What nipc registration means
The Nigerian Investment Promotion Commission is the federal body responsible for promoting and coordinating investment in Nigeria.
Under the NIPC Act, an enterprise in which a foreign national holds shares must register with the Commission before commencing business.
Registration is not incorporation. The company is first registered at the Corporate Affairs Commission in the ordinary way, and NIPC registration follows. It is a separate step with a separate certificate.
The Act also does two things beyond registration that matter to foreign investors.
It opens the economy. A foreign investor may invest and participate in the operation of any enterprise in Nigeria except those on a short negative list, and there is no general requirement of Nigerian shareholding.
And it gives statutory guarantees: that an enterprise will not be nationalised or expropriated without due process and fair compensation, and that funds may be transferred out of Nigeria in freely convertible currency, including dividends, profits, loan repayments and the proceeds of a sale or liquidation, subject to the exchange control machinery.
How it is used
The sequence for a foreign investor setting up in Nigeria is fixed and doing it out of order causes delay.
Incorporate the company at the Corporate Affairs Commission, with the share capital the various approvals require.
Obtain the taxpayer identification number.
Register with the NIPC and obtain the certificate of registration.
Bring in the equity through an authorised dealer bank and obtain the certificate of capital importation for it, which is what makes the later repatriation of dividends and capital possible.
Apply to the Ministry of Interior for the business permit, and for the expatriate quota if foreign staff are needed.
Then deal with the immigration steps for any expatriate, and with any sector licence the business needs.
The NIPC application itself is documentary: the certificate of incorporation, the memorandum and articles, evidence of the share capital, the status report or particulars of directors and shareholders, the tax identification number, and evidence of the registered address.
Where pioneer status is being sought, that is also an NIPC process, made after the business has been established and evaluated against the approved list of pioneer industries.
Key features
- Required for any Nigerian company with foreign shareholding
- Follows CAC incorporation rather than replacing it
- Foreign investment is permitted in all sectors except the negative list
- Carries statutory guarantees against expropriation without compensation
- Supports transferability of dividends, profits and capital in convertible currency
- The NIPC also administers the pioneer status incentive
How this works in Nigeria
Three points do most of the practical work.
The first is the share capital. A minimum share capital applies to companies with foreign participation for the purposes of the approvals that follow, and the figure has been revised upwards. It should be confirmed before incorporation rather than after, because a company incorporated with too little capital has to increase it and pay the associated fees and stamp duty, which is a wasted step.
The second is the certificate of capital importation, and it is the one foreign investors regret ignoring. Equity and shareholder loans brought into Nigeria should come through an authorised dealer bank, which issues a certificate within a defined period. Without the certificate, remitting dividends, repaying the loan or repatriating the proceeds of a sale through official channels becomes very difficult. Money brought in informally is money that cannot easily go back out.
The third is the negative list, which is short. It covers the production of arms and ammunition, narcotic drugs and psychotropic substances, and military and paramilitary wear and accoutrements. Outside it, foreign participation is permitted, although individual sectors have their own licensing regimes with their own local participation requirements, particularly oil and gas, aviation, shipping, broadcasting and private security.
So the general rule is openness and the detail is in the sector licence, which is where a foreign investor should look after clearing the NIPC step.
NIPC registration vs business permit vs certificate of capital importation
Three approvals a foreign owned Nigerian company needs, from three different bodies, for three different purposes.
NIPC registration records the enterprise with the Nigerian Investment Promotion Commission and is required before a company with foreign shareholding commences business.
The business permit is issued by the Ministry of Interior and authorises a company with foreign participation to operate in Nigeria. The expatriate quota, allowing the company to employ a stated number of foreign nationals, is granted through the same ministry.
The certificate of capital importation is issued by the authorised dealer bank through which foreign capital enters Nigeria. It evidences the inflow and is what enables dividends, loan repayments and sale proceeds to be remitted out through official channels.
They are cumulative rather than alternative, and the order matters. Incorporate, register, import the capital and document it, then obtain the permit and the quota.
Limits and risks
Registration is administrative and it does not grant any sector licence. A foreign owned bank, insurer, broadcaster or security company still needs its own regulator's approval.
The statutory guarantees also operate within the exchange control framework, so the practical ability to remit depends on the certificate of capital importation and on market conditions at the time.
The process takes time, and a business that starts operating before it is complete is exposed.
And the negative list, while short, is not the only restriction. Local participation requirements exist in several regulated sectors and are found in the sector legislation rather than in the NIPC Act.
Worth knowing
Bring your equity in through an authorised dealer bank and collect the certificate of capital importation. Foreign investors who funded a Nigerian company informally find they cannot remit dividends or repatriate the proceeds of a sale through official channels afterwards.
Questions people ask
Who has to register with the NIPC?
Any Nigerian enterprise in which a foreign national holds shares. Registration is required before the company commences business and it follows CAC incorporation rather than replacing it.
Can a foreigner own 100 percent of a Nigerian company?
Generally yes. The NIPC Act permits foreign participation in any enterprise except those on the negative list, though individual regulated sectors have their own local participation requirements.
What is on the negative list?
The production of arms and ammunition, narcotic drugs and psychotropic substances, and military and paramilitary wear and accoutrements.
What share capital is required?
A minimum applies to companies with foreign participation for the purposes of the approvals that follow, and the figure has been revised. Confirm the current threshold before incorporating rather than after.
What does the NIPC guarantee?
That an enterprise will not be nationalised or expropriated without due process and fair compensation, and that funds including dividends, profits, loan repayments and sale proceeds may be transferred in convertible currency.
What is the correct sequence?
Incorporate at the CAC, obtain the tax identification number, register with the NIPC, import the capital through an authorised dealer bank and collect the certificate, then apply for the business permit and expatriate quota.