FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SECTOR

Follow @wingrassnews

BARR, CHIGOZIE EZEKIEL

This also means alien participation. Section 650 of CAMA defines an alien as a person or association, whether corporate or incorporated, other than a Nigerian citizen or association.

Section 20(4) of CAMA provides:

“subject to the provisions of any enactment regulating the rights and capacity of aliens to participate or undertake in trade or business, an alien or a foreign company may join in forming of a company”.

Section 17 of Nigerian Investment Promotion Commission (NIPC) provides that a non-Nigerian whether company or individual may invest and participate in the operation of any enterprise in Nigeria except those in the negative list. (click on any of the pictures on the right hand side or left for more insight).

It is clear from the above provisions that a foreigner is allowed to participate in business in Nigeria but subject to some enactments.

An alien (foreigner) may choose to register a business name as a sole proprietor (or partnership), he may wish to incorporate a company with other aliens or Nigerians, he may wish to buy shares into an existing company. Where he is incorporating a company, he may do business in any area except the negative list. The negative list include: arms and ammunition; narcotic drugs and psychotrophic substance; para-military and military wears and accoutre.

VARIOUS LAWS REGULATING FOREIGN PARTICIPATION IN BUSINESS IN NIGERIA

1.      Companies and Allied Matters Act (CAMA), Cap. C.20 LFN 2004 – Sections 148 and 155 of CAMA.  Section 148 of the Act requires the production of a document which is by law sufficient evidence of probate of a Will or letters of administration of an estate.  Section 155, on the other hand, deals with transmission of shares

2.      Nigerian Investment Promotion Commission (NIPC) Act, Cap NI 17 LFN 2004 – Section 17 of the Nigerian Investment Promotion Commission Act which requires alien to register with the Commission before commencing business in Nigeria.

3.      Immigration Act Cap I 1 LFN 2004 – Obtaining business permit under Section 8 of the Immigration Act, 1963.

4.      Investments and Securities Act (ISA) 2009 – Section 8 of the Investments and Securities Act which empowers the Securities and Exchange Commission (SEC) to keep and maintain Foreign Direct Investments (FDI) and Foreign Portfolio Investments (FPI) in Nigeria.

5.      Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F.34 LFN 2004.

6.      Industrial Inspectorate Act Cap. I 8 LFN 2004.

7.      National Office for Technology Acquisition and Promotion Act, Cap N. 62 LFN 2004.

GOVERNMENT AGENCIES REGULATING FOREIGN PARTICIPATION IN NIGERIA AND THEIR FEATURES

There are basically three government agencies regulating foreign participation in Nigeria and these are:

1.      Nigerian Investment Promotion Commission (NIPC);

2.      National Office of Technology Acquisition and Promotion (NOTAP); and

3.      Immigration.

NIGERIAN INVESTMENT PROMOTION COMMISSION

This was established in 1995 as a body corporate with perpetual succession under the Nigerian Investment Promotion Commission (NIPC) Decree, 1995. It is now Nigerian Investment Promotion Commission (NIPC) Act, Cap NI 17 LFN 2004. The commission shall encourage, promote and coordinate investment in the Nigerian economy.

An enterprise in which foreign participation is permitted must apply for registration with the Nigerian Investment Promotion Commission (NIPC) before commencing business in Nigeria – section 20 of NIPC Act.

FEATURES OF NIPC

1)      To be the agency of the Federal Government to coordinate and monitor all investment promotion activities to which this Act applies;

2)      Initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;

3)      Promote investments in and outside Nigeria through effective promotional means;

4)      Provide and disseminate up-to-date information on incentives available to investors;

5)      Assist incoming and existing investors by providing support services;

6)      Evaluate the impact of the Commission in investments in Nigeria and recommend appropriate recommendations; and

7)      Maintain liaison between investors and ministries, government departments and agencies, institutional lenders and other authorities concerned with investments.

NATIONAL OFFICE OF TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP)

Every contract or agreement entered into by any person in Nigeria with another person outside Nigeria (foreigner) involving the transfer of foreign technology to Nigerian partners shall be registered with the National Office of Technology Acquisition and Promotion (NOTAP) in the prescribed manner, that is, not later than 60 days from the execution of the agreement – Section 5(2) of the National Office of Technology Acquisition and Promotion (NOTAP) Act.

FEATURES OF NOTAP

1.      Promote investments of foreign technology in and outside Nigeria;

2.      Assist incoming and existing investors by providing support services; and

3.      Promote investments in and outside Nigeria through effective promotional means.

TYPES OF COMPANIES AND ENTITIES EXEMPTED FROM REGISTRATION

Section 56(1) of CAMA provides that a foreign company or entity may be exempted from registration if it belongs to any of the following categories or types of companies –

a)      A foreign company invited to Nigeria by or with the approval of the Federal Government to execute a specified individual project.

b)      A foreign company which is in Nigeria for the execution of a specific individual loan project on behalf of the donor organisation or agency.

c)      A foreign government-owned company engaged solely in export promotion activities.

d)     Engineering consultants and technical experts engaged on any individual specific project under contract with any of the governments of the Federation or any of their agencies or with any person where the Government has approved such contract.

STEPS INVOLVED IN APPLYING TO RELEVANT GOVERNMENT AGENCIES

Section 56(2) of CAMA further provides that application for exemption is to be made to the Secretary to the Federal Government setting out eight (8) specified particulars and such other particulars as may be required by the Secretary to the Federal Government.

The application which must be in writing must set out the following particulars –

1)      The name and place of business of the foreign company outside Nigeria;

2)      The name and place of business or the proposed name and place of business of the foreign company in Nigeria;

3)      The name and address of each director, partner, or other principal officer of the foreign company;

4)      A certified copy of the charter, statute or memorandum and articles of association of the company or other instrument constituting or defining the constitution of the company, and if the instrument is not written in English language, a certified translation thereof;

5)      The names and addresses of persons resident in Nigeria authorized to accept on behalf of the foreign company service of process and any notices required to be served on the company;

6)      The business or proposed business in Nigeria, of the foreign company and the duration.

7)      The particulars of any project previously carried out by the company as an exempt company; and

8)      Such other particulars as may be required by the Secretary to the Federal Government.

After receiving and considering the application, the Government may, if it considers it expedient in the circumstances, grant it specifying the period and/or project for which it is granted – section 56(3) of CAMA. The Government may, however, revoke any exemption granted if it is necessary to do so. Both the grant of exemption and any revocation are required to be published in the Gazette – section 56(6) of CAMA.

DIFFERENCE BETWEEN FOREIGN DIRECT INVESTMENTS AND FOREIGN PORTFOLIO INVESTMENT

Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. While Foreign Portfolio Investment (FPI), is the entry of funds into a country where foreigners make purchases in the country’s stock and bond markets. Thus, if an alien wants to invest in the shares of a company, whether public or private, he can do so through Foreign Portfolio Investment.

DOCUMENTS TO BE SUBMITTED TO THE RELEVANT GOVERNMENT AGENCIES SEEKING RELIEFS AND APPROVAL ON BEHALF OF COMPANIES

PERMITS/APPROVALS

1.      BUSINESS PERMITS – No person other than a Nigerian citizen shall on his own account or in partnership with any other person practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any such purpose without the written consent of the Minister of Internal Affairs – Section 8(1)(b) Immigration Act. This is the operational licence granted to an expatriate to enable him carry on business activities in Nigeria. The consent of the Minister of Internal Affairs is issued in the form of Business Permit.

Note that the permit is now issued through the NIPC.

2.      EXPATRIATE QUOTA – This is the official approval granted to a company to enable it employ individual expatriates to specifically designated jobs and the quota must state its duration. Section 8(1)(a) of the Immigration Act provides that “no person other than a citizen of Nigeria shall accept employment, not being employment with the Federal or a State Government, without the approval of the Chief Federal Immigration Officer.  The approval is what is known as “Expatriate Quota”.

There are two types of expatriate quotas viz:

(i)   Permanent until Reviewed – This is usually granted to the Chairman of the Board of a company or the Managing Director. As the name implies, it is permanent until there is a supervening circumstance, which will necessitate its review.

(ii)  Temporary Quota – This is usually granted to the directors or other employees of the company. The maximum number of years granted in the first instance is five (5) years renewable for a further period of two years.

It should be noted that the quota position attaches to a particular post hence different persons can be covered by the same quota.  It is the duty of the company to apply for the quota and not that of the employee – Oil Fields Supply Centre Ltd v. Johnson (1987) 18 NSCC 725.

3.      RESIDENCE PERMIT – Every alien may enter Nigeria and stay therein for three months without a residence visa (Tourist Visa). However, any person who is not a citizen of Nigeria who desires to enter Nigeria for purpose of residence (that is, beyond three months) must obtain a residence permit. The application for residence permit is made by the employer company to the Nigerian Embassy or Consular Officer in the country where the applicant resides by way of a letter (two copies) accompanied by a valid passport of the alien from the company requesting permission to employ the alien to the Immigration Department (via Consular authorities). Also to be attached is a letter of employment and the photocopy of the Expatriate Quota. 

On approval, the alien is then granted an STR Visa which on arrival in Nigeria will be regularised and the alien issued a work permit.

RELIEFS AND INCENTIVES

TAX REBATE AND CONCESSION

A wide range of incentives and reliefs have been designed by the Federal government to boost industrial and agricultural production for export. These are:

1.      PIONEER STATUS – Tax exemption is granted for a period of three years in the first instance but may be extended to a further period of two years under the Industrial Development (Income Tax Relief) Act Cap. 17 LFN 2004. To qualify,

a)      The applicant must be a public company;

b)      The investment must be in respect of industry or products designated as pioneer, for example, agro-allied or export goods and solid minerals; and

c)      The estimated cost of qualifying capital expenditure on or before the production date is not less than N50,000 for an indigenous company and N150,000 in any other case.  See Sections 1 and 10 of the Industrial Development Act.

2.      TAX RELIEF UNDER THE COMPANIES INCOME TAX (CIT) ACT, CAP 60 LFN, 1990 – Profit exempted from taxation- section 19 of the CIT Act e.g. co-operative societies, religious/charitable, etc. organization, sporting activities. Similarly the profits of any Nigerian company in respect of goods exported from Nigeria are exempted from taxation, provided that the proceeds from such export are repatriated to Nigeria and are used exclusively for the purchase of' raw materials, plants, equipment and spare parts –  Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1996.

Also to enjoy exemption from taxation is the profit of a company for the first six thousand naira (N6,000.00) – Section 29 of the CIT Act.

Relief is also available where a Nigerian company is liable to pay a Commonwealth Tax – Section 33 of the CIT Act.

Also there is relief from payment of double taxation if there are bilateral agreements with other countries – Sections 34 and 35 of the CIT Act.  Note the arrangement between the Government of the Federal Republic of Nigeria and the Governments of Great Britain and Northern Ireland.

It should be noted that there is also tax exemption for foreign loans not less than One hundred and fifty thousand naira (N150,000) granted to a Nigerian company when it is not repayable within 10 years – Section 9(1) of the CIT Act.

Interests payable on bank loan granted for agricultural trade and business also enjoy tax concession. Bank loan granted to a company engaged in agricultural business and fabrication of local plant and machinery also enjoys concession. Deposit accounts or domiciliary accounts of a foreign non-residence company are also exempted from taxation provided that the account consists mainly of foreign currencies imported into Nigeria on or after 1^st January 1990 though the CBN or any other authorised bank. 

Bank loans granted for manufacture of goods for export are also tax-free. It should however be noted that stocks and shares of any description have been removed from the list of assets liable to Capital Gains Tax (CGT).

3.      DUTY DRAWBACK AND SUSPENSION SCHEME – The Customs and Excise Management Act, Cap 84, LFN 1990 and also the Customs Duty Drawback Scheme/Regulation provides for the refund of import duties on:

a)      Raw materials including packaging materials used in manufacturing goods that are exported - 100% of import duty.

b)      Paper used for the manufacture of goods supplied for educational purposes to educational establishments recognized by the Federal Adviser on Education ­100% of import duty.

c)      Goods exported in the same state as that in which they were imported – Customs and Excise Management Act Cap. C. 45 LFN 2004 and Drawback (Customs) Regulations 1959.

d)     Export incentives under the Export (Incentives and Miscellaneous Provisions) . Act Cap. E. 19, LFN 2004.

e)      Incentives to a company engaged in the utilization of associated gas under the Petroleum Profits Tax Act Cap. P. 13 LFN 2004 (as amended by Finance (Miscellaneous Taxation Provisions) Decree No. 18, 1998).

f)       Investment in the Export Processing Zone. Section 28(3) of the Companies Income Tax Act, (as amended by Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1996) the profits or gain of a 100% export oriented undertaking established within and outside an Export Free Zone shall be exempted from tax for the first three consecutive assessment years provided, among other conditions, it manufactures, produces and exports articles during the relevant year and the export proceeds from 75% of its turnover.

g)      Investment in economically disadvantaged areas - 100% tax relief for seven years.

h)      Local raw materials utilization.

i)        Investment in solid minerals - A new company going into mining of solid minerals shall be exempted from tax for the first three years of its operation, which maybe extended for another further period of two years – section 22(2) of Minerals and Mining Act Cap. M. 12 LFN 2004. Section 18 has to do with capital allowances, while section 19 for exemption from customs duties and other benefits.

j)        Research and Development (R and D) – Research and Development carried out in Nigeria.  Sections 20 and 22(3) of the CIT Act:

                                                        i.            Companies engaged in R and D activities for commercialization are allowed 20% investment tax credit on their qualifying expenditure –Section 22(3) of Companies Income Tax Act (as amended by Finance (Miscellaneous Taxation Provisions) (No.3) Decree No. 32, 1966).

                                                      ii.            Expenses incurred on research and development including the amount paid to the national Science and Technology Fund are allowed as deductible expenses – Section 20 of Companies Income Tax Act (as amended by Finance (Miscellaneous Taxation (Amendment) Decree No.3, 1993)

                                                    iii.            Rural Investment Allowance – Section 28(b) of the Companies Income Tax Act, (as amended by Finance (Miscellaneous) Taxation (Amendment) Decree No.3 of 1993) which provides graduated allowances for capital expenditure on such facilities as electricity, water, tarred road and telephone located at least 20 kilometers away from such facilities provided by the government.

CHECKLIST OF DOCUMENTS TO BE ATTACHED IN SUPPORT OF APPLICATION TO RELEVANT REGULATORY AGENCIES

DOCUMENTS REQUIRED FOR APPLICATION WITH NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)

1.      NIPC Form 1

2.      Receipt of purchase of NIPC Form 1

3.      Payment of a fee of five thousand naira (N5,000).

4.      Joint venture agreement (if any)

5.      Certified True Copy of the memo and article of the company.

6.      Certificate of Incorporation

7.      Tax clearance certificate

8.      Certificate of capital importation

9.      Evidence of acquisition of business premises

10.  Feasibility study report (if any)

11.  Profile of expatriate personnel showing their qualifications, experience, positions to be held in the company and duration of each quota position.

PROCEDURE FOR REGISTRATION WITH NIPC

1.      The company seeking registration with NIPC must first obtain the NIPC Form 1. A non refundable deposit of ten thousand naira (N10,000) must be paid and receipt obtained.

2.      The form will be completed by the company and submitted at NIPC Headquarters in Abuja or State Ministries of trade with the following:

a)      Two copies of receipt of payment of N10,000

b)      Certificate of Incorporation

c)      The memorandum and articles of association of the company.

d)     Receipt of payment of stamp duties on the authorized share capital of the company as at the date of the application.

e)      Tax clearance certificate of the applicant company.

f)       Partnership (Joint Venture) Agreement where applicable.

g)      Feasibility Report and Project Implementation Program of the company for its proposed business.

h)      Title deeds of land evidencing firm commitment to acquire requisite business premises for the company’s operations.

i)        Training program for Nigerian Staff or personnel policy of the company, incorporating management succession schedule for qualified Nigerians.

j)        Names, addresses, nationalities and occupations of the proposed Directors of the Company including non-resident directors which should be marked “NRD”.

k)      Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions.

l)        Information brochure, if any, on the foreign partner.

m)    Evidence of capital importation for wholly foreign companies.

DOCUMENTS REQUIRED FOR APPLICATION WITH IMMIGRATION (MINISTRY OF INTERNAL AFFAIRS)

1.      Completed Immigration Form T/1.

2.      Certificate of incorporation.

3.      Certified True Copies of particulars of directors, share allotment, and memo and articles of the company.

4.      Current Tax Certificate.

5.      Rent, Lease or Certificate of Occupancy for operating premises.

6.      Evidence of imported machineries with perfoma invoices, Form M, etc., or evidence of work on hand with value attached to the contract.

7.      Functional feasibility report.

8.      Notary public confirmatory letter of office or site location.

9.      Proposed salaries of expatriates to be received, designation and qualification.

10.  Training programme for Nigerians under studies.

11.  Audit account.

Follow @wingrassnews

Barr. Ezekiel Chigozie has many years experience in providing legal representation and advising clients across exceptional broad range of contentious and non-contentious matters. His main goal is to help clients resolve contentious or non-contentious legal problems they are having rapidly and cost effectively.