Nigeria is a viable destination for business and investment. This explains why a growing number of foreigners want to invest in the country. Are you one of those foreign nationals who is looking towards Nigeria for business and investment? The guidance this post provides, will get you started.
Why Invest In Nigeria?
Probably the idea you have about Nigeria is a country with high level of insecurity. That’s just how the popular press presents it. While insecurity is a challenge the Government is addressing, Nigeria remains a stable democracy with vast investment opportunities.
There are good number of reasons why Nigeria is an attractive investment destination.
It’s Africa’s biggest economy and home to over 200 million people and still growing. This huge population provides adequate pool of labour for industries. It’s also a huge consumer market and very strategic in the continent.
It’s strategically located with easy access to ECOWAS and the rest of Africa by air, sea and land borders.
Nigeria has the second largest oil reserve and the largest gas reserve in Africa. It’s OPEC’s sixth largest oil producing nation and has other mineral resources in abundance.
Since 2016, Nigeria’s government has been committed to implementing reforms that ensures ease of doing business. With these reforms government is removing bottle necks and bureaucratic impediments to doing business.
And of particular interest is that investing in Nigeria offers very attractive Returns (ROI).
How to Invest In Nigeria
Like in every other country, there are two routes to investing in Nigeria. These are through portfolio investment and Foreign Direct Investment (FDI).
Portfolio Investment
These are investments in financial assets, either through the capital market or the money market. For example, one can invest in different publicly quoted companies in Nigeria at the same time by buying the shares of these companies through the Nigeria stock market.
The stocks and money markets offer a variety of investment options with attractive returns and foreigners can access these investments simply by following some set guidelines.
Foreign Direct Investment
This refers to investments foreign nationals make directly in businesses and projects in Nigeria. This investment is usually in the form of equity interest in the local business. The investment could be in an existing business or by direct establishment of a subsidiary of a company in the investor’s country.
While most portfolio investments are speculative and short term in nature, Foreign Direct Investments (FDI) are stable and long term in nature. Usually, developing countries like Nigeria seek FDI because it catalyzes development.
When a foreigner sets up a business in Nigeria or partners with local people to set up such business and remits his investment capital, he is doing a foreign direct investment.
Where to Invest In Nigeria
Here’re some of the most active sectors of the Nigerian economy that are attracting attention and open to investment. In line with the government’s economic recovery and growth plan, some of these are priority sectors due to their significance to the country’s economic growth.
#1. Agriculture
Agriculture is very critical to Nigeria’s economy. It’s contribution to the country’s GDP is about 25% and it employs 48% of the labour force. This makes the sector the highest employer in Nigeria.
Nigeria agricultural sector is divided into four subsectors, namely: crop production, livestock, forestry and fishery, Over the years, government policies have focused on increasing food production and thus driving commercial and mechanized farming.
Huge investment opportunities exist in the sector, particularly in the processing and manufacturing sectors of the agricultural value chain.
#2. Oil and Gas
Nigeria has large deposit of oil, natural gas and its related resources. As a matter of fact, crude oil accounts about 90% of the country’s export earning. Vast investment opportunities exist in both the downstream and upstream segments of the industry.
Government recently enacted the Petroleum Industry Act to reform the sector, address challenges affecting the industry and open it up further for private investment. Oil exploration, refining and petrochemical plants are some of the areas that presents attractive investment opportunities. Others include investment in marginal fields, mini LNGs, LPGs and flared gas processing.
#3. Power
Nigeria has huge energy resources and vast regional market largely unexplored. To encourage private investment, the Government recently liberalized and commercialized the sector.
Some of the areas that presents attractive investment opportunities in the power sector include: renewable energy (solar, wind and biomass), hydro-electricity, etc.
#4. Solid Minerals
Nigeria has been on the ride to diversifying her economy away from oil. In doing this, two sectors easily come out as presently massive potentials as alternative to oil. These sectors are agriculture and solid minerals. Available data shows that there are at least 45 different solid minerals yet untapped in Nigeria.
The opportunities are in mining, processing, waste management, equipment and technology supplies amongst others.
Also Read: 16 Business Ideas in Nigeria’s Solid Minerals Sector
#5. Financial Services
Nigeria has a very active financial services industry. The banking sector which is the largest and most active sector attracted a foreign flow of about $15.7 billion in 5 years to April 2022.
Opportunities exist in commercial banking, merchant banking, payment services, and capital markets. Fintech firms are currently making great inroads in the Nigeria’s financial services sector with some of them getting the unicorn status in recent times.
#6. Information, Communication and Technology
The ICT industry in Nigeria has grown astronomically since 2002 when the first GSM licensing round was held. Nigeria remains a major African market for Information, Communication and Technology with a teledensity of 107% in 2021.
The sector is increasingly attracting investment in infrastructure and this is stimulating growth and facilitating innovation. Areas with attractive opportunities include internet services, data deployment and management, application hosting, cloud computing, information security as well as business continuity and disaster recovery.
E-commerce, transport and logistics, travel and tourism, health care, housing, etc., are yet other vibrant sectors that attracting huge investment in Nigeria.
Steps to Setting Up a Business In Nigeria
A foreigner can either set up a new business in Nigeria, open a branch of his existing business in Nigeria or invest in an already established and existing local company.
There are really no restrictions on how or where a foreigner can invest in Nigeria, The rules get better as the government removes more bottlenecks to make doing business in Nigeria easier. This has encouraged more foreign companies to establish presence in the country.
You too can set up a business in Nigeria and you can do so following the steps below.
Ready?
Step 1: Decide on the sector and type of business to do in Nigeria
I have highlighted in the foregoing paragraphs some priority areas that attracts private investment in Nigeria. Conduct your research, do your analysis to decide on what type of business to set up.
Step 2: Register Your Business
The principal legislation that governs the formation of companies in Nigeria is the Companies and Allied Matters Act 2020. This act established the Corporate Affairs Commission ( CAC) which regulates and administers business registration processes in Nigeria
The process of registering your business or incorporating the company start with searching for availability and reservation of the name of the proposed company. On approval of the suggested names, the applicant makes the formal application to incorporate the company on the prescribed forms.
The promoters shall complete and present the following in support of the application:
Memorandum of Association
Article of Association
Allotment of shares and particulars of directors (Form CAC 1.1)
The Memo shall contain essential information such as the type of company, nature of its business, minimum share capital, and subscribers to the share capital.
The prevailing company regulation prescribes a minimum share capital of N10 million for foreign owned companies. However, where the company operates in a regulated industry, the minimum capital shall be as prescribed by that industry regulator.
Payment of Stamp Duties
The promoters shall pay the applicable filing fees to CAC. Also payable is stamp duties at 0.75% of the minimum share capital. On successful review of the application, CAC will issue a certificate of incorporation evidencing that the company is duly incorporated and can commence business.
Under the current process, the Federal Inland Revenue Service, upon receipt of the stamp duty payment for new companies, will issue a Tax Identification Number (TIN) to show it has registered the company as corporate tax payer.
Step 3: Register with Federal and State Tax Authorities
Though at the point of incorporation, the FIRS captures the new company in its data base for tax purposes and issues it with a TIN, the company still need to activate its registration with the relevant tax office for income tax remittance and Value Added Tax (VAT).
Also necessary is that the company should register with the relevant tax authority in the state where it’s going to operate. This is to enable it comply with state taxes such as PAYE and others.
Step 4: Obtain a Certificate of Capital Importation
The next thing you will have to do is to remit the minimum share capital or your contribution to the share capital as the case may be. This will require the creation of a domiciliary bank account with a Nigerian commercial bank into which the money will be remitted.
On receipt of the inflow into the domiciliary account, the Central Bank of Nigeria, through the commercial bank will issue the company a Certificate of Capital Importation (CCI). A certificate of capital importation is an evidence that money, technology/equipment or a combination of the two remitted by a foreign investor has been received in the Nigerian entity.
Amongst its many benefits, a CCI is useful in repatriation of investment in the form of dividend or repayment of loan. With CCI the company is able to source foreign exchange through the official window.
Step 5: Register with the Nigerian Investment Promotion Commission
Before a foreign company can commence business in Nigeria, it must obtain a business permit from the Nigerian Investment Promotion Commission (NIPC). The NIPC is the body that coordinates and promotes investments in Nigeria.
The certificate of business registration that the NIPC issues becomes important in the event that the company seek certain tax waivers, etc.
Step 6: Obtain Expatriate Quota and Work Permit
If the company is wholly owned by the foreigner, the law requires that it obtains a permit from the Federal Ministry of Interior after incorporation. It will also need to obtain, from the same ministry an Expatriate Quota if intends to employ foreign personnel in the company.
With the expatriate quota the foreign nationals employed in the company can now get work permit allowing them to live and work in Nigeria.
Step 7: Obtain Industry Specific Permit and Registration
Businesses operating in certain industries requires special licensing. If this applies to your business of interest, then you must obtain such licensing. In some cases, getting this industry specific permit is a pre-condition for the other steps highlighted above.
It is therefore important that you do your research very well to know what applies. As a guide, industries or business sectors in which special licensing is required include the following
| Banking | Banking, lending or payment licensing from the Central Bank of Nigeria |
| Oil and Gas | Relevant operating permit from the Department of Petroleum Resource |
| Power | Licensing from the Nigerian Electricity Regulatory Commission |
| Pharmaceutical, health and food processing | Relevant permit from the National Agency for Food and Drug Administration and Control |
| Information, Communication and Technology | Permits from the Nigerian Communications Commission (NCC) |
| Investment and Capital Market | Permits from the Securities and Exchange Commission |
| Maritime and Ports Services | Nigerian Maritime and Safety Agency (NIMASA) |
| Aviation | Nigerian Civil Aviation Authority |
Finally, you will have to deal with administrative issues of setting up your office, getting a business premises and dealing land registration if your business is such that requires the acquisition of land.
Final Words
It will help you to hire a consultant to guide you through the process. With the right partner who understands the local environment, the process is much more easier.
Our advisory firm, Stalwart Investment Partners Ltd is in a position to work with foreign investors who are interested in setting up businesses in Nigeria or making portfolio investment in the domestic financial market. We give the best entry advice and guidance because we understand the local business environment.
Buchi creates content and leads the Team at Kobotalk Management Services; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.
