1. Introduction

Establishing a business in Nigeria can be challenging, especially when navigating complex regulatory requirements and high operating costs. Now, imagine running a business in Nigeria without paying conventional taxes such as Companies Income Tax, Import Duties, or Valued Added Taxes, and at the same time you are enjoying streamlined regulatory processes and unrestricted profit returns.  This is not a loophole. It is the legal advantage of operating within one of Nigeria’s designated Free Zones.

In this guide, you will be walked you through what you need to know to register and operate a business in a Nigerian Free Zone, from choosing the right zone to securing your operating license and staying compliant.

 

2. What is a Free Trade Zone?

A Free Zone, also known as a Special Economic Zone (SEZ), Free Trade Zone, Export Processing Zone, or Industrial Development Zone, is a geographically designated area within a country that is considered to be outside the national customs territory for the purposes of trade and economic activity.[1] Within this zone, the application of national regulations relating to customs, taxation, import/export restrictions, and certain bureaucratic procedures is either relaxed or selectively applied to promote investment and facilitate business operations.

Presently, there are over 20 free zones in Nigeria across the country,[2] these free zones were created to encourage industrial growth, attract foreign direct investment, promote exports, and create employment. Businesses operating within these zones benefit from various fiscal and regulatory incentives, such as tax holidays,[3] duty-free import of raw materials and equipment, and unrestricted repatriation of profits and capital.

 

3. Specific Benefits of Operating in a Nigerian Free Zone Under the Relevant Regulations

Businesses licensed to operate in a Nigerian Free Zone enjoy a wide range of incentives designed to reduce costs and encourage investment. These include:

• Full exemption from all federal, state, and local taxes, levies, rates, customs duties, and VAT—including VAT on construction and locally procured goods and services.
• No foreign exchange restrictions: Licensees can operate freely without being subject to forex regulations.
• Free repatriation of capital, profits, and dividends at any time.
• 100% foreign ownership and management of businesses is allowed.
• No import or export licenses required for goods entering or leaving the Free Zone.
• Unlimited sale of Free Zone products into Nigeria’s customs territory is permitted with a valid permit and payment of duties.
• Foreign employees are not subject to Nigeria’s immigration quota, provided they work within the Free Zone.
• No duties on goods used for business operations or approved special products.
• 75% import duty rebate for special products that are value-added in the Free Zone and sold in Nigeria, as long as their essential character remains unchanged.
• Duty-free storage and export of goods from the Free Zone.

These incentives make Free Zones an attractive option for both local and international investors seeking regulatory ease and cost efficiency.

 

4. Legal and Regulatory Framework Guiding the Operation of Free Zones in Nigeria

The legal basis for operating within Nigeria’s Free Zones is primarily regulated by two key enactments: the Nigerian Export Processing Zones Authority (NEPZA) Act and the Oil and Gas Free Zones Authority (OGFZA) Act. These laws, together with supplementary regulations and administrative guidelines, govern the establishment, operation, supervision, and compliance obligations of businesses in Free Zones.

1. Nigerian Export Processing Zones Authority (NEPZA) Act (CAP N107, LFN 2004)

The NEPZA Act is the principal legislation governing the establishment and administration of Export Processing Zones (EPZs) in Nigeria. It provides the legal basis for creating designated areas where commercial activities can be conducted with minimal interference from regular customs, tax, and regulatory regimes.

Under this Act, the Nigerian Export Processing Zones Authority (NEPZA) was established as a statutory agency under the Federal Ministry of Industry, Trade and Investment. NEPZA is responsible for:

• Licensing Free Zones and enterprises operating within them
• Facilitating the development and operation of Free Zones
• Regulating and supervising activities within NEPZA-designated zones
• Coordinating with other government agencies to streamline procedures for Free Zone businesses
• Ensuring that licensed enterprises comply with applicable Free Zone guidelines

NEPZA oversees several Free Zones across Nigeria, including the Lagos Free Zone, Lekki Free Zone, Calabar Free Trade Zone, and Kano Free Trade Zone, among others.

 

2. Oil and Gas Free Zones Authority (OGFZA) Act (CAP O5, LFN 2004)

The OGFZA Act governs Free Zones established specifically for oil and gas-related activities. It provides for the creation, designation, and operation of Oil and Gas Free Zones and establishes the Oil and Gas Free Zones Authority (OGFZA) as the regulatory body responsible for managing them.

OGFZA’s primary responsibilities include:

• Approving and licensing businesses operating within Oil and Gas Free Zones
• Monitoring compliance with relevant guidelines and environmental standards
• Promoting investment in upstream and downstream oil and gas activities
• Coordinating with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Customs Service to facilitate smooth operations within these zones

Examples of zones under OGFZA’s jurisdiction include the Onne Oil and Gas Free Zone, Brass Oil and Gas Free Zone, and Warri Oil and Gas Free Zone.

 

3. Other Relevant Laws and Regulations

In addition to the NEPZA and OGFZA Acts, Free Zone businesses must comply with a range of other applicable legal frameworks, including:

• Companies and Allied Matters Act (CAMA) 2020: Governs company incorporation and corporate governance
• Investment and Securities Act and Nigerian Investment Promotion Commission (NIPC) Act: Relate to foreign investment and capital repatriation
• Customs and Excise Management Act: Applies to customs procedures, although often relaxed within Free Zones
• Immigration Act: Regulates employment of expatriates in Free Zones
• Environmental Guidelines and Standards: Issued by NESREA and other relevant agencies, particularly in industrial zones
• Tax enactments such as the Companies Income Tax Act

 

4. Business Activities That Can Be Carried Out in Free Zones in Nigeria

Permissible business activities that can be carried out in free zones area in Nigeria include:

• Construction & Light Manufacturing: Housing, Light Manufacturing & Services
• Solid Minerals & Metals: Cement, Basic Steel, Aluminum, Chemicals, Auto Assembly
• Oil & Gas: Petrochemical, fertilizer, methanol, Plastics, Refineries
• Agric business & Argo-Allied: Food Processing, Sugar, Oil Processing, Cocoa Processing, Leather Product, Rubber Product, Textiles and Garment.

Permissible industries include:

• Electrical and electronic products
• Textile product and garment
• Wood product and handcraft
• Leather product and petroleum product
• Rubber and plastic product
• Cosmetics and other chemical products
• Metal product and machinery
• Educational materials
• Printing materials, communication and office equipment
• Medical kits, optical instruments and appliances
• Biscuits, pastries and food processing business
• Pharmaceutical products
• Ship building and repairs, oil and gas, logistics
• Sport equipment

 

5. Activities Prohibited in the Free Zones in Nigeria

• Prohibition of retail trade: No retail trade shall be conducted within a Zone without the prior approval of the Authority and which may be subject to such terms and conditions as may be imposed, from time to time, by the Authority.[4]
• Prohibition of Dangerous Goods in Zones: The importation, entry, or storage of certain dangerous goods in a Zone is strictly prohibited. These include firearms and ammunition except by authorized security personnel dangerous explosives without prior approval, and flammable or hazardous materials such as petrol or oil fuels, unless permitted under specified conditions.[5]

 

6. Types of Licence Under NEPZA

• Free Zone Developers License
• Free Zone Enterprise License
• Export Processing Factory/Export Processing Farm License

 

7. Types of Licence Under OGFZA

• Free Zone License
• Sub-Zone License
• Free Zone Extension License
• 75 per cent Duty Rebate License
• Special Activity License.

 

8. Steps in Registering a Business or Company in Free Zones in Nigeria

Under NEPZA

Step 1: Complete the Application Form

Complete an application form which can be downloaded online or collect from the administration of the free zone or from NEPZA HQ in Abuja, with a non-refundable fee of US$500 or its Naira equivalent.

An approved enterprise can engage in approved activities as stipulated by the Decree and for which the Authority has granted it permission to engage in a Zone provided the approved enterprise’s investment in the approved activity is of the value of at least US$500,000.00 (five hundred thousand United States dollars) and the operation of the approved activity does not cause damage to human life and property, damage the environment, constitute a threat to public peace and order or national security.[6]

Step 2: Submit the Form

Submit completed application form to the Zone Administration or NEPZA Office in Abuja along with required Project Plan/Feasibility Study. Application will be reviewed and either approved or returned with observations within five (5) working days.

Application to undertake an approved activity shall be considered within five working days of its acknowledgement and the applicant notified in writing of approval or otherwise.[7]

Step 3: Approval and License

On approval of application, an Operating License (OPL) will be issued by the Free Zone Administration. Being licensed by the Authority constitutes registration and no further registration is required with the Corporate Affairs Commission (CAC). It is at this point that the Free Zone Administration will discuss your site location and assign or reserve a space for you.

Step 4: Remit Capital

Remit your investment capital through banks located in the zones which will in turn issue a Certificate of Capital Importation.

Step 5: Prepare Building Space

Prepare your building or warehouse space. Investors who are constructing their own buildings must submit four (4) copies of full architectural drawings for approval by Zone Management according to established building codes. Built-up spaces should not exceed 70% of the leased land, and construction should start within three (3) months after execution of agreement.

Buildings and structures to be constructed by an approved enterprise shall be permanent structures built with fire resistant material in accordance with building, public health and fire regulations adopted by the Authority from time to time.[8]

Step 6: Move in and Operate

Government has designed the process to be as streamlined and user friendly as possible. Some companies may have some additional procedure to follow such as obtaining permission for their foreign nationals and employees which can be done at the immigration desk offices in the free zones.

NOTE: An approved enterprise shall prior to the commencement of operations apply to the Authority/Management for permit to commence operations. The Authority shall within twenty-four hours of the receipt of the application complete inspection of the factory site to ensure compliance with relevant building, factory and public health laws and regulations and shall issue permit to commence operation if there will be no breach of applicable laws and regulations within twenty-four hours of completion of the inspection.[9] Where an approved enterprise has not complied with relevant regulations, the Authority/Zone Management shall in writing within twenty-four hours after the completion of inspection notify the approved enterprise of the non-compliance and direct that it be remedied within a stipulated period.[10]

 

UNDER OGFZA

STEP 1: Submit filled out copy of application to the Managing Director/CEO and pay the prescribed fee. The Authority shall notify the applicant in writing of any decision made within 30 days of the receipt of the application. An applicant for a grant of Free Zone Enterprise License (offshore company) shall produce a bond to the Free Zone Registrar, in accordance with the fees prescribed by the Authority.[11]

STEP 2: Submit the following documents:

• Certificate of incorporation / notarized certificate of incorporation
• Memorandum and articles of association
• Company brochure/profile
• Contact person, designation, phone numbers and address of company
• Report of the feasibility studies of the intended investment in the zone (business plan) 3–5-year business plan
• Financial profile and personal profile
• Companies last three y ears audited account (not applicable to companies less than one year in operation)
• Evidence of capital importation

STEP 3: License is issued seven (7) days from date of submission of above-listed requirements. A successful applicant for the formation of a Free Zone Enterprise shall be issued with a certificate, which shall among other things, carry the date of registration, name of the Enterprise and the seal of the Authority.[12]

NOTE: Once licensed under NEPZA or OGFZA, an enterprise must be registered in the Free Zone Register, and a duly executed Certificate of Registration must be issued. The name of the enterprise must end with the acronym “FZE”.

 

9. Renewal of Licence

A Free Zone license is valid until the end of the year in which it is issued. Renewal is subject to the following conditions:

1. Payment of the applicable license renewal fee;
   b. Submission of any required documents, returns, or information as may be requested by the Authority; and
   c. Settlement of all outstanding payments, if any, owed to the Authority.[13]

 

10. De-Registration of a Free Zone Enterprise[14]

A Free Zone licensee may apply for de-registration by formally notifying the Authority and submitting key documents, including a certified board resolution, proof of payment of outstanding dues, confirmation of recovered guarantees, Free Zone vehicle plates, and details of a qualified liquidator (not being a shareholder or CEO). Within 10 days of receiving these documents, the Authority will publish a 30-day notice in local newspapers to invite any third-party objections. A comprehensive audit will then be conducted to confirm that all imports/exports and customs obligations have been settled. If the license has expired for over a month, the enterprise must renew it or pay a penalty of 50% of the registration fee per month. The Authority will cancel the visas of all foreign employees and the appointed liquidator. If all requirements are met, a Certificate or Letter of Deregistration will be issued. During the notice period, the enterprise’s Board may still make representations to the Authority.

 

11. Conclusion

Setting up a business in a Nigerian Free Zone offers a smart, strategic path for investors seeking to minimize bureaucracy, reduce tax burdens, and access global markets with ease. With the right guidance, registering, operating, and even exiting a Free Zone enterprise can be straightforward and rewarding. Whether you’re a local entrepreneur or a foreign investor, Free Zones provide a legally backed opportunity to grow your business in one of Africa’s largest economies, with fewer barriers and more benefits.

By Adeola Austin Oyinlade and Felicia Ayeomoni for Adeola Oyinlade & Co.

Adeola Oyinlade & Co is a top corporate and commercial law firm in Nigeria specializing in company incorporation and post incorporation compliance services to several local and foreign clients in diverse sectors of the Nigerian economy. Our services have earned us the Nigeria Law Firm of the Year Award at the Lawyers Global 2024 Annual Legal Awards and the prestigious International Law Firm of the Year in Nigeria of Corporate INTL Global Awards for the years 2022, 2023, 2024 and 2025 (4 years in a row) among others.

For consultation, further information on corporation and commercial law services in Nigeria, contact us at [email protected] or call +234 803 826 7683 / +234 802 686 0247.

[1] https://nepza.gov.ng/free-zones/ accessed 26^th of May, 2025.

[2] https://nepza.gov.ng/free-zones/operational-zones/ accessed 26^th of Ma y, 2025.

[3] Section 8 of the Nigeria Export Processing Zones Act, 2004.

[4] Section 14 of the NIGERIA EXPORT PROCESSING ZONES ACT, 2004.

[5] Section 16 of the NIGERIA EXPORT PROCESSING ZONES ACT, 2004.

[6] Part 1 Regulation 16 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.

[7] Part 1 Regulation 4 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.

[8]Part 1 Regulation 8 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.

[9] Part 1 Regulation 10 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.

[10] Part 1 Regulation 11 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria, 2004.

[11] Part 3, Regulation 23 (3) of the Oil and Gas Export Free Zones Regulations, 2019

[12] Part 3, Regulation 23 (6) of the Oil and Gas Export Free Zones Regulations, 2019

[13] Part 4, Regulation 6 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria. 2004.

[14] Part 5, Regulation 21 of the Investment Procedures, Regulations and Operational Guidelines for Free Zones in Nigeria. 2004.

Introduction

The Land Use Act of 1978 revolutionized Nigeria’s land ownership system by centralizing control and vesting title to all land in the governor of each state, who holds it in trust for the people. This marked a significant shift from the previous system, where land was primarily governed by customary land tenure, leading to confusion, inconsistencies and disputes in land transactions.

The state governor is responsible for land administration and has the authority to grant rights of occupancy, which serve as legal land titles. The governor allocates land for various uses, including residential, commercial, and agricultural purposes. These allocations provide legal recognition to landholders and form the basis for land transactions. The Act mandates that the consent of the governor is required for every land transfer or transaction. Be it an assignment of land or a mortgage, the consent of the governor must be obtained upon conclusion. Land disputes often arises in Nigeria either as result of competing claim to the ownership of a property or border disagreement by neighboring communities.  This articles seeks to identify the sources of land disputes and proffer resolution to these disputes.

 

Laws Regulating Land Transactions in Nigeria

Land transactions in Nigeria are regulated by various laws which includes but not limited to;

1. Constitution of the Federal Republic of Nigeria 1999
2. Land Use Act 1978
3. Statute of Frauds Act 1677
4. Land Instrument Registration Law of various states
5. Conveyancing Act 1881 & 1882
6. Property and Conveyancing Law 1959
7. Stamp Duties Act 2004
8. Urban and Town Planning Law of various states or Act

 

Acquiring land ownership in Nigeria

Land can be acquired in Nigeria through any of the following means;

1. Gift Inter-vivos: under Customary Law, it is an oral pronouncement by grantor in the presence of witnesses but the grantee is expected to take the interest during the lifetime of the grantor. If it is not under Customary Law, the gift must be by deed
2. Adverse possession: arises when a person has been in continuous possession of another person’s property without the owner’s permission for a specified period. It can lead to the possessor acquiring legal title to the property, thereby extinguishing the original owner’s rights.
3. Partition of Family Land: Partition is a determination and sharing of family property amongst individual members. Each individual has absolute ownership over his portion. The partition can also be by the order of a court of law.
4. First Settlement: where a person is the first to enter upon a virgin land with the intention of remaining on the land and excluding other persons from possession for a long and continuous period exercising acts of ownership, the law contemplates the person as the owner of the land.
5. Purchase: the owner of a land can transfer his interest in the land property for a consideration. This is the most common means of acquiring land in Nigeria.
6. Allocation of State Land by Government: in lieu of buying land from individuals or companies, another known way of acquiring land in Nigeria particularly in Lagos state, is allocation of land by the government. Which can be perfected by processing the Certificate of Occupancy.
7. Devolution in A Will: this is where the owner of a landed property bequeath such property to the beneficiary of a will.[1]

 

Disputes over Ownership of Lands in Nigeria

In Nigeria, land disputes refer to conflicts over land ownership, possession, or boundaries between individuals, communities, or entities. These disputes often stem from issues like competing claims, unclear boundaries, land grabbing, inheritance disputes, and other related matters.

 

Factors leading to Land disputes in Nigeria

1. Competing claim: different individuals may lay claim to the ownership of a landed property which could be as a result of multiple sale by the initial owner of the property.
2. Revocation of Right of Occupancy: this often leads to legal battle between the government of a state empowered to revoke granted right of occupancy to citizens of the state where adequate compensation is not being paid or the right of occupancy was not revoked in public interest.
3. Encroachments into adjoining Land: neighbors of adjoining land often disagree as to their borderlines. This is also one of the major causes of communal conflicts.
4. Devolution of land: beneficiaries of a demised owner often contest the distribution of inherited land, especially when the owner dies intestate.
5. Unauthorized Sales: When someone sells land they don’t own, it frequently sparks disputes between the legitimate owners and innocent buyers who were unaware of the seller’s lack of title.
6. Inefficiency of Land management: Land ownership acquisition in Nigeria is often plagued by bureaucratic inefficiencies, including delays in title registration, illegal land allocations, uncompensated land revocations, and land use conflicts, which collectively hinder the process for landowners nationwide.
7. Existence of Land grabbers: Land grabbing, which involves influential individuals or entities acquiring land through illicit means or corruption, poses a significant challenge in Nigeria’s land acquisition process. However, stringent penalties have been established by law to deter such practices.[2]

 

How to Prove Land Ownership in Nigeria

Where the ownership of a land is in disputes, it can be proved through any of the following methods;

1. Through traditional historical evidence.
2. By providing the documents of title.
3. Evidence of ownership and possession over an adequate period.
4. Proving possession of adjacent and connected land in circumstances that make it probable that the owner of such adjacent and connected land owns the land in dispute.[3]

 

Recommended steps to be taken in determining Disputes relating to Land

Land disputes can be resolved by adhering to the prescribed steps below;

1. Gather and verify necessary documents: all necessary documents relating to the property in question including title documents must be examined to ascertain one’s title to the property. It’s advisable to visit the Land Registry to have a first hand and verifiable information on the property.
2. Engage a Surveyor to determine the Land measurement: where encroachment is being alleged or the disputes is as result of inability to ascertain the boundaries of neighboring communities, a professional surveyor can be engaged to survey the land in disputes.
3. Give room for Alternative Dispute Resolution: Disputing parties can opt for mutual discussions to resolve their differences peacefully, avoiding further escalation. Additionally, traditional rulers or community leaders can facilitate mediation, helping to find a mutually acceptable solution.
4. Consult a Legal Practitioner: If alternative dispute resolution is unsuccessful, consult an experienced real estate lawyer for expert guidance on the best course of action to take next.
5. File a legal proceeding in court: If mediation is unsuccessful, the next step is to file a court action seeking a declaration of title to the disputed land. Such cases are typically brought before the High Court of the state where the land is located, specifically at the judicial division with jurisdiction over the area.

 

Prevention of Disputes in Land Transactions

1. Engage Real Estate Experts: Always use professionals such as qualified lawyers, surveyors, and real estate agents when engaging in land transactions. These professionals can help verify land titles and ensure all legal processes are followed.
2. Conduct due diligence: before the purchase of a landed property, it’s important to investigate the vendor’s title to the property to determine his right to deal with the property and to uncover the existence of any encumbrance on the property.
3. Acquire necessary documents: Ensure you acquire necessary certificates, including the Certificate of Occupancy, Deed of Assignment, and Survey Plan.
4. Registration of title document: Ensure that your land documents are immediately registered after acquisition as an unregistered deed of assignment only gives the purchaser an equitable interest in the property.
5. Insurance: Given the high cost of legal proceedings, consider investing in legal indemnity insurance to mitigate potential expenses associated with future disputes.

 

Conclusion

Resolving land disputes in Nigeria requires a comprehensive understanding of the Land Use Act and other relevant laws governing land ownership and transactions. By identifying the sources of disputes, such as competing claims, boundary disagreements, and unauthorized sales, individuals and communities can take proactive steps to prevent and resolve conflicts. Gathering and verifying documents, engaging surveyors and legal practitioners, and exploring alternative dispute resolution methods can help resolve disputes efficiently. Moreover, conducting due diligence, acquiring necessary documents, and registering title documents can prevent disputes from arising. By following these guidelines and seeking professional advice, individuals can protect their land rights and interests, ensuring a smoother and more secure land acquisition process in Nigeria.

Written by Olamilekan Fayemi for Adeola Oyinlade & Co.

Email us: [email protected]

Telephone Number: +234 803 826 7683 / +234 802 686 0247

_________

As one of the top law firms in Nigeria, Adeola Oyinlade & Co provides legal services to national and multi-national companies and clients for their corporate and commercial law matters with specialty in property, land and real estate law. Our services have earned us the Nigeria Law Firm of the Year Award at the Lawyers Global 2024 Annual Legal Awards and the prestigious International Law Firm of the Year in Nigeria of Corporate INTL Global Awards for the years 2022, 2023, 2024 and 2025 (4 years in a row) among others.

[1] https://cjokoyelawview.com/law-421-land-law-i/topic-6-modes-of-acquisition-of-land

[2] https://landproperty.ng/how-to-handle-land-disputes-in-nigeria-by-dennis-isong/

[3] Idundun v okunmagba (1976) 9 & 10 s.c 27

Abstract

Taxation as a crucial fiscal policy measure is a factual tool for social economic development, which has been adopted by various countries around the world to improve their economic goals. The Nigerian tax regime is made up of a complex web of disjointed tax laws which leave much to be desired in terms of efficiency and effectiveness both in administration and in achieving the nation’s fiscal policy goals. It is therefore pertinent to examine the causes of the gap between policy and implementation with a view to proffering workable solutions which will aid the development of the country especially as it pertains to its fiscal setup. This paper employs judicial authorities, tax articles, journals and opinions of learned authors on the subject matter for a plenary discourse.

Keywords: Taxation, Tax System, Tax Policy, Policy Implementation, National Development.

• Introduction

Taxation plays a pivotal role in the economic development of any nation, providing the necessary resources for public services, infrastructure development, and social welfare programs. In Nigeria, the National Tax Policy (NTP) 2017 was formulated to guide the orderly development of the tax system and ensure its alignment with the nation’s broader socio-economic goals. It envisions a tax system that promotes voluntary compliance, provides stable government revenue, and ultimately fosters economic growth.

However, despite the NTP’s ambitious objectives, a significant gap persists between its policy pronouncements and its effective implementation. This disconnect undermines the potential of taxation to contribute meaningfully to Nigeria’s development agenda. It is thus imperative to interrogate this with a view to proffering a feasible solution.

1.1 The Current State of the Nigerian Tax System

The NTP defines tax as a mandatory payment to the state with the support of law, with no direct benefit or consideration, as long as it is designated as a tax. For a tax system to be efficient, it must be harmoniously balanced on the tripod of taxation: law, policy and administration. Without this synergy, the tax system will be in an utter state of disarray, leaving everyone to cultivate the wilderness of confusion, which aptly describes the current state of the Nigerian tax system, especially the great chasm between the tax policy and its implementation. The reasons for this discombobulation are examined next.

• The Chasm Between Policy Making and Implementation: The Causes

Several factors have been adduced for the gap between policies and their implementation.

2.1 Division of Taxing Powers

The policy has not adequately addressed the lack of fiscal federalism in the distribution of taxing powers, leading to proliferation of taxes. Some of the taxing powers are clearly delineated,[1] others are not. Quintessentially, is the VAT,[2] which like the mythical Phoenix bird resurrects from its ashes each time the matter seems to be laid to rest and given a befitting burial by way of a judicial pronouncement.[3] This leads to the next problem.

2.2 Multiplicity of Taxes

This problem emanates from the states’ complaints about the mismatch between their fiscal responsibilities and fiscal powers or jurisdiction,[4] and it has resulted into multiple taxes which is most evident in the areas of property[5] and income taxes.[6] It connects to the next problem.

2.3 Tax Avoidance and Evasion

While tax avoidance is minimising one’s tax liability within the ambits of the law, evasion is the total refusal to pay taxes which is illegal and punishable. Because the same income is subjected to multiple levels of taxes, the reasonable taxpayer will avoid taxes where possible while the unreasonable one will evade it outrightly. Avoidance or evasion has the effect of shifting the tax burden to the next available taxpayer.

2.4 Demographic Data

How can government tax the citizens that they do not know? There is dearth of the correct data of Nigerian citizens lending credence to the failure of the Nigerian government to capture the accurate data of her citizens and others dwelling within her borders and cannot therefore make veracious decisions.[7] Taxation is the oldest governmental activity since the country’s unification in 1914, so one would think that tax statistics would be easily accessible. However, this expectation is misplaced, as the government at almost every level, has serious data management failures. Additionally, there are no efforts to have the limited data that is available collated or analyzed on a regular basis, let alone stored or made more easily accessible or retrievable.[8]

2.5 Political Interference

It is counterintuitive that many politicians prioritize politics over professionalism when it comes to revenue generation. Many policymakers, administrators, and lawmakers do not fully comprehend the tax system. Tax collection will remain frustratingly low as a result of this, as well as excessive political interference and special interests.[9] This is closely linked with the rot that pervades every Nigerian system: corruption. Politics and corruption is like night and day. They are complimentary and both operate to negative good policies.

2.6 Complexity of Tax Laws

Nigerian tax regulations are complicated and challenging for the average taxpayer to comprehend; even literate authorities may encounter difficulties in certain situations. In addition to this, many taxpayers may not even know that certain taxes exist.  Together with the absence of information, tax officials’ indolence, resistant taxpayers, and the propensity for quick fixes, these factors promote the application of ‘the best judgment’ method. This could be an indication of inadequate tax education and a failure on the part of tax authorities to perform their duties regarding public awareness which will aid implementation.[10]

2.7 Priority of Tax Efforts

The political economy of revenue allocation in Nigeria does not prioritize tax efforts, rather, it is anchored on factors such as equality of states, pollution, landmass and terrain, social development needs, and internal revenue effort. This discourages a proactive revenue drive as well as zeal for policy implementation, particularly for internally generated revenue, and makes all government tiers heavily reliant on unstable oil revenues.[11]

The more these problems linger, the farther the policies are from being effectively implemented.

• The Way Forward

Identifying problems alone do not solve them, rather, it is the first step taken towards solving it. The proposed solutions are discussed below.

3.1 Constitutional Amendment

A constitutional amendment involving inputs from all the stakeholders on a clear delineation of the taxing powers of all the levels of government is envisaged.[12] The constitution should be amended such that it would allow for more fiscal autonomy of the states and the local governments.[13] This will solve the first three problems earlier mentioned to a great degree.

3.2 Review of Tax Laws

Regular reviews of existing tax laws to ensure they are relevant and reflect current economic realities can help address complexities and ambiguities that confuse taxpayers. To address the urgent need for comprehensive tax reform in Nigeria, President Tinubu, formed the Fiscal Policy and Tax Reforms Committee in August 2023. The committee, led by the tax veteran, Mr. Taiwo Oyedele, was charged with formulating recommendations for improving the country’s tax structure and accomplishing fiscal policy objectives.[14] The Tax Reform Bills are the result of the Committee’s mandate to recommend changes to overhaul the Nigerian fiscal landscape, and promote consistency in the administration and operation of the tax laws.[15]

3.3 Modernized Tax System

Nigeria has been using an antiquated tax system for many years, one that has not kept up with post-pandemic reality, technology developments, and the ever-changing needs of the taxpayers or even changes in the economy. The tax reform aims to upgrade the system, making it more efficient, transparent, and aligned with contemporary economic conditions.[16] This would involve periodically training tax workers on the innovations and current practice obtainable in advanced countries. It would also necessitate the integration of technology like The Integrated Tax Administration System (ITAS) which is a significant initiative in Nigeria aimed at modernizing tax administration through automation and technology.[17]

3.4 Increased Tax Registration and Compliance Monitoring

Tax registration enforcement is increasing with the FIRS[18] requiring businesses and individuals to obtain a Tax Identification Number (TIN) before carrying out certain transactions.[19] This development is a move towards strengthening the Nation’s tax administration, ensuring that businesses, are properly registered and taxed. It reflects a growing emphasis on transparency and accountability in Nigeria’s business environment. By requiring all parties involved in Nigerian business activities to have a TIN, the tax authorities are widening the tax base and reducing informal or unregistered transactions that often evade tax obligations.[20]

3.5 Enhancing Accountability

Even though no one pays taxes with a smile, once there is evidence of the judicious use of taxes, which is clear to all and sundry, it will provide a good ground for justifying the government’s demand for taxes and overall compliance to policies.

• Conclusion

There is a quota that taxation is supposed to contribute to nation building and development. Without solving these problems, it will be impossible to achieve that. Nigeria’s economic landscape and population is like a forest of trees, with big ripe fruits, waiting to be harvested by the implementation of a bespoke tax policy, perfectly suiting Nigeria.

 

By Opeyemi Amodu, winner of the 2025 Adeola Oyinlade & Co National Essay Competition.

_______________________________

[1] For example, Items 16, 25, 58 and 59 of Part I of the Second Schedule to the 1999 Constitution on  taxation of customs and excise duties; export duties; stamp duties; and incomes, profits and capital gains, all of which are clearly within the purview of the National Assembly. Even in those clearly outlined, there is still problem in its implementation such as the tenement rates meant for local governments which came up for adjudication in Knight-Frank & Rutley & Anor. v A-G. of Kano State (1998) LLJR-SC.

[2] Value Added Tax regulated by the Value Added Tax Act, Cap V-1, Laws of Federation of Nigeria, 2004. The VAT began to be levied by the federal government in 1993 under military rule but they failed to grant it a constitutional status which has made it to remain an apple of discord.

[3] The VAT tussle dates back to the sales tax in A-G. of Ogun State v. Aberuagba (1985) LLJR-SC. The gravamen has now escalated and is yet to end with a suit still pending at the Court of Appeal since 2021, initiated by the Rivers State government, after so many cases have been adjudicated on such as Nigerian Soft Drinks Ltd v. A-G. of Lagos State [1987] 2 NWLR (Pt 57) 444 CA, Mama Cass v FBIR (2010) 2 TLRN 99 (FHC), and  A-G. of Lagos State v. Eko Hotels Limited (2017) 12 SC (Part 1) 107. This is just to mention but a few.

[4] Micah Leyira, Ebere Chukwuma, Umobong Asian, “Tax System in Nigeria – Challenges and the Way Forward” (2012). 3(5) RJFA. Available at https://core.ac.uk/reader/234629280. Accessed on 18th, February 2025.

[5] There are multiple property taxes such as Land Use Charge, Tenement Rates, Neighbourhood Improvement Charge, etc.

[6] This includes earmark taxes such as Education Tax, Information Technology Tax, Local Content levy, Industrial Training Fund levy and so on. Despite the enormous amount of funds generated by these earmark taxes at significant cost to businesses, it is unfortunate that very little or no positive impact has been made on the people and the economy.

[7] The last official census in Nigeria held in 2006 which is appalling since there is no substitute to correctly monitor the figures. There are those citizens with multiple NIN numbers, voters’ card, etc, making the figures obtained from such estimation unreliable.

[8] Micah Leyira, Ebere Chukwuma, Umobong Asian, op. cit.

[9] Taiwo Oyedele, “2017 Tax & Fiscal Policy Prospects”, Taxwatch, The Guardian, Monday, January 23, 2017.

[10] Micah Leyira, Ebere Chukwuma, Umobong Asian, op. cit.

[11] Ibid.

[12] Like the Supreme Court said in Steve T. Ugba v. Gabriel Suswam SC.191/2012 (CONSOLIDATED), “if any area of the law is creating hardship or injustice for the people, they can sit down and do something about it through their lawmakers.”

[13] One factor for the financial success of the country in the earlier times was the decentralized system where the then legislative lists (under the 1960 and 1963 constitutions) had few items allowing the regions more autonomy. Professor Oyelowo Oyewo commenting on the current legislative lists in his inaugural lecture titled “Nigeria: What Manner of Federation is This?”, called Nigeria a pseudo-unitary state masquerading as a federation.

[14] Oyetola Atoyebi, “The Nigerian Tax Bill 2024 At a Glance: Highlights and Key Provisions ” (December 19, 2024). Available at https://omaplex.com.ng/the-nigerian-tax-bill-2024-at-a-glance-highlights-and-key-provisions/. Accessed on 21^st, February 2025. The committee’s recommendations  were in the form of four Tax Bills. They are: The Nigeria Tax Bill (NTB) 2024; The Nigeria Tax Administration Bill (NTAB); The Nigeria Revenue Service (Establishment) Bill (NRSEB); and The Joint Revenue Board (Establishment) Bill (JRBEB).

[15] Udo Udoma & Belo-Osagie, “Navigating Nigeria’s Tax Landscape: Key Trends And Developments In 2024 And Outlook For 2025”(Mondaq,  4 February 2025). Available at https://www.mondaq.com/nigeria/tax-authorities/1579484/navigating-nigerias-tax-landscape-key-trends-and-developments-in-2024-and-outlook-for-2025. Accessed on 21st February, 2025.

[16] Abdullahi Hashim, “Nigeria’s Tax Reform Bill: A Step towards Economic Transformation | TheCable” (TheCable, February 7, 2025). Available at https://www.thecable.ng/nigerias-tax-reform-bill-a-step-towards-economic-transformation. Accessed on 15th, February 2025.

[17] Nwamgbebu Obinna, Oketa Chiamake, Odom Amarachi, Nwambe Cynthia and Nweke–Charles Esther, “Electronic Tax System As A Panacea For Tax Revenue Leakages In Nigeria” (African Journal of Politics and Administrative Studies, Vol. 12(1); June 2019). Available at https://www.ajol.info/index.php/ajpas/article/view/247153/233774. Accessed on 21st February 2025. Launched by the Federal Inland Revenue Service (FIRS) in 2013, ITAS seeks to enhance the efficiency of tax collection and compliance processes.

[18] Federal Inland Revenue Service. The federal body in charge of tax collection.

[19] For instance, the FIRS’ stamp duties portal has been updated to capture a variety of transactions and entities so that foreign counterparties to agreements relating to transactions in Nigeria are required to provide their TIN as a prerequisite for stamping their documents in Nigeria. Also, vendors who fail to provide a valid TIN face penalties of twice the applicable Witholding Tax rate.

[20] Udo Udoma & Belo-Osagie, op. cit.

Introduction

Foreigners are free to either do business alone or in partnership with any other person in Nigeria. They are free to invest in any sector of the Nigerian economy except items listed on the negative list.[1] Generally it is provided in the Company and Allied Matters Act 2020 (CAMA), which is the law that regulate Nigeria’s corporate activities that every foreign company, incorporated outside Nigeria, intending to carry on business in Nigeria must take all necessary steps to obtain incorporation as a separate entity in Nigeria and until so incorporated, the foreign company shall not have a place of business in Nigeria for any purposes other than the receipt of notices and other documents as matters preliminary to incorporation.[2]   Where a company fails to comply with the provision of the law, it will amount to an offence, liable to prosecution. The company and every officer are liable to a penalty as may be specified by Corporate and Affairs Commission.[3] However a foreign company can register a Representative or Liaison office in lieu of incorporation of a company in Nigeria.

Understanding the concept of Representative or Liaison Office

A representative office or liaison office is an office established in a foreign country by a company or legal entity to carry out non-transactional operations.  It is used to create a relationship with prospective clients. What this means is that the principal activities of representative offices in Nigeria should be limited to marketing activities and acting as a liaison to help coordinate the exchange of information between the foreign parent company and local institutions/customers in Nigeria. It is usually established in a foreign jurisdiction where it has no license to operate business fully. It should be noted that this doesn’t amount to the incorporation of a company, hence the Representative or Liaison Office cannot be clothed with the powers of a duly incorporated company. The representative or liaison office of a foreign company in Nigeria must have a minimum share capital of ₦100 million.

 

CBN’s Guidelines for the regulation of Representative Offices of Foreign Banks in Nigeria

Foreign banks are permitted to establish representative offices in Nigeria subject to obtaining the prior approval of the Central Bank of Nigeria.[4] A bank representative office simply serves as a physical legal representative of a foreign bank in Nigeria rather than carrying out regular banking business such as taking deposits, providing loans and overdrafts.

Prior to October 2022, the CBN did not have any formal regulation relating to the licensing and regulation of bank representative offices in Nigeria. On 12th October 2022, the CBN released its first regulation titled “Guidelines for the Regulation of Representative Offices of Foreign Banks in Nigeria” to representative offices of foreign banks in Nigeria, stakeholders and the general public.

The CBN set out in the Guidelines the requirements for obtaining its approval to set up a representative office and guidance to stakeholder on the operational and management terms for representative offices. The CBN on March 5 2023, issued a revised guidelines for the regulation of representative offices of foreign banks in Nigeria.

 

Key Features of a Representative or Liaison Office

1. No Legal Status: A representative office has no independent legal status, making it unable to sue or be sued in its own name.
2. Temporary Arrangement: It’s often a temporary administrative setup, with liabilities extending to the parent foreign company.
3. Limited Activities: Allowed activities include market research, storage or display of goods, promotional work, and logistics support.
4. No Tax Liability: Representative offices aren’t subject to tax payments, as they can’t generate income, provided their objectives don’t trigger tax liability.
5. No Business Activities: They can’t engage in business, negotiate contracts, or conclude deals, serving only as liaison or promotional offices.
6. Funding: Expenses are covered by inflows from the foreign parent company.
7. Incorporation: Registration follows a similar process to a private limited company, with the same costs and timeline, but with distinct objectives and naming conventions.

 

Permissible Activities for Approved Representative or Liaison Offices 

They are permitted to carry out the following activities:

1. Marketing the products and services of its foreign parent or an affiliate of the foreign parent licensed and domiciled outside Nigeria.
2. Carrying out research activities in Nigeria on behalf of the foreign parent.
3. Serving as a liaison between the foreign parent and local private institutions within Nigeria and other customers of the foreign parent based in Nigeria.
4. Pursuing business opportunities for the foreign parent or affiliated institutions.
5. A Representative of a Foreign Bank can connect banks and other financial institutions to its foreign parent.
6. Assisting exporters in Nigeria with information related to the laws and markets of target countries in which the foreign parent or any of the Group’s affiliates has a subsidiary.
7. Facilitating seminars, forums and other activities within Nigeria through which a foreign parent may meet with and hold further discussions with existing or potential customers in Nigeria.
8. Collating and distributing economic and financial information or country reports to its foreign parent for use by customers of the foreign parent; and assisting customers of the foreign parents that desire to invest in Nigeria or do business with Nigerian companies subject to the extant Data Protection Regulations.
9. Connecting exporters in Nigeria with potential customers in jurisdictions where the parent company operates; and assisting Nigerian exporters with finding new markets through its international offices.

Approvals Required for a Representative Office

While a representative office in Nigeria may not require a business license, there are other compliance requirements to be met, including:

1. Registration with Corporate Affairs Commission (CAC)
2. Registration with the Nigerian Investment Promotion Commission (NIPC)
3. Obtaining work and residence permits for foreign employees Securing an expatriate quota for foreign staff from Nigerian Immigration Service (NIS)
4. Registration with the Special Control Unit against Money Laundering of the Economic and Financial Crimes Commission (EFCC)
5. Compliance with Central Bank of Nigeria (CBN) guidelines for representative offices of foreign banks in Nigeria (where applicable)

 

Requirements for Registration as a Representative Office

To register a Representative office in Nigeria, you’ll need to meet the following requirements:

1. Company Information
2. Company Name: Submit two alternative names for approval
3. Business Nature & Objectives: Describe the business activities the representative office will undertake

• Shareholding Structure: List of Shareholders and percentage held

1. Company’s Address
2. Company’s Directors, Secretary, Shareholders, and Witnesses Details
3. Full Name
4. Valid Means of Identification (e.g., Passport or National ID)

• Signature

1. Passport Photograph
2. Phone Number
3. Email Address

• Date of Birth
• Address (State, City, Street, LGA)

3. Other statutory documents may be required by the Corporate Affairs Commission (CAC) during the registration process

 

Conclusion

Foreign companies intending to have presence in Nigeria without having to incorporate a subsidiary in the country can register a representative office. Likewise, entities seeking to conduct market research before incorporation of subsidiaries can as well set up a liaison office in the country without any tax liability. Registered liaison offices are, however, advised not to act beyond their objectives as this will make them liable to hefty fines by the regulatory authority.

By Olamilekan C. Fayemi for Adeola Oyinlade & Co.

 

Adeola Oyinlade & Co is a top corporate and commercial law firm in Nigeria specializing in company incorporation and post incorporation compliance services to several local and foreign clients in diverse sectors of the Nigerian economy. Our services have earned us the Nigeria Law Firm of the Year Award at the Lawyers Global 2024 Annual Legal Awards and the prestigious International Law Firm of the Year in Nigeria of Corporate INTL Global Awards for the years 2022, 2023, 2024 and 2025 (4 years in a row) among others.

 

For consultation, further information on corporation and commercial law services in Nigeria, contact us at [email protected] or call +234 803 826 7683 / +234 802 686 0247.

[1] Section 20(4) of the Companies and Allied Matters Act 2020, section 17 of the Nigerian Investment Promotion Commission Act

[2] Section 78(1) of the Companies and Allied Matters Act, 2020.

[3] Section 79 of the Companies and Allied Matters Act, 2020.

[4] section 8 of the Bank and Other Financial Institutions Act 2020

As Africa’s largest economy and most populous nation, Nigeria continues to attract global interest as a strategic destination for investment. From its dynamic consumer market to its vast natural and human resources, Nigeria presents promising opportunities for foreign businesses seeking expansion in Africa. However, navigating the legal and regulatory landscape is essential for any foreign investor aiming to establish a legitimate and sustainable presence in the country.

In recognition of the critical role foreign investment plays in driving economic growth and development, Nigeria has made concerted efforts to open its economy to foreign participation, improve the ease of doing business, and provide incentives that make investment more attractive. Nonetheless, the process of registering a foreign-owned business in Nigeria is guided by a framework of statutory laws and regulatory requirements that must be carefully followed.

This article provides a comprehensive guide to registering a foreign-owned business in Nigeria, detailing the legal structure, registration procedures, permits and licenses required, available incentives, and key considerations for foreign investors. As a foreigner, whether you are exploring a new market or looking to expand your global footprint, understanding the regulatory terrain is the first step toward success in Nigeria’s vibrant business environment.

 

Capacity of a foreigner to do business in Nigeria

Foreign investors have significant opportunities to establish and operate businesses in Nigeria. Under the Nigerian Investment Promotion Commission (NIPC) Act, foreigners are granted the ability to engage in business activities across various sectors of the economy.[1] However, this provision is subject to provision of section 18 of the Act which outlines the scope of allowable investments which a foreigner can engage in.

While foreign investors enjoy the right to operate businesses, the NIPC Act imposes certain restrictions on the types of businesses in which they can participate. This is primarily through a “negative list” that outlines specific sectors that are completely prohibited to both foreigners and Nigerians. These restrictions ensure that certain strategic or sensitive industries remain under control of the government.

The negative list as defined under Section 31 of the NIPC Act includes, but is not limited to, the following sectors:

• Production of arms, ammunition, and explosives: This includes the manufacture of military-grade weapons or explosives, which are deemed critical to national security.
• Production and dealing in narcotic drugs and psychotropic substances: The production, trade, or distribution of illegal substances or drugs that are harmful to public health and safety is strictly prohibited.
• Production of military and para-military clothing and accoutrements: Foreigners are prohibited from engaging in the production of uniforms, equipment, and other goods for the military, police, customs, immigration, and prison services.
• Any other sectors determined by the Federal Executive Council: The Federal Executive Council (FEC) holds the authority to amend and expand the list of prohibited sectors, thereby limiting foreign participation in additional industries deemed crucial to national interests.

The above is further reiterated by the Companies and Allied Matters Act 2020 (CAMA) as follows:

“Subject to the provisions of any enactment regulating the rights and capacity of aliens to undertake or participate in trade or business, an alien or a foreign company may join in forming a company.’’[2]

It is crucial to note that these restrictions do not bar foreigners from engaging in general commercial and industrial activities in Nigeria. Rather, they are aimed at protecting Nigeria’s sovereignty and maintaining control over sectors that have a direct impact on national security, public health, and societal welfare.

Thus, while foreigners have the capacity to invest and carry on business operations in Nigeria, it is important for potential investors to carefully assess these restrictions and ensure compliance with the provisions outlined in the NIPC Act. This will help to mitigate legal risks and ensure a smooth and lawful establishment of their business operations in Nigeria.

 

Classification of foreign participation in Nigeria

Foreign participation in Nigeria’s economy is primarily categorized into two major options, each of which allows for different levels of engagement and investment opportunities. These classifications are pivotal in determining the structure and operational scope for foreigners looking to establish a business in Nigeria. The two primary processes through which a foreigner can engage in business and register a business in Nigeria are:

1. Foreign Direct Investment (FDI)
2. Foreign Portfolio Investment (FPI)

Each of these investment types offers distinct features, regulatory frameworks, and methods of business integration, which will be discussed extensively below.

 

Foreign Direct Investment

Foreign Direct Investment (FDI) refers to a situation whereby a non-Nigerian establish a company independently or jointly with a Nigerian in Nigeria. This involves the direct injection of capital into the Nigerian economy through the establishment of a new company, acquisition of an existing one, or expanding operations via joint ventures.

 

Procedure for Foreign Direct Investment in Nigeria

1. Apply and Obtain business visa ‘’Subject to Regularization’ (STR) at the Nigerian embassy.
2. Where necessary, prepare a joint venture agreement and any other necessary pre-incorporation agreements such as promoters’ service contract, acquisition of business agreement, directors’ service contract, property acquisition agreement and Non-Disclosure Agreement.
3. Form and register a company with the Corporate Affairs Commission.[3] A qualified legal practitioner can carry out this process by undertaking the following procedural steps:

i. Receiving and reviewing necessary instructions from the client;
ii. Preparing all required incorporation documents and ensuring proper stamping;
iii. Filing the documents with the appropriate regulatory authority and securing the certificate of incorporation.

4. Apply to the Nigerian Investment Promotion Commission for registration.[4]
5. Apply the Securities and Exchange and Commission for registration of the security or investment.[5]
6. Import capital through an authorized dealer and obtain a certificate of importation.[6]

 

Regulatory Approvals Required for Foreign Direct Investment (FDI) in Nigeria

1. Business Permit: Foreign-owned companies are required to obtain approval from the Federal Ministry of Interior before establishing operations in Nigeria. This approval is granted in the form of a business permit.
2. Residence Permit: A residence permit authorizes a foreign national engaged in business activities in Nigeria to reside legally and freely within the country.
3. Expatriate Quota: This is an authorization granted to companies to employ expatriates for positions requiring specialized skills that are scarce or unavailable locally. The quota is initially granted for a period of three (3) years and may be renewed every two (2) years, up to a maximum of seven (7) years. However, for companies operating in the oil and gas sector, the initial approval is for two (2) years and may be renewed once, with a total validity period not exceeding four (4) years.[7]

 

Foreign Portfolio Investment (FPI)

In Foreign Portfolio Investment (FPI), foreign investors contribute to the economy by purchasing shares or stocks in companies established within Nigeria.[8] This process involves the importation of capital in the form of foreign currency, which is subsequently converted into the local currency (Naira) through an authorized dealer, such as a licensed commercial bank. The investment allows foreign investors to participate in Nigeria’s financial markets, offering opportunities for portfolio diversification while adhering to the country’s regulatory framework. This form of investment typically provides returns through capital appreciation and dividends, without involving direct management or control over the invested companies.

 

Procedure for Foreign Portfolio Investment in Nigeria

1. Application for shares by the foreigners.
2. A resolution will be passed by the Board of Directors allotting the shares subject to the relevant approvals being obtained.
3. Register the securities with SEC.[9]
4. Import capital and obtain certificate of importation. [10]

 

How Capital is Imported into Nigeria

Capital importation by foreign individuals and companies is regulated by the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act. According to this Act, any person investing in an enterprise or security in Nigeria, using foreign currency or capital, must carry out the transaction through an Authorized Dealer. The investment can be made via telegraphic transfer, cheques, or other negotiable instruments, and the foreign currency must be converted into Naira in the official market, in compliance with the provisions of the Act.[11]

The Authorized Dealer through which the foreign currency or capital for the investment is imported shall, within 24 hours of the importation, issue a Certificate of Capital Importation to the investor and shall, within 48 hours thereafter, make returns to the Central Bank giving such information as the Central Bank may, from time to time, require.[12]

An authorized dealer through which capital is imported freely into the country, can either be a commercial bank or a debt-equity scheme by the federal government

 

Capital Importation by an Authorized Dealer

A foreign investor intending to acquire shares or import capital for the purpose of conducting business in Nigeria is permitted to bring in foreign capital through an authorized dealer, typically a licensed commercial bank. This process ensures that the capital importation is properly documented and recognized by the Nigerian authorities.

The funds brought into the country is converted into Nigerian Naira using the prevailing exchange rate at the official foreign exchange market, thereby facilitating smooth integration into the local economy.

Capital brought into Nigeria can take the form of cash or non-cash considerations. In addition to monetary transfers, investors may also import capital through tangible assets such as machinery, equipment, raw materials, or other goods intended for business operations.[13] These forms of capital must also be properly valued and documented to qualify for official recognition and potential repatriation benefits.

 

Capital Importation by Debt-Equity Scheme of The Federal Government

In 1988, the Federal Government of Nigeria established the Debt Conversion Programme (DCP) and set up a Debt Conversion Committee (DCC) to implement the Programme and one of the objectives of the programme is to create an attractive avenue for the importation of foreign capital.[14]

Where the purpose of conversion is for investment, the minimum paid-up capital of the beneficiary company shall not be less than N5,000,000.00.[15] In order to minimize administrative work, discourage frivolous applications and facilitate the supervision of, or surveillance over the projects in which the naira proceeds of debt conversion are invested, the minimum amount of debt to be considered under the Scheme is $250,000 in the first instance and $25,000 in subsequent redemptions[16]

 

Incentives And Assurances Available to Foreigners Intending to Do Business in Nigeria.

1. Prohibition of Expropriation and Nationalization

Under the Nigerian Investment Promotion Commission (NIPC) Act, the government is prohibited from arbitrarily acquiring or nationalizing the assets of foreign investors.[17] If such action becomes necessary in the public interest, it must be carried out lawfully, with due process, and accompanied by prompt, adequate, and effective compensation.

This is designed to promote investor confidence by ensuring that foreign investments are protected from unjust interference.

2. Pioneer Status: The Pioneer Status Incentive was established by the Industrial Development (Income Tax Relief) Act, No 22 of 1971 and is a tax holiday which grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional years.
3. Duty Drawback Facilities: The scheme provides for fixed drawback and individual drawback facilities. The fixed Drawback facility is for those Exporters/Producers whose export products are listed in the Fixed drawback schedule to be issued from time to time by the Committee.[18]
4. Tax reliefs: Foreign investors in Nigeria enjoy several tax reliefs aimed at encouraging investment. Key incentives include: i. Tax relief under the Companies Income Act. ii. Double Taxation Treaties iii. Free Trade Zones.

 

Conclusion

In conclusion, while Nigeria presents a wealth of investment opportunities for foreign investors, it is essential to understand the formalities involved in registering a foreign-owned business. The process includes obtaining necessary permits, registering with the Corporate Affairs Commission and the Nigerian Investment Promotion Commission and complying with capital importation requirements, among others. Foreign investors must also be mindful of specific restrictions and regulatory approvals, such as the Business Permit, Expatriate Quota, and residence permits, which are essential for smooth operation. By following the structured registration procedures and understanding the legal framework with the support of experienced business lawyers, foreign investors can establish a legitimate and sustainable presence in Nigeria. With the added benefits of incentives and legal protections, Nigeria remains an attractive destination for foreign investment, provided investors comply with the regulatory requirements.

By Felicia Ayeomoni for Adeola Oyinlade & Co.

Adeola Oyinlade & Co is a top corporate and commercial law firm in Nigeria specializing in assisting both local and foreign clients in company incorporation, post incorporation permits, and business law related matters. Our services have earned us the Nigeria Law Firm of the Year Award at the Lawyers Global 2024 Annual Legal Awards and the prestigious International Law Firm of the Year in Nigeria of Corporate INTL Global Awards for the years 2022, 2023, 2024 and 2025 (4 years in a row) among others.

For consultation, further information on corporation and commercial law services in Nigeria, contact us at [email protected] or call +234 803 826 7683 / +234 802 686 0247.

_________________________

[1] Section 17 of the Nigerian Investment Promotion Act, 2004.

[2] Section 20 (4) of the Companies and Allied Matters Act, 2020.

[3] Section 78 of the Companies and Allied Matters Act, 2020.

[4] Section 20 of the Nigerian Investment Promotion Act, 2004.

[5] Section 8 of the Investment and Securities Act, 2025.

[6] Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

[7] http://ecitibiz.interior.gov.ng/Content/HandbookOnExpatriateQuota/HANDBOOK.pdf accessed April 8, 2025.

[8] Section 21 of the Nigerian Investment Promotion Commission Act.

[9] Section 8 of the Investment and Securities Act, 2025.

[10] Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

[11] Section 15 (1) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

[12] Section 15 (2) of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

[13] https://blog.sidebrief.com/capital-importation-in-nigeria/ accessed April 8, 2025.

[14]https://kwaracails.edu.ng/library/law/nigerian_laws/GUIDELINES_ON_THE_NIGERIAN_DEBT_CONVERSION_PROGRAMME.pdf accessed April 8, 2025.

[15]  Guideline 9.2  of the Guidelines on the Nigerian Debt Conversion Programme, 2004. See, https://kwaracails.edu.ng/library/law/nigerian_laws/GUIDELINES_ON_THE_NIGERIAN_DEBT_CONVERSION_PROGRAMME.pdf accessed April 8, 2025.

[16] Guideline 13 of the Guidelines on the Nigerian Debt Conversion Programme, 2004. See, https://kwaracails.edu.ng/library/law/nigerian_laws/GUIDELINES_ON_THE_NIGERIAN_DEBT_CONVERSION_PROGRAMME.pdf accessed April 8, 2025.

[17] Section 17 of the Nigerian Investment Promotion Commission Act.

[18] https://nairametrics.com/wp-content/uploads/2011/07/INVESTMENT-INCENTIVES-IN-NIGERIA.pdf accessed April 8, 2025.