Nigeria is Africa’s second largest market and a gateway to the African business hub with a population of over 170 million, a consumer market of over $400bn yearly and a middle class of circa 25 million people.
All over the world, governments particularly in developing countries try to attract foreign investments into their countries. This is due to the fact that such investments amongst others bring in capital and create employment opportunities. Therefore, attention is devoted to political, social and legal incentives that will attract foreign investors. Nigeria as a developing country is no exception. “Nigeria is open for business” – this has been the mantra of several governments in Nigeria till date.
It is common knowledge that Nigeria’s economy, like most frontier and emerging markets, is dependent on external aid, trade and foreign direct investments. Consequently, to ensure that the investment climate is conducive and friendly, countries enact relevant investment legislation aimed at attracting foreign investments and assuring the investors of the security of their investments. Nigeria has joined other countries in this respect and has put in place quality investment legislation with a view to providing a conducive and encouraging legal environment for foreign investors and investments. An alien whether individual or corporate may invest and participate in the operation of any enterprise in Nigeria except those on the negative list.
The ultimate goal of this write-up is to bring to life a better understanding of salient regulatory frameworks for foreign investments in the commercial nerve centre of Africa’s economy. Thus, when you think investment, think Nigeria!
The Nigerian legislature, recognising the immense roles and importance of foreign investments in the economy, has at various times enacted laws that allow and encourage foreign investments in Nigeria by non-Nigerians.
Thus, foreign investments are initiated in Nigeria either through
- Foreign Direct Investment: These are direct investments by foreign investors who invest by incorporating a Nigerian entity (either solely or with Nigerians) or acquiring or investing in an already existing one; or
- Foreign Portfolio Investment: Which involves participating indirectly in business by purchasing shares in existing companies, usually through the Nigerian capital markets. It is the passive holding of securities, none of which entails active management or control by the investor.
The relevant laws governing foreign investment in Nigeria are as follows:
- The Companies and Allied Matters Act Cap. C20 Laws of the Federation of Nigeria 2004;
- Nigerian Investment Promotion Commission Act Cap. NI17 LFN, 2004;
- Immigration Act Cap. I1 LFN,2004;
- Investments and Securities Act Cap 124, LFN, 2007;
- Foreign Exchange [Monitoring and [Miscellaneous Provisions]Act Cap. F34 LFN, 2004;
- Industrial Inspectorate Act Cap. I8 LFN, 2004;
- National Office for Technology Acquisition and Promotion Act Cap. N62 LFN, 2004.
The law governing the formation and regulation of business enterprises in Nigeria is the Companies and Allied Matters Act and this law established the Corporate Affairs Commission, which is the body responsible for the registration and regulation of companies.
By the provisions of the Companies and Allied Matters Act, a foreign investor may join in forming a Nigerian company subject to the provisions of any law regulating a particular trade or business. Also, any foreign investor wishing to set up business operations in Nigeria is obliged to take all necessary steps to obtain local incorporation of a Nigerian company or branch or subsidiary of an existing company, which would be a separate and distinct entity from its parent company. Without such compliance, the foreign company shall not have a place of business in Nigeria for any purpose other than the receipts of notice and other documents. CAMA, however, sets out exceptions to the general rule that all foreign investors doing business in Nigeria must incorporate in Nigeria. These exceptions include companies engaged by the Federal Government to execute specific projects, companies undertaking approved loan projects on behalf of donor countries or international organisations, and foreign government owned companies engaged wholly in export promotion activities. The Corporate Affairs Commission administers the CAMA.
Similarly, the Nigeria Investment and Promotion Commission Act, CAP N117, LFN 2004 establishes the Nigerian Investment Promotion Commission which is the primary body responsible for encouraging, facilitating and monitoring foreign investment activity in Nigeria. A foreign investor, before commencing business is required to register with the NIPC by virtue of Section 20 of the NIPC Act. The foreign enterprise is permitted to commence operations once it has been registered with the NIPC. Thus, the NIPC Act allows foreigners to invest and participate in the operation of any Nigerian enterprise 100 per cent without any restriction. This is however, subject to certain sectors where local content policies apply – sectors where Nigerians must own a majority shares in the companies.
Interestingly, due to the avalanche of regulations that need to be complied with by foreigners desirous of doing business in Nigeria, there exists a One-Stop Investment Centre to ease registration of companies, obtaining relevant permits and licences for incoming investors etc. The centre is a facilitation mechanism that brings all relevant investment facilitation agencies in one location to provide a well-coordinated, speedy, and transparent service to investors.
To be concluded
- Orimobi is Global Chairman, Tokunbo Orimobi Legal Group
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