NIGERIA 3 Investment approval
3.1 For foreign investment approval explain the following: a) The regulator/s’ name, factors it must consider when making its deci- sions, and how much discretion it has; There is no general requirement for a national security review of foreign investments. The incorporation process is fairly straightforward and companies will usually be incorporated upon the submission of complete and appropriate documentation and payment of official fees to the Corporate Affairs Commission (CAC). The exercise of the CAC’s discretion here is otherwise limited to, for example, non-compliant applications and prohibited businesses or the proposed use of corporate names that have already been registered. NIPC registration is also fairly straightforward.
The Federal Ministry of Information (FMI) has fairly wide discretion. The submission of complete documentation and evidence of the importation of foreign shareholders’ equity participation into Nigeria are crucial factors in determining whether the FMI will grant foreign investment approvals. The discretion to grant expatriate quota approvals is dependent to a large extent on the ability of the applicant to adduce satisfactory evidence that there are no suitably qualified Nigerians who can provide the required skills and services.
The Securities and Exchange Commission (SEC) is empowered to review mergers, acquisitions and business combinations. The SEC also regulates competition and monopolies. It has wide discretion in reviewing transactions and may request such information and documentation as it deems necessary before it approves them.
Depending on the sector in which the FDI is being made, it may also be necessary to obtain sector-specific approvals before the FDI can be concluded. For example, FDIs into the telecommunications sector, depending on the structure of the investment, may require the prior approval of the Nigerian Communications Commission
b) Any investment caps and other legislative restrictions; Companies with foreign participation must have a minimum share capital of N10 million. A larger share capital may be required by the CAC at incorporation, or subsequently by the NIPC at registration for companies engaged in certain industries, such as petroleum exploration and production.
The Nigerian Investment Promotions Commission Act prohibits investment in: the production of arms and ammunition; the production of, and dealing in narcotic drugs, and psychotropic substances; the production of military and paramilitary wears and accoutrement including those of the police and the customs; immigration and prison services; and such other items as the Executive Council of the Federation may from time to time determine.
Foreign investors are free to invest in the Nigerian oil and gas industry, up to any amount. However, a foreign investor seeking to acquire controlling equity in a company that has been granted an Oil Exploration Licence to explore for petroleum resources, an Oil Prospecting Licence to prospect for petroleum resources, or an Oil Mining Lease to exploit petroleum resources, by the Nigerian Minister of Petroleum Resources, or that otherwise holds participating interests in an oil or gas field in Nigeria, will require the prior written consent of the Minister to make the investment. Similarly, an acquisition of an oil or gas field in Nigeria (or any participating interest in either) will require ministerial consent.
In addition, the Nigerian Oil and Gas Industry Content Development Act enacted in 2010 (Local Content Act) requires that Nigerian companies be given preferential (and in some cases exclusive) consideration in bids for the award of contracts and licences in the Nigerian oil and gas industry. A Nigerian company is defined as a company that is incorporated in Nigeria, at least 51% of the shares of which must be held by Nigerians. The Local Content Act has led to a boost in the number of joint ventures and strategic alliances between locals and foreign investors seeking a competitive advantage, or to increase their eligibility for contract awards.
42 IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014
The consent of the Central Bank of Nigeria is required for the acquisition of more than 10% of a bank’s shareholding; the consent of the National Insurance Commission is required for the acquisition of more than 25% of the shares of an insurance company; and, the consent of the NCC is required for the acquisition of more than 10% of the shares of a telecommunications company. Such sector-specific approval requirements apply to both Nigerian and foreign companies.
Technical services or management or licensing agreements for the provision of such services by foreign companies in Nigeria must be registered with the National Office for Technology Acquisition and Promotion (NOTAP) and the fees payable are subject to caps prescribed by NOTAP. NOTAP approval is required to access official foreign exchange for making offshore payments to service providers.
c) Which party must notify and when/if notification is mandatory or voluntary; All of the authorisations discussed in 3.1 (a) and (b) are mandatory approvals and not notifications. The applicant in most cases will be the acquirer or the Nigerian entity that is either being established or being utilised for the business venture. The approvals are mandatory and must be obtained prior to commencing business
d) What information must be included with notification and what is the review fee; This varies with each application. For example, business permit applications must be supported by: the company’s incorporation documents; certificate of capital importation banker’s reference; tax clearance certificate; feasibility report application letter; and a duly completed application form. The review fee is N50,000. Application fees of N50,000, and a processing fee of 0.3% of the first N500 million, 0.225% of the next N500 million and 0.15% of any sum thereafter of the consideration paid is payable to obtain SEC approval for acquisitions, the requirements for which are relatively extensive.
e) How long does the review and approval process take, and are there any fast-track options; The application for a business permit usually takes between 6-8 weeks. SEC approval for acquisitions can take at least 60 days to process. There are no fast track options available for any of the approval processes outlined. Complete, accurate and compliant applications may help to expedite processing, which is often at the discretion of the relevant regulator.
f) Is there the ability to consult on a named or unnamed basis; It is generally possible to make enquiries with the FMI, the SEC, the Department of Petroleum Resources (DPR), the NCDMB and most regulators on a named or anonymous basis.
g) Does notification/review occur pre- or post-closing, and are there any pre- or post filing requirements unique to FDI; Approval (or at the very least approval in principle) is generally required pre-closing, and there are no pre- or post-closing filing requirements that are unique to FDIs other than the requirement that details of all foreign investments should be filed with the NIPC and the Central Bank of Nigeria by authorised dealers of the Central Bank of Nigeria for statistical purposes.
h)What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? Applications will generally be addressed, and applicants may follow up with regulators where there are delays. Aggrieved or dissatisfied applicants may generally appeal decisions but the discretion of the FMI is absolute.
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