associations can be formed in any workplace with the aim of protecting workers' interests and promoting their welfare.

Several agencies and bodies also protect workers' rights and welfare, such as:

• the National Industrial Court of Nigeria;
• the National Salaries, Incomes and Wages Commission; and
• the National Pension Commission.

8.3 How are dismissals, both individual and collective, governed in your jurisdiction? What is the process for effecting dismissals?

Dismissals in Nigeria are governed by:

• the Labour Act;
• employment contracts; and
• other relevant laws and regulations.

The Labour Act provides for both individual and collective dismissals and outlines the procedures that employers must follow when effecting dismissals.

• Individual dismissals: Subject to an employee's employment contract, an individual employee may be dismissed for just cause, such as misconduct or poor performance. In this instance, an employer must initially investigate and give the employee an opportunity to present a defence before dismissing him or her. The employee is entitled to a written notice of termination, in accordance with the terms of the agreed employment contract, specifying the reasons for the dismissal and the date on which it takes effect.
• Collective dismissals: In cases of collective dismissals, such as during redundancy, retrenchment or reorganisation, an employer must first notify the appropriate authorities, including:
• • the Ministry of Labour and Productivity; and
  • the trade unions (if any) representing the affected workers.
• The employer must also:
• • consult with the affected workers or their representatives; and
  • provide them with written notice of the proposed dismissals, the reasons for them and any compensation or benefits due to the affected workers.

Employers must ensure that they follow due procedure in handling employee dismissals to prevent their employees from suing them for wrongful dismissal. Aggrieved employees who are not satisfied with their dismissals may refer the matter to the National Industrial Court of Nigeria for resolution.

8.4 How can specialist talent be attracted from overseas where necessary?

The Immigration Act 2015 provides that any company in Nigeria seeking to employ a foreigner must seek the consent of the comptroller general of the Nigerian Immigration Service (NIS) and take the following steps:

• Obtain an expatriate quota: Any Nigerian company seeking to hire a foreigner must obtain an expatriate quota from the NIS. An expatriate quota permits companies to employ expatriates to approved job designations and specifies the duration of such employment. Exemptions from the expatriate quota requirement apply to:
• • government officials;
  • foreign students;
  • expatriate technical officials;
  • expatriates of international non-governmental organisations; and
  • expatriates of firms operating in free zones.
• Obtain a 'Subject to Regularisation' (STR) Visa: Upon a company receiving an expatriate quota from the NIS, it must apply to the Nigerian embassy situated in the resident country of the expatriate for an STR Visa. This visa is valid for 90 days and is granted to an expatriate pending the regularisation of the expatriate's status in Nigeria.
• Apply for a Combined Expatriate Residence Permit and Alien Card (CERPAC): Expatriates who plan to live and work in Nigeria for a period exceeding 56 days must obtain a CERPAC. Upon the grant of an STR Visa, an application for a CERPAC can be made. Where an expatriate intends to work in Nigeria for a short period of time, he or she can obtain a temporary work permit, which is usually granted for three months and can be extended for an additional six months.

8.5 What key concerns and considerations should be borne in mind with regard to employment in your jurisdiction?

The key concerns and considerations to bear in mind regarding employment in Nigeria include the following:

• Compliance with employment laws: Employers must ensure that they comply with Nigerian employment laws, which govern issues such as:
• • minimum wage;
  • working hours;
  • health and safety; and
  • employment contracts.
• Provision of employment contracts: Employment relationships are generally contractual in nature. It is therefore important that an employer execute an employment contract with each employee it engages, detailing the terms and conditions of his or her employment.
• Employee rights and benefits: Employers must provide employees with the rights and benefits outlined in the Labour Act, including:
• • paid annual leave;
  • sick leave;
  • maternity leave; and
  • severance pay.
• Employers should also ensure that employees are not subject to discrimination or harassment in the workplace.
• Deduction of taxes: Employers must ensure that they deduct, from their employees' salaries, the personal income taxes of their employees on a Pay-As-You-Earn basis as required by applicable laws.
• Talent retention and development: Employers must invest in talent retention and development to retain their skilled workforce. This includes providing opportunities for:
• • career advancement;
  • training; and
  • professional development.
• Expatriate regulations: Employers must comply with the regulations governing the employment of expatriates in Nigeria. This includes:
• • obtaining the necessary work permits and visas;
  • complying with immigration and tax laws; and
  • providing expatriates with appropriate housing and other benefits.

9. Tax

9.1 What is the applicable tax regime in your jurisdiction and what are its key features?

The tax regime in Nigeria is regulated by:

• the Federal Inland Revenue Service (FIRS);
• the inland revenue service of various states; and
• the tax laws.

The key features of the tax regime in Nigeria will depend on whether an individual or a business is tax resident or non-tax resident.

Individuals: Non-tax resident individuals who are employees are not subject to pay any taxes. However, tax-resident employees are subject to personal income tax and other deductions, as follows:

• Personal income tax: This is a tax imposed on the income of individuals in Nigeria. The tax rate varies based on the individual's income level and ranges from 7% to 24% at the following rates:.
• • Up to NGN 300,000: 7%.
  • Additional income of NGN 300,000 (making total income more than NGN 300,000 but less than NGN 600,000): 11%.
  • Additional income of NGN 500,000 (making total income more than NGN 600,000 but less than NGN 1.1 million): 15%.
  • Additional income of NGN 500,000 (making total income more than NGN 1.1 million but less than NGN 1.6 million): 19%.
  • Additional income of NGN 1.6 million (making total income more than NGN 1.6 million but less than NGN 3.2 million): 21%.
  • Any additional making total income more than NGN 3.2 million: 24%.
• National Housing Fund: Public sector employees who earn the minimum wage or above must contribute 2.5% of their basic monthly income to the National Housing Fund. Employers must deduct this at source.
• Pension contributions. Every employee in an organisation that employs up to 15 persons must deduct and contribute up to 8% of each employee's monthly salary into his or her retirement savings account, which is managed by a pension fund administrator (PFA) of their choice. The employer has a statutory obligation to deduct this contribution at source and remit it to the PFA on behalf of the employee.

An employee is deemed tax resident in Nigeria if the employee:

• is domiciled in Nigeria;
• resides in Nigeria for up to 183 days in a 12-month period; and/or
• serves as a diplomat or diplomatic agent of Nigeria in another country.

Businesses: A Nigerian company is tax resident in Nigeria when it has been incorporated in Nigeria. However, a non-tax resident business is not incorporated in Nigeria.

Profits from a non-tax resident business (i.e., a non-resident company (NRC)) are deemed to have been derived in Nigeria and subject to tax if any of the following applies:

• The company has a fixed base of business in Nigeria;
• The company habitually operates a trade through an authorised person in Nigeria or carries out contracts in Nigeria; or
• An arm's-length transaction takes place with a related company that the FIRS assesses to be artificial or fictitious, despite the company reporting that foreign transaction as an arm's-length transaction.

Where an NRC is incorporated in a jurisdiction that has a double taxation treaty (DTT) with Nigeria, the provisions of the treaty will be relevant in determining the tax liability of the vehicle.

The Finance Act expanded the basis for taxing NRCs with a significant economic presence (SEP) in Nigeria to include digital services and services rendered outside Nigeria to a Nigerian beneficiary. NRCs that transmit, emit or receive signals, sounds, messages, images or data of any kind to Nigeria in respect of any activity – including electronic commerce, online ads, online payments and so on – and have a SEP in Nigeria, will be taxed on the profit attributable to such activity in Nigeria.

The taxes that apply to businesses in Nigeria include the following.

Companies income tax (CIT): This is a tax imposed on the profits of companies in Nigeria. Resident companies are liable to CIT on their worldwide income while non-residents are subject to CIT on their Nigeria-source income. The CIT rate is:

• 30% for large companies;
• 20% for medium companies; and
• 0% for small companies.

However, a small company is still required to register for CIT and file the necessary returns required under the CIT Act.

Value-added tax (VAT): This is a consumption tax imposed on the supply of goods and services in Nigeria. The definition of goods and services that are subject to VAT was expanded by the Finance Act to include intangibles such as IP rights, shares and royalties. The current VAT rate in Nigeria is 7.5%.

Some goods and services are exempted from VAT. Exempted goods include:

• medical and pharmaceutical products;
• basic food items;
• books;
• exports;
• brown and white bread;
• cereals including maize, rice, wheat, millet, barley and sorghum;
• fish of all kinds;
• flour and starch meals;
• fruits, nuts, pulses and vegetables of various kinds;
• roots such as yam, cocoyam, sweet potatoes and Irish potatoes;
• meat and poultry products including eggs;
• milk;
• salt and herbs of various kinds;
• natural water and table water;
• locally manufactured sanitary towels; and
• tuition.

Exempted services include:

• medical services;
• services provided by community banks;
• services rendered by microfinance banks;
• mortgage institutions; and
• all exported services.

Capital gains tax (CGT): This is a tax imposed on the profit made from the disposal of capital assets, such as land, buildings and shares. The tax rate is 10% of the gain realised. The following are exempt from CGT:

• gains on a disposal of stocks, shares and other government securities such as treasury bonds, premium bonds and savings certificates;
• gains arising from acquisitions, mergers or takeovers, provided that no cash payment is made in respect of the shares acquired. In a related-party transaction, the Finance Act provides that the CGT exemption applies only where:
• • the related parties have been so related for at least 365 days before the acquisition, merger or takeover; and
  • the assets are not disposed of within 365 days of the merger; and
• gains made on any asset used for the purpose of a trade or business that are used for replacing old assets sold.

Withholding tax: This is a tax deducted at source on payments made to non-residents and residents. The withholding tax rate varies based on the type of payment and ranges from 5% to 10%. Withholding tax on rents, dividends, royalties and interest is 10% (reduced to 7.5% where the recipient is registered in a country with which Nigeria has a DTT). Fees for management or technical services are taxed at:

• 10% for companies; and
• 5% for individuals.

Contracts of supplies are taxed at 5%.

Tertiary education tax: This is a tax imposed on the profits of companies in Nigeria. The tax rate is 2% of a company's assessable profits.

Stamp duty: This is a tax imposed on certain types of transactions, such as:

• land and property transfers;
• loan agreements; and
• share transfers.

The tax rate varies based on the transaction and may be ad valorem or a fixed rate.

Ad valorem rates range from 0.15% to 6%. The fixed rate is currently:

• NGN 500 for the original document; and
• NGN 50 for counterparts.

Electronic transactions are liable to stamp duty under the Finance Act. Transfers of shares, stock or securities by a lender to its approved agent or a borrower in furtherance of a regulated securities lending transaction are exempt from stamp duty.

Information Technology Development Levy: Companies that conduct the following businesses with an annual turnover of at least NGN 100 million must pay 1% of their profits before tax to the FIRS:

• cyber companies and internet providers;
• pension managers and pension-related companies;
• banks and other financial institutions;
• insurance companies; and
• telecommunication companies.

National Cybersecurity Levy: Under the Cybercrimes Act, 2015, the following companies must pay a levy of 0.005% on all electronic transactions into a fund held with the Central Bank of Nigeria:

• telecommunications companies;
• internet service providers;
• banks and other financial institutions;
• insurance companies; and
• the Nigerian Exchange Group.

9.2 What taxes apply to capital inflows and outflows?

The taxes that apply to capital inflows and outflows in Nigeria include the following:

• foreign exchange transaction tax, which applies to all foreign exchange transactions that are conducted by banks and authorised foreign exchange dealers in Nigeria. The tax rate is 0.5% of the value of the transaction;
• capital gains tax;
• withholding tax;
• stamp duty; and
• VAT.

Dividends, interest and royalties on capital are taxed as follows:

• Dividends: A 10% tax is withheld from dividends paid to all shareholders, 7.5% if a foreign shareholder is resident in a country with which Nigeria has a DTT. On the other hand, dividends derived from foreign companies by Nigerian residents (corporate and individuals) and brought into Nigeria through government-approved channels are exempt from tax.
• Interests: A 10% tax must be withheld on interest payments on all loans, except where the interest payments are specifically exempt from tax. If the lender is resident in a country that has a DTT with Nigeria, the rate is reduced to 7.5%. Tax on interest is further reduced for loans in foreign currency by a foreign lender as follows:
• • If the repayment period is less than two years, there is no exemption.
  • If the repayment period is two to four years (including a moratorium of at least one year), 40% tax is exempted.
  • If the repayment period is five to seven years (including a moratorium of at least 18 months), 70% tax is exempted.
  • If the repayment period is more than seven years (including a moratorium of at least two years), it is fully tax exempt.
• Royalties: Royalty payments on IP rights are taxed at the rate of 10%, reduced to 7.5% where the recipient is resident in a country with which Nigeria has a DTT.

9.3 What key exemptions and incentives are available to encourage enterprises to do business in your jurisdiction?

The Nigerian government provides various exemptions and incentives to encourage enterprises to do business in Nigeria. These include the following:

• Pioneer status: This incentive is granted in qualifying industries and exempts them from paying income tax for an initial period of up to five years, with an option to extend for another three years. To qualify, an industry must be new and must not have previously been operating in Nigeria.
• Start-up incentives: Various incentives are available to start-ups under the Nigeria Start-up Act, including:
• • access to finance from the Start-up Investment Seed Fund; and
  • exemption from the payment of companies income tax for a maximum of five years.
• Export expansion grant: This is a cash grant given to exporters in Nigeria to encourage the export of non-oil products.
• Tax holidays: These are incentives given to new industries that operate in designated rural areas or economically disadvantaged areas. The incentive grants the industry a tax holiday period of up to seven years from the start of business operations.
• Investment allowance: This incentive provides an additional tax deduction for companies that invest in new assets, such as plant and machinery. The investment allowance is 10% of the cost of the asset and can be claimed in the year in which the asset is purchased.
• Free trade zones: These are designated areas in Nigeria where companies can operate without paying customs duties, taxes or other tariffs.

9.4 What key concerns and considerations should be borne in mind with regard to tax in your jurisdiction?

Key considerations include:

• compliance with the applicable tax laws and regulations;
• tax rates for the various taxes;
• tax planning;
• tax incentives and exemptions;
• transfer pricing; and
• dispute resolution mechanisms for tax disputes.

10. M&A

10.1 What provisions govern mergers and acquisitions in your jurisdiction and what are their key features?

• The Federal Competition and Consumer Protection Act 2019 (FCCPA);
• The Merger Review Regulations, 2021;
• The Merger Review Guidelines, 2019;
• The Companies and Allied Matters Act 2020;
• The Companies Regulations 2021;
• The Investments and Securities Act (ISA) 2007;
• The Rules and Regulations of the Securities and Exchange Commission; and
• The Nigerian Exchange Group Rulebook.

The key features of these provisions include the following:

• Regulatory approval: The Federal Competition and Consumer Protection Commission (FCCPC) is the regulator in charge of mergers and acquisitions in Nigeria. The FCCPC is tasked with authorising (with or without conditions), prohibiting and approving mergers or any acquisitions leading to a change of control.
• Disclosure requirements: Companies involved in M&A transactions must disclose information about the transaction to the public, including details of:
• • the parties involved;
  • the terms of the transaction; and
  • any potential impact on shareholders and other stakeholders.
• Fairness opinion: In some cases, companies involved in M&A transactions may be required to obtain a fairness opinion from an independent financial adviser. This opinion evaluates whether the terms of the transaction are fair to shareholders and other stakeholders.
• Shareholder approval: M&A transactions in Nigeria require approval from shareholders of the companies involved.
• Protection of minority shareholders: In cases where the majority shareholder seeks to acquire a minority shareholder's shares, the minority shareholder has the right to demand a fair price for shares.
• Post-merger integration: After a merger or acquisition, companies must undertake post-merger integration to ensure a smooth transition and minimise disruption to the business. This may include:
• • integrating systems and processes;
  • reorganising staff; and
  • developing a new organisational structure.

10.2 How are mergers and acquisitions regulated from a competition perspective in your jurisdiction?

Mergers and acquisitions in Nigeria are regulated from a competition perspective by the FCCPC. The main legislation that governs competition in Nigeria is the FCCPA. The competition provisions in the FCCPA provide the regulatory framework for ensuring that M&A transactions in Nigeria do not prevent, lessen or block competition in relevant markets. The FCCPA also provides for a mandatory notification requirement for certain categories of mergers.

Under the FCCPA, parties to an M&A transaction must notify the FCCPC of the proposed transaction if the following thresholds are met:

• The combined annual turnover of the acquiring undertaking and target undertaking in, into or from Nigeria equals or exceeds NGN 1 billion; or
• The annual turnover of the target undertaking in, into or from Nigeria in, into or from Nigeria equals or exceeds NGN 500 million.

The notification must:

• be made prior to the implementation of the merger; and
• include detailed information about:
• • the transaction;
  • the rationale for the merger;
  • the impact on competition in the relevant market; and
  • any potential benefits to consumers.

10.3 How are mergers and acquisitions regulated from an employment perspective in your jurisdiction?

Mergers and acquisitions in Nigeria are regulated from an employment perspective by:

• the Labour Act;
• the Pension Reform Act; and
• other relevant employment laws and regulations.

Companies involved in M&A transactions must comply with the Labour Act. In Nigeria, it appears that no special protection is afforded to employees in a merger. The Labour Act essentially caters for situations where employees are laid off because of redundancy, which is often the case in a merger transaction. In such cases, the companies must comply with the Labour Act and provide appropriate payments to the affected employees.

Where employees are acquired by the acquirer during an M&A transaction, the acquirer must continually comply with the Labour Act.

Companies involved in M&A transactions must also comply with the Pension Reform Act, which requires employers to make mandatory contributions to their employees' pension funds. The acquirer must maintain the employees' pension entitlements in accordance with the Pension Reform Act.

10.4 What key concerns and considerations should be borne in mind with regard to M&A activity in your jurisdiction?

• Regulatory compliance: The various laws governing M&A transactions should be complied with to avoid any legal or regulatory issues. Companies should carefully navigate these regulations and ensure compliance to avoid any potential legal or regulatory sanctions.
• Due diligence: Proper due diligence is essential for any successful M&A transaction. Legal, financial and operational due diligence should be conducted on the target to identify any potential risks or liabilities.
• Human resources: M&A transactions often involve the transfer of employees from the target to the acquirer. Companies should be aware of the potential impact on employees, as well as any legal requirements for:
• • employee transfer;
  • severance pay; and
  • employee consultation.
• Valuation: This is an important part of M&A transactions, as it guides the buyer and seller to reach the final transaction price.
• Tax implications: Taxes including capital gains tax, stamp duty and value-added tax must usually be paid under an M&A transaction. Companies should consider the applicable taxes for any M&A transaction.

11. Financial crime

11.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction?

• The Money Laundering (Prohibition and Prevention) Act, 2022;
• The Banks and Other Financial Institutions Act, 2020;
• The Nigerian Financial Intelligence Unit Act, 2018;
• The Central Bank of Nigeria Act, 2017;
• The Terrorism (Prevention) Act, 2011;
• The Economic and Financial Crimes Commission (Establishment) Act, 2004;
• The Terrorism Prevention (Freezing of International Terrorists Funds and Other Related Measures) Regulations, 2013;
• The Central Bank of Nigeria (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) Regulations 2022;
• The Guidance Note on Anti-Money Laundering and Combattng the Financing of Terrorism Regulations for Other Financial Institutions, 2022; and
• The Financial Action Task Force Recommendations and United Nations Security Council Resolutions.

11.2 What key concerns and considerations should be borne in mind with regard to the prevention of financial crime in your jurisdiction?

Companies and business organisations should bear the following in mind regarding preventing financial crime in Nigeria:

• Develop and implement an effective anti-money laundering policy.
• Conduct due diligence to know the source of wealth and sources of fund of business partners and customers.
• Implement technologies, systems, processes and controls that prevent and detect financial crime.
• Comply with know-your-customer requirements when onboarding clients and customers.
• Liaise with regulators and law enforcement authorities to reduce and prevent financial crime.
• Have the right organisational structure and internal monitoring systems in place to combat financial crime.

12. Audits and auditors

12.1 When is an audit required in your jurisdiction? What exemptions from the auditing requirements apply?

As a general rule, every company registered in Nigeria must have its financial statements audited by a qualified external auditor on an annual basis.

However, a company is exempt from the audit requirements for a financial year where:

• it has not carried on any business since its incorporation; or

• it is categorised as a small company. A 'small company' is a company that meets the following criteria:
• • It is a private company with liability limited by shares;
  • It has a turnover that does not exceed NGN 120 million;
  • It has assets whose net value does not exceed NGN 60 million;
  • It has no foreign shareholders;
  • It has no shareholders which are a government, a government agent or a government nominee as shareholder; and
  • If it has a share capital, its directors hold at least 51% of the equity share capital.

Notwithstanding the exemptions stated above, banks and insurance companies are not exempt from the audit requirements under the Companies and Allied Matters Act, 2020 (CAMA) in any financial year.

12.2 What rules relate to the appointment, tenure and removal of auditors in your jurisdiction?

• The CAMA;
• The Nigerian Code of Corporate Governance, 2018 (NCCG);
• The Financial Reporting Council of Nigeria Act 2011; and
• The Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Services Banks

The CAMA provides that the auditors may be appointed by the members of the company at a general meeting and removed by an ordinary resolution before the expiration of the auditors' term.

The NCCG also recommends that where a company engages an external auditor, the auditor should not serve in that capacity for more than 10 years consecutively. The NCCG also recommends that where an external auditor is engaged after serving for 10 years, the auditor should not be engaged again until seven years have lapsed from the year of disengagement.

The Financial Reporting Council of Nigeria Act makes provision for the independence of auditors to the effect that a professional accountant, in the exercise of his or her audit function:

• must carry out his or her function in full independently; and
• must not:
• • act in any manner that is contrary to the Code of Conduct and Ethics that may be made by the council or under any enactment in force; or
  • engage in any activity which is likely to impair his or her independence as a professional.

12.3 Are there any rules or recommendations that limit the scope of services as regards the provision of non-audit services by an auditor?

The rules and recommendations in Nigeria aim to ensure that auditors maintain their independence and objectivity while providing audit services to their clients.
The following laws provide for the scope of audit and non-audit services to be performed by auditors:

• the Financial Reporting Council Act, 2011;
• the Financial Reporting Council Guidelines/Regulations for Inspection and Monitoring of Reporting Entities, 2014; and
• the Institute of Chartered Accountants of Nigeria (Scale of Professional Fees, Etc) Regulations, 2015.

The combined effect of the provisions of these laws is that auditors may provide certain non-audit services such as:

• accounting and book-keeping services;
• taxation services;
• limited financial and investment advisory services; and
• IT services.

12.4 Are there any rules or recommendations which cap the remuneration of an auditor as regards payment for the provision of non-audit services?

The Institute of Chartered Accountants of Nigeria (Scale of Professional Fees, Etc) Regulations (2015) outline a scale of fees for audit and non-audit services but do not specify a maximum remuneration for the performance of non-audit services.

13. Termination of activities

13.1 What are the main routes for terminating business activities in your jurisdiction? What are the advantages and disadvantages of each?

In Nigeria, business activities can be terminated for voluntary and involuntary reasons.

Voluntary termination: Voluntary termination usually involves the voluntary winding up of a company through:

• the sale of its assets;
• the settlement of outstanding obligations; and
• the submission of notification to the company's regulators.

An upside of a voluntary winding up is the control the company has over the winding up process. The directors and shareholders of the company can:

• reach decisions on the course(s) of action that will best fit its interests; and
• ensure that the assets of the company are distributed fairly and subject to regulation.

Regardless of the voluntary nature of the winding-up process, the company must appoint professionals who will be tasked with coordinating the process; the company will need to pay certain professional fees for this.

Additionally, where a company has outstanding debt obligations at the time of the commencement of a winding up, the directors must make a declaration of creditworthiness reflecting the company's willingness to offset its debt obligations within a 12-month timeframe.

Involuntary termination: A business can be terminated involuntarily for the following reasons:

• Bankruptcy: Where a business is unable to pay its debts, it may be declared bankrupt by a court of law and the liquidation of its assets may be ordered. Once a company is declared bankrupt, most of its unsecured creditors are unable to pursue further legal action against the company. As an alternative to winding up a company based on its insolvency, the Companies and Allied Matters Act introduced a compulsory voluntary arrangement (CVA). Through the CVA, a company can enter into a binding agreement with its unsecured creditors for the repayment of its debts.
• Compulsory winding up: If a business has engaged in fraudulent or illegal activities, or if it is carrying on business with the intent to defraud its creditors, a court may order the business to be wound up. Through this mode of business termination, creditors may in certain instances recover their investments in the business after selling the assets of the business.

13.2 What key concerns and considerations should be borne in mind with regard to the termination of business activities in your jurisdiction?

• The compliance obligations of the company to regulators at the time of the termination of business;
• The contractual obligations of the company to its customers;
• The outstanding assets and liabilities of the business, and its financial position;
• The management of employees of the company; and
• The financial and tax implications of the business termination.

14. Trends and predictions

14.1 How would you describe the current landscape for doing business and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The business landscape in Nigeria is governed by various political, economic, legal and social factors that influence doing business in Nigeria.

On the political front, following the election and swearing in of the new president in May 2023, new reforms and policies have been introduced and there are indications that there are more to come. New ministers and officials have also been appointed to supervise the ministries and agencies responsible for implementing these policies and reforms. This transition is projected to have a significant effect on the economy and businesses over the coming months.

Nigeria has not escaped the high inflation experienced worldwide following the COVID-19 business disruptions; in addition to other circumstances specific to the Nigerian economy, this has resulted in reduced investment activities. Businesses are exploring other options to survive – including mergers and acquisitions, which we anticipate will be on the increase for the time being.

While Nigeria has made progress in advancing reforms to eliminate constraints to doing business – especially through actions driven by the Presidential Enabling Business Environment Council – certain issues remain, especially in terms of:

• attracting investments;
• providing an enabling environment for businesses to thrive and prosper; and
• resolving certain complexities in regulatory compliance, including the foreign exchange controls put in place by the Central Bank of Nigeria.

Recent legislative reforms aimed at improving the business environment in Nigeria include:

• the Nigeria Start-up Act 2022; and
• the Business Facilitation Act 2023.

Within the next 12 months, necessary steps will be taken to ensure the implementation of these laws.

15. Tips and traps

15.1 What are your top tips for doing business smoothly in your jurisdiction and what potential sticking points would you highlight?

Our top tips for doing business in Nigeria are as follows:

• Understand the applicable laws and regulations and develop internal systems to ensure compliance with the laws and regulations.
• Build strong relationships with customers, business partners, regulators, government officials and other stakeholders.
• Hire skilful and experienced talent as employees and service providers.
• Keep abreast of political, economic, social, technological, legal and environmental changes in Nigeria that could affect business operations in Nigeria.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.