What foreign company means
A foreign company is one incorporated outside Nigeria.
CAMA takes a clear position: a foreign company intending to carry on business in Nigeria must take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose. Until it does, it is not to carry on business or exercise the powers of a registered company here.
That is different from many jurisdictions, where a foreign company can register a branch and operate through it. Nigeria expects a locally incorporated subsidiary.
There is an exemption route. The President may exempt certain categories of foreign company from that requirement, and the categories are narrow, covering situations such as companies invited by the federal government for specific projects, companies executing specific loan projects on behalf of donors, foreign government owned companies engaged solely in export promotion, and engineering consultants under contract with a government body.
For an ordinary foreign business wanting to trade in Nigeria, the exemption is not the route. Incorporation is.
How it is used
The sequence for a foreign investor is settled, and each step depends on the one before it.
Incorporate a Nigerian company at the Corporate Affairs Commission. Where there is foreign shareholding, the share capital expectations are higher than for a wholly Nigerian company, and that threshold is applied when the later permits are sought.
Register with the Nigerian Investment Promotion Commission as an enterprise with foreign participation.
Obtain a business permit from the Federal Ministry of Interior, which is what authorises a company with foreign participation to operate.
Obtain an expatriate quota where foreign nationals will work in Nigeria, and then CERPAC for each individual.
Bring capital in through an authorised dealer bank and obtain a certificate of capital importation for each inflow, which is what supports repatriation of dividends and exit proceeds later.
Register for tax, obtain the TIN, and comply with filing obligations from the first year.
Missing any step tends to surface at the point where money needs to move.
Key features
- A company incorporated outside Nigeria
- Must generally incorporate a Nigerian entity to carry on business here
- Branch operation is not the default route available in Nigeria
- A narrow presidential exemption exists for defined categories
- Higher share capital expectations apply where there is foreign participation
- NIPC registration, a business permit and capital importation certificates follow
How this works in Nigeria
The incorporation requirement is where most foreign entrants get their planning wrong, because they budget for a branch and discover they need a subsidiary with local capitalisation.
The practical consequences of getting it wrong are worth stating. A foreign company that trades in Nigeria without incorporating is operating contrary to CAMA. Contracts entered into may be affected, banking is difficult, and the position is awkward to regularise afterwards.
Selling into Nigeria from abroad is a different question from carrying on business in Nigeria. A foreign supplier exporting goods to a Nigerian buyer, invoicing from abroad, is not necessarily carrying on business here. A foreign company with staff, premises, ongoing contracts and a local presence is. The line is fact specific and worth taking advice on before committing to a structure.
Repatriation is the other planning point that gets left too late. Money that arrives without a certificate of capital importation has no documented route out, and the problem surfaces years later when dividends or exit proceeds need to be remitted.
Diaspora founders sit in the same framework. A Nigerian abroad incorporating a Nigerian company is not a foreign company, but if the shareholder is a foreign entity, the foreign participation rules apply.
Nigerian subsidiary vs branch vs representative office
Three structures foreign businesses ask about, and only one of them is generally available in Nigeria.
A Nigerian subsidiary is a company incorporated at the CAC, owned by the foreign parent. It is a separate legal person, it contains its own liabilities, and it is the route CAMA contemplates. This is what almost every foreign entrant ends up using.
A branch is an extension of the foreign company itself, with no separate legal personality. It is the normal route in many jurisdictions and it is not the default position in Nigeria, where the incorporation requirement applies.
A representative or liaison office, used elsewhere for non trading presence such as market research and liaison, does not sit comfortably in the Nigerian framework either, and a foreign company maintaining a presence in Nigeria should take advice rather than assume the concept transfers.
The planning point is to budget for a subsidiary with local capitalisation, permits and compliance from the outset.
Limits and risks
Incorporation brings ongoing obligations. Annual returns, audited accounts where thresholds are exceeded, tax filings and permit renewals continue whether or not the venture succeeds.
Capitalisation requirements can be significant relative to a modest pilot operation, which discourages small scale entry.
The permits also take time. Business permits, quotas and residence documentation each carry their own processing periods, and a business planning to start operations on a fixed date should work backwards from them.
And the exemption route is narrow. Most foreign businesses will not qualify, and applying for it as a way around incorporation is not a realistic strategy.
Worth knowing
Budget for a Nigerian subsidiary with local capitalisation, not a branch. Foreign businesses plan a light presence, discover CAMA requires incorporation with higher share capital where there is foreign participation, and lose months restructuring what should have been decided at the start.
Questions people ask
Can a foreign company open a branch in Nigeria?
Generally no. CAMA requires a foreign company intending to carry on business in Nigeria to incorporate a separate Nigerian entity for that purpose, rather than operating as a branch.
Is there any exemption?
The President may exempt narrow categories, including companies invited by the federal government for specific projects, companies executing donor funded loan projects, foreign government owned companies engaged solely in export promotion, and engineering consultants under government contract.
What steps follow incorporation?
Registration with the Nigerian Investment Promotion Commission, a business permit from the Ministry of Interior, an expatriate quota where foreign staff will work here, CERPAC for each individual, capital importation certificates for inflows, and tax registration.
Is selling into Nigeria the same as carrying on business here?
Not necessarily. A foreign supplier exporting to a Nigerian buyer and invoicing from abroad is in a different position from a company with staff, premises and ongoing local contracts. The line is fact specific and worth advice.
What happens if we trade without incorporating?
The company is operating contrary to CAMA. Contracts may be affected, banking is difficult, and regularising the position afterwards is more awkward and more expensive than doing it correctly at the start.
How do we get money back out later?
Through certificates of capital importation obtained when each inflow arrives via an authorised dealer bank. Capital that came in without one has no documented route out, and that surfaces at exit.