NIGERIA
Nigeria Folake Elias Adebowale and Jumoke Lambo, Udo Udoma & Belo-Osagie
1 Overview of FDI in the jurisdiction
1.1 Which countries are the principal sources of FDI into Nigeria? The principal sources of FDI into Nigeria, measured in terms of new projects, are the United States, the United Kingdom, the Republic of South Africa, India and France. Measured in terms of capital invested the United States, Canada, France, China and India are the principal sources.
Nigeria remains one of sub-Saharan Africa’s largest recipients of foreign direct investment inflows, with its FDI receipts estimated as falling between 10% and 15% of total FDI into sub-Saharan Africa. This is despite the weak global economy and incidences of political instability, to which the United Nations Conference on Trade and Development’s (UNCTAD) 2013 World Investment Report attributes a $1.9 billion decline in FDI inflows into Nigeria between 2011 and 2012
1.2 What are the key sectors in Nigeria which attract, or the government is seeking to attract FDI? Measured in terms of capital invested in Nigeria, the sectors that have traditionally attracted FDI have been petroleum (oil and gas) and petroleum services, telecommunications, hotels and tourism, chemicals and real estate. In terms of new projects, the key sectors that have attracted FDI include oil and natural gas, financial services, telecommunications, business services, food and tobacco. There has also been a discernible increase in FDI into the fast moving consumer goods sector. The government is keen to attract FDI into key areas of the economy such as power, infrastructure development and agriculture.
1.3 Is the government generally supportive of FDI? Which government, and regional, bodies are responsible for driving FDI in your jurisdiction? The Nigerian government is striving to make Nigeria one of the top 20 global destinations for FDI by 2020, and is very supportive of FDI. Nigeria has a relatively liberal environment for investment, and the government continues to develop initiatives aimed at streamlining existing processes and costs to further facilitate doing business in Nigeria.
The key government and other bodies charged with responsibility for driving FDI in Nigeria include the federal ministers for finance and the coordinating minister for the economy, and for industry, trade and investment, petroleum, communications and technology, together with other ministries and the governments of the 36 states and Federal Capital Territory of Nigeria. The government recognises the need to diversify the application of FDI inflows as well as their application to all sectors that play a key role in the country’s economic development.
2 Investment vehicle
2.1 What are the most common legal entities and (pass-through) vehicles used for FDI in Nigeria, and how long do they take to become operational? There are several vehicles available for doing business in Nigeria, including private and public limited and unlimited liability companies and partnerships. Of these, private and public limited liability companies are the most common vehicles utilised for FDI in Nigeria. Section 54 of the Companies and Allied Matters Act, chapter C20 Laws of the Federation of
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Nigeria (CAMA) requires foreign companies to do business through a limited liability company that is incorporated in Nigeria. In addition, limited liability companies have perpetual succession, may sue and be sued in their own names, may incur liabilities, allow the investor to appoint (directly or indirectly) the persons to manage the company. Any liability that the investor may incur as its proprietor is limited to the extent of its shareholding and it is relatively easy to transfer equity shares in a limited liability company, should an investor wish to divest. While limited exemptions to this mandatory incorporation requirement may be granted at the discretion of the Federal Executive Council, such exemptions are rare and are usually only granted for limited periods in respect of specific government-sponsored projects.
Limited liability companies may be incorporated within two to four weeks of the submission of an appropriate application being submitted at the Nigerian Corporate Affairs Commission. Following this, any company with foreign participation will need to be registered with the Nigerian Investment Promotions Commission under the Cap N117, LFN 2004 (NIPC Act), must register with tax authorities, and must obtain a business permit from the Federal Ministry for the Interior before it can commence business in Nigeria. All together, these processes may together require as much as 12 to 15 weeks to complete.
2.2 What are the key requirements for establishment and operation of these vehicles which are relevant to FDI? There are no FDI-specific rules regarding the establishment and operation of companies limited by shares.
In addition to incorporation as outlined in 2.1, however, certain post- incorporation approvals must be obtained by companies with foreign participation. These include registration with the Nigerian Investment Promotions Commission, registration with the tax authorities, and the procurement of a business permit and expatriate quota approvals for any expatriate personnel proposed to be employed by the company, from the Federal Ministry for the Interior. Depending on the proposed area of business, additional requirements may apply, such as Department of Petroleum Resources’ registration and licensing requirements for petroleum sector participants, and Nigerian Communications Commission (NCC) registration for telecommunications sector participants.
Foreign companies must have a share capital of at least N10 million ($63,000) to qualify for a business permit. Foreign directors who intend to be resident in Nigeria and expatriate employees will also require immigration approvals in order to be able to live and work in Nigeria. These approvals are the expatriate quota positions and the Combined Expatriate Residence Permit and Aliens Card (CERPAC).
Although Nigerian companies are required to have at least two shareholders and two directors, there is no general requirement that a Nigerian vehicle utilised for FDI purposes must have local directors. Petroleum sector companies are, however, required by the Nigerian Oil and Gas Industry Content Development Act 2010 and the guidelines issued by the Nigerian Content Development and Monitoring Board to obtain NCDMB approval of applications for expatriate quotas.
IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014
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