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.

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[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.

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[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.

Introduction

On March 18, 2025, the President of Nigeria, Bola Ahmed Tinubu, in a televised national address, issued a proclamation declaring a state of emergency in Rivers State, an oil-producing region of the country. The President justified this decision by citing intelligence reports indicating a series of alarming incidents of pipeline vandalism perpetrated by militant groups. He further asserted that the crisis was amplified by an ongoing political conflict within the state, particularly between the Governor and the State House of Assembly, which had resulted in a breakdown of governance and law enforcement.[1] The President contended that the failure of the state government to address these security breaches necessitated federal intervention. Consequently, as part of the emergency measures, the President suspended the Governor of Rivers State, his deputy, and all members of the State House of Assembly. However, the judicial arm of the state government was not included in the suspension, leaving the courts operational despite the drastic political restructuring.

The President’s action ignited widespread debate, raising critical questions regarding the extent of his constitutional powers to declare a state of emergency within a federating unit. In particular, concerns were raised about whether this authority extends to the suspension of a duly elected Governor and lawmakers of a State House of Assembly, who derive their mandate from the electorate. In this view, this article seeks to critically examine the constitutional implications of such an executive action, particularly its impact on the governance structure of the state. It will further attempt to interrogate the extent to which a presidential declaration of a state of emergency can justifiably alter the balance of power between the executive and legislative branches at the state level. Additionally, the analysis will explore the legality and constitutional validity of suspending elected state officials within the framework of Nigeria’s federal system.

The constitutional framework governing the declaration of a state of emergency in Nigeria

A state of emergency is a situation in which a government is given emergency legal powers to steer the country through a crisis or extraordinary situation to protect its citizens, it follows a declaration made by the government in response to extreme circumstances ranging from natural disaster, armed conflict, civil unrest, or an epidemic.[2]

As a democratically regulated country, Nigeria operates under the supremacy of the 1999 Constitution (as amended), which serves as the fons et origo—the ultimate source of legal authority. The Constitution not only establishes the fundamental principles of governance but also delineates the powers and functions of the three arms of government: the executive, legislature, and judiciary.

Within this constitutional framework, the President of Nigeria is entrusted with specific powers to address grave threats to national security, public order, or the stability of any part of the federation and this includes a declaration of a state of emergency. The legal basis for this authority is found in Section 305 of the 1999 Constitution of the Federal Republic of Nigeria, which outlines the circumstances under which a state of emergency may be declared.

Pursuant to Section 305, the President may issue a Proclamation of a State of Emergency through an instrument published in the Official Gazette of the Government of the Federation.[3] However, this power is not exercised in isolation; it is subject to legislative oversight. Once a state of emergency is declared, the President is mandated to transmit copies of the proclamation to the President of the Senate and the Speaker of the House of Representatives.[4] Upon receipt, both presiding officers must convene their respective legislative chambers to deliberate on the situation and determine whether to approve or reject the proclamation through a formal resolution.[5] This legislature ratifying the power of the president to declare a state of emergency underscores the principle of checks and balances, ensuring that the power is not exercised arbitrarily or beyond constitutional limits.

While the President has the authority to declare an emergency, such power is not absolute and can only be invoked under specific substantive circumstances outlined in Section 305(3) of the 1999 Constitution (as amended). These conditions include:

1. Existence of War or Imminent Invasion – The President may declare a state of emergency if Nigeria is at war or faces an imminent threat of invasion, armed conflict or involved in a state of war.[6]
2. Breakdown of Public Order and Safety – If there is an actual or clear and present danger of an actual breakdown of public order or public safety in the federation or any part thereof to the extent that extraordinary measures are necessary to restore security a state of emergency may be declared.[7]
3. Disaster or Public Danger – A state of emergency may also be proclaimed in response to natural disasters, environmental crises, or other existential threats to the Federation.[8]
4. Request from a State Government – A state of emergency may be declared if the Governor of a State formally requests federal intervention in response to a crisis beyond the state’s capacity to manage.[9]

President Bola Ahmed Tinubu’s power to declare a state of emergency in Rivers State finds constitutional justification under Section 305(3)(c) and (d) of the 1999 Constitution (as amended), which provide for such a declaration in instances of actual or imminent breakdown of public order and public safety. The constitutional framework provides that a state of emergency be employed as a mechanism to restore stability when normal state structures are unable to contain a crisis. In the extant case, the President cited rising militant activities, particularly the vandalization of oil pipelines, as well as a severe political crisis between the Governor and the State House of Assembly, which he deemed to have contributed to governance paralysis.

Under Section 305(3)(c), a state of emergency may be declared when public order and safety have already collapsed to a degree requiring extraordinary measures to restore normalcy. Given the security threats posed by militant groups, coupled with the lack of an effective state-led response, it can be argued that the situation met this threshold. Additionally, Section 305(3)(d) permits proactive intervention where there is a clear and present danger of a breakdown of public order and safety, suggesting that even if the crisis had not fully escalated, federal action was warranted to prevent further deterioration.

Even if it is acknowledged that the action of the President constitutes a declaration of a state of emergency, it remains legally inchoate until it receives formal approval through a resolution of the National Assembly.[10] Under the provisions of the 1999 Constitution, the President lacks the unilateral authority to declare a state of emergency.

Impact of declaration of state of emergency on the executive and legislative governance of a state

Conventionally, when the President of the Federation declares a state of emergency, the executive branch of the state comprising primarily the Governor and Deputy Governor along with the legislative arm, the State House of Assembly, is mandated by the President to suspend its authority and, administrators most often military officers are appointed to oversee the affairs of the state until normalcy is restored.

In 1962, the Late Tafawa Balewa, the then Prime Minister of the country, declared a state of emergency to allay the crisis in the Western Region. The region was placed under emergency rule and Dr. Moses Majekodunmi was appointed as administrator.[11] In 2004, former President Olusegun Obasanjo declared a State of Emergency in Plateau State due to the religious killings that occurred in the state. The then governor, Joshua Dariye alongside the State House of Assembly was suspended and Major General Chris Alli was appointed as administrator. In 2006, former President Olusegun Obasanjo declared a state of emergency to contain the political unrest in Ekiti state as a result of the impeachment of Governor Ayo Fayose, and Brigadier Adetunji Olurin was appointed as administrator. Former president Goodluck Ebele Jonathan on the other hand, opted to depart from this precedent and instead retained all the state functionaries when he declared a state of emergency in Borno, Yobe, and Adamawa states in 2013 and 2014. He also followed the same procedure in 2011 when he declared a state of emergency in some local government areas in Borno and Plateau states.[12]

In the extant case, the current President Bola Ahmed Tinubu declared a state of emergency in Rivers state and he temporarily suspended the Governor of the State, Siminalaya Fubara, his deputy Ngozi Odu and the entire members of the Rivers State House of assembly in an attempt to quell the impending violence rising from the escalated tension between the Governor and the State House of Assembly.

The suspension of the executive and legislative arms of the government of Rivers State has given rise to a significant question: whether the President possesses the constitutional authority to suspend an electoral appointed Governor and State House of Assembly and appoint an administrator while exercising the power to declare a state of emergency.

This question has been argued by various constitutional law experts and judicial authorities have delivered nuanced pronunciations on the issue.

Legal professor, Professor Itse Sagay, has stated in his paper that “The whole tenor of section 11 of the Constitution (which is the section containing all the powers exercisable during an emergency shows that an emergency declaration is intended to be a cooperative endeavor between the federal government and state government, whose organs, governors, House of Assembly and judiciary are fully functioning.”[13] He opines that even during a state of emergency, the state’s institution, such as the Governor, House of Assembly, and Judiciary are expected to remain operational rather than being completely suspended or replaced by federal authority in line with section 11 of the Constitution of the Federal Republic of Nigeria (as amended).

The Nigerian Bar Association (NBA) the body that houses lawyers in the country in a statement released through its President Mazi Afam Osigwe (SAN), laid its concerns on the suspension of the Governor, Deputy Governor and House of Assembly of Rivers State stating that  “The 1999 Constitution does not grant the President the power to suspend or otherwise prevent an elected governor, deputy governor, or members of a state’s legislature from exercising the functions of their offices, under the guise of a state of emergency. Rather, the Constitution provides clear procedures for the removal of a governor and deputy governor as per Section 188. Similarly, the removal of members of the House of Assembly and dissolution of parliament is governed by constitutional provisions and electoral laws, none of which appear to have been adhered to in the present circumstances. These provisions have not been followed in this instance.”[14] The body reiterated that a declaration of emergency does not automatically dissolve or suspend elected state governments, and that the Constitution does not empower the President to unilaterally remove or replace elected officials—such actions amount to an unconstitutional usurpation of power and a fundamental breach of Nigeria’s federal structure.[15]

However, the Attorney General of the Federation (AGF) and Minister of Justice, Lateef Fagbemi held a contrary opinion as regards the suspension of the Governor, Deputy Governor and the members of the House of Assembly of Rivers State. Speaking in defense of President Bola Tinubu’s declaration of a state of emergency, Fagbemi claimed that Fubara not only failed to prevent the attacks but had also indirectly encouraged the militants.[16] He further acknowledged that the National Assembly holds the ultimate authority over the suspension and has the power to either ratify or reject it in which the National Assembly approved days after.

Judicial pronunciations have also been made as regards the suspension of elected members of the government. In Attorney General of the Federation v. Attorney General of Abia State & Ors,[17] the Supreme Court of Nigeria held that the removal of elected chairmen and councilors as well as appointment of sole administrators or caretaker committees by State Governors to run local government councils are illegal and unconstitutional.

In the case of Governor of Ekiti State & Ors. v Olubunmo & Ors,[18] where the then Governor of Ekiti State, Governor Kayode Fayemi dissolved the Local Government Councils, removed the democratically elected Council Chairmen and appointed caretaker committees, Justice C.C Nweke criticized the move stating that “Simply put, therefore, the election of such officials into their offices and their tenure are clothed with constitutional force. They cannot, therefore, be abridged without breaching the constitution from which they derive their force”

Comparative analysis of the implication of declaration of state of emergency on the executive and legislative arm of the state government: case study of the U.S.A and India

United State of America

The United States has remained under a continuous state of emergency since November 1979, when President Jimmy Carter declared a national emergency in response to the Iran hostage crisis and issued an executive order freezing Iranian government assets. Although Iran freed the hostages on Ronald Reagan’s inauguration day in 1981, Reagan extended Carter’s emergency declaration annually throughout his presidency. Subsequent presidents have not only upheld the 1979 emergency but have also introduced numerous additional emergency declarations of their own.[19]

When Donald Trump began his second term on January 20, 2025, the United States had approximately 40 active emergency declarations. On the day of his inauguration, he issued two additional declarations: a national energy emergency and an emergency at the U.S.-Mexico border.[20]

Notably, in the United States, a presidential declaration of a state of emergency has never resulted in the suspension or removal of a state governor, as the federal system preserves state autonomy even in crises. While the President can mobilize federal resources and impose emergency measures, executive authority over state governance remains with the governor of the state.

India

In India, the President can declare a state of emergency under the Constitution, granting broad powers to the central government. Article 352 allows for a National Emergency in cases of war, external aggression, or armed rebellion.[21] The President’s Rule as commonly called, permits the dismissal of a state government if it fails to function constitutionally, transferring executive power to the Governor and dissolving or suspending the state legislature.[22]

Unlike the United States, where emergency powers do not extend to removing state governors, India’s constitutional framework enables direct federal intervention in state governance, often leading to political controversy.

Submission

Under Section 305 of the 1999 Constitution, the President is vested with the constitutional authority to declare a state of emergency in any part of Nigeria when there is a significant breakdown of public order and security. However, this power is not absolute, as it is subject to legislative oversight, requiring approval from the National Assembly to prevent potential executive overreach. The primary objective of this constitutional provision is to preserve national sovereignty and security while ensuring adherence to democratic principles and the rule of law. In the present case, President Tinubu’s declaration of a state of emergency in Rivers State is firmly within his constitutionally conferred powers and, therefore, remains legally valid.

A state of emergency permits the Federal Government to deploy security personnel, impose necessary restrictions, and implement emergency measures aimed at restoring stability. Nevertheless, it does not inherently dissolve or suspend the democratic institutions of the affected state, nor does it authorize the removal of duly elected officials who have not been found culpable of any constitutional violation. From this perspective, the suspension of the Governor, Deputy Governor, and the entire membership of the Rivers State House of Assembly by the President constitutes a clear constitutional overreach and a misapplication of the emergency powers granted to the presidency.

The Governor and Deputy Governor of Rivers State are elected representatives with a legitimate constitutional mandate, and their removal or suspension in the context of a state of emergency runs contrary to the fundamental tenets of federalism and the doctrine of separation of powers. The 1999 Constitution does not provide for the appointment of an interim administrator by the President as a substitute for the Governor. Instead, it explicitly outlines the lawful procedures for the removal of state executives, which must be strictly adhered to in accordance with due process.

Likewise, the suspension or dissolution of the Rivers State House of Assembly undermines the principles of representative democracy and constitutional governance. As an independent arm of government, the legislature plays a crucial role in lawmaking and oversight, even in times of crisis. The invocation of a state of emergency should not serve as a pretext for imposing direct federal control or circumventing established constitutional processes. Such an approach not only erodes democratic institutions but also sets a dangerous precedent for executive overreach in Nigeria’s federal structure.

Recommendations

To ensure that the declaration of a state of emergency aligns with constitutional principles and does not undermine Nigeria’s democratic structure, the following recommendations should be considered:

1. Adherence to Constitutional Provisions and Federalism
   The Federal Government must strictly adhere to the provisions of the 1999 Constitution when exercising emergency powers. While the President has the authority to declare a state of emergency, such measures should be implemented in a manner that respects Nigeria’s federal system and does not usurp the autonomy of state governments.
2. Non-Suspension of Elected State Officials
   The Governor, Deputy Governor, and House of Assembly should not be suspended or removed under the guise of emergency governance. Instead, their roles should be reinforced to ensure that governance continues effectively within the constitutional framework. Any disciplinary measures against elected officials should follow the legal procedures outlined in the Constitution, such as impeachment or judicial processes.
3. Collaborative Governance During Emergencies

Rather than resorting to direct federal intervention, the Federal Government should prioritize collaboration with state governments to effectively manage crises. This approach should involve enhancing intergovernmental cooperation, providing security support, and strengthening state institutions to address the underlying causes of instability. In the present situation, President Tinubu can take on the role of mediator between Governor Siminalayi Fubara and the Rivers State House of Assembly to facilitate a resolution and ensure the smooth functioning of the state government.

4. Judicial Oversight of Emergency Powers
   To prevent potential abuses of emergency powers, the judiciary should play an active role in reviewing and interpreting the constitutionality of executive actions during a state of emergency. Courts should provide a check on any attempt to exceed constitutional limits, ensuring that emergency declarations do not infringe upon democratic governance.
5. Legislative Involvement and Oversight
   The National Assembly should not only approve a state of emergency but also actively monitor its implementation. This oversight role will ensure that emergency measures remain proportionate, temporary, and necessary to restore order without overstepping constitutional boundaries.

Conclusion

The declaration of a state of emergency serves as a constitutionally sanctioned tool for responding to significant threats to public order and national security in Nigeria. While Section 305 of the 1999 Constitution empowers the President to implement emergency measures, the exercise of such authority must remain within the boundaries of constitutional provisions, particularly those that uphold democratic governance, federalism, and the separation of powers.

In this context, although President Tinubu’s proclamation of a state of emergency in Rivers State falls within his constitutional mandate, the suspension of the Governor, Deputy Governor, and the State House of Assembly exceeds the permissible scope of executive authority. The Nigerian Constitution does not confer upon the President the unilateral power to remove or suspend duly elected state officials under the pretext of emergency rule. Such actions compromise the independence of state institutions, undermine democratic norms, and weaken the federal structure of governance.

To uphold constitutional integrity, any federal intervention during a state of emergency should be strictly confined to security and administrative measures essential for restoring order, without interfering with the legitimate governance structures of the affected state. The rule of law must remain paramount in the application of emergency powers, ensuring that constitutional democracy is safeguarded even in times of crisis.

By Felicia Ayeomoni for Adeola Oyinlade & Co.

Adeola Oyinlade & Co. is full-service law firm in Nigeria offering legal support to both local and foreign clients in the areas of constitutional and statutory interpretation.

To see our service offerings, please contact us at [email protected] or visit www.adeolaoyinlade.com

Mobile: +234 803 826 7683 / +234 802 686 0247/ +234 814 198 3314

[1] https://www.reuters.com/world/africa/nigerian-president-declares-state-emergency-oil-producing-rivers-state-2025-03-18/ Accessed 19^th of March, 2025.

[2] https://www.liberties.eu/en/stories/state-of-emergency/44692 Accessed 19^th of March, 2025.

[3] Section 305 (1) Constitution of the Federal Republic of Nigeria, 1999 (as amended).

[4] Section 305 (2) Constitution of the Federal Republic of Nigeria, 1999 (as amended).

[5] ibid.

[6] Section 305 (3) (a) & (b) Constitution of the Federal Republic of Nigeria, 1999 (as amended).

[7] Section 305 (3) (c) & (d) Constitution of the Federal Republic of Nigeria, 1999 (as amended).

[8] Section 305 (3) (e) & (f) Constitution of the Federal Republic of Nigeria, 1999 (as amended).

[9] Section 305 (3) (g) Constitution of Federal Republic of Nigeria, 1999 (as amended).

[10] https://edojudiciary.gov.ng/wp-content/uploads/2017/07/LEGALITY-OF-THE-PRESIDENTIAL-DECLARATION-OF-A-STATE-OF-EMERGENCY-IN-SOME-STATES-IN-NIGERIA-AND-ITS-IMPLICATION-ON-STATE-GOVERNMENT-FUNCTIONARIES-BY-BRIGHT-E.-ONIHA.pdf Accessed 19th of March, 2025.

[11] https://pmnewsnigeria.com/2025/03/18/nigerias-history-of-crisis-a-timeline-of-state-of-emergency-declarations/

[12] (n 10)

[13] Itse Sagay, “Nigeria: The Unfinished Federal Project”, delivered at the 8th Justice Idigbe Memorial Lecture (University of Benin) 2008, 50.

[14] https://blog.nigerianbar.org.ng/2025/03/18/state-of-emergency-in-rivers-suspension-or-otherwise-summary-removal-of-a-democratically-elected-governor-and-other-elected-officials-is-unconstitutional/ Accessed 19^th of March 2025.

[15] Ibid.

[16] https://tribuneonlineng.com/fubaras-suspension-the-ball-is-now-in-the-court-of-national-assembly-agf/ Accessed 19^th of March 2025.

[17] (2024) LPELR-62576 (SC).

[18] (2016) LPELR-48040 (SC)

[19] https://www.history.com/news/national-state-of-emergency-us-presidents accessed 19th of March, 2025.

[20] Ibid.

[21] Constitution of India, section 352

[22] Constitution of India, section 356.

In Nigeria, the Companies and Allied Matters Act 2020 (CAMA) governs the appointment and removal of company directors.

Shareholders wishing to remove a director are to issue a special notice (28 days before the general meeting) of the resolution seeking to remove the concerned director, and or to appoint some other director in the stead of the director so to be removed.

In this article, we respond to some important questions on the legal procedures for the removal and appointment of company directors under the Nigerian law.

Under what circumstances can a director be removed in Nigeria?

A director in Nigeria can be removed under the following circumstances:

• By Ordinary Resolution: Shareholders can remove a director through an ordinary resolution passed at a general meeting, regardless of the director’s term of office.
• Breach of Duty: A director may be removed for failure to perform their duties, such as not attending meetings or violating fiduciary duties.
• Incapacity or Illness: If a director is incapacitated or mentally unfit to perform their duties.
• Bankruptcy: If the director becomes bankrupt or enters into a voluntary arrangement with creditors.
• Failure to Comply with Legal Requirements: Directors who fail to comply with Nigerian corporate laws, including those set out in the Companies and Allied Matters Act (CAMA), may face removal

What is the process for removing a director in Nigeria?

The process for removing a director in Nigeria generally involves

1. Notice of the Meeting: A notice must be given to the company and all shareholders that a resolution for the removal of the director will be proposed at a general meeting.
2. Passing a Resolution: An Ordinary resolution must be passed at the general meeting by a majority of shareholders, with a minimum of 51% voting in favour of removal.
3. Opportunity for Defense: The director facing removal must be given an opportunity to defend themselves at the meeting.
4. Filing with the Corporate Affairs Commission (CAC): Once the resolution is passed, the company must notify the Corporate Affairs Commission (CAC) of the director’s removal.

Can a director be removed without their consent in Nigeria?

Yes, a director can be removed without his or her consent in Nigeria, as long as the removal is done in accordance with the provisions of the Companies and Allied Matters Act (CAMA) and the company’s Articles of Association. The director’s consent is not required to pass a resolution for their removal, although they must be given the opportunity to present their case before the shareholders.

Are there any protections for directors against unfair removal in Nigeria?

Yes, there are some protections for directors against unfair removal:

• Right to be Heard: Directors must be given the opportunity to defend themselves at the general meeting before any decision is made.
• Appeals: If the director believes the removal is unjust, they can challenge the decision in court, especially if there are claims of misapplication of the law or violation of the company’s Articles of Association.
• Legal Framework: Removal must comply with both the company’s Articles of Association and the provisions of the Companies and Allied Matters Act (CAMA).

Can a director who has been removed claim severance benefits in Nigeria?

A removed director may be entitled to severance benefits only if it is stipulated in their contract of employment or in the company’s Articles of Association. In the absence of such terms, the director is typically not entitled to severance unless otherwise agreed or provided by law.

What happens to the director’s position after they are removed?

After a director is removed from office, the position becomes vacant, and the company may appoint a new director to replace the vacant position. The appointment of a new director must follow the company’s procedure, which may involve shareholder approval or board nomination, depending on the company’s Articles of Association.

Is the process for the removal of a director from a private company different from a public company in Nigeria?

The basic process for removing a director is similar in both private and public companies, but there may be additional procedural requirements for public companies, such as compliance with the rules set by the Nigerian Stock Exchange (NSE) and disclosure requirements. Public companies may also face more scrutiny and regulations related to the removal of directors.

Can a director be removed for personal reasons, like conflict with shareholders, in Nigeria?

A director can be removed for personal reasons, including conflicts with shareholders, but such conflicts must be handled within the framework of the company’s governance structure and CAMA. Personal conflicts alone may not be sufficient for removal unless they affect the director’s ability to fulfil their duties or violate their legal obligations to the company.

Can a director who is also a shareholder be removed from their position as a director in Nigeria?

Yes, a director who is also a shareholder can be removed from their position as a director. The process for removing a director is governed by the Companies and Allied Matters Act (CAMA), which allows shareholders to pass a resolution to remove a director regardless of their status as a shareholder.

Can the director who is also a shareholder be removed from their position as a shareholder in Nigeria?

No, the director cannot be removed from their position as a shareholder simply because they have been removed from their position as a director. Shareholders are owners of the company, and their ownership is not contingent on their role as a director. Removing a shareholder would require a separate process, such as selling or transferring their shares or invoking a clause in the company’s Articles of Association (if any) that allows for the forfeiture or compulsory sale of shares under certain conditions.

Note: The content of this article is anticipated to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstance.

By Ayoola Hassan for Adeola Oyinlade & Co.

Adeola Oyinlade & Co. is a leading full-service law firm in Nigeria offering legal support to both local and foreign clients in the area of corporate law.

To see our service offerings, please contact us at [email protected] or visit www.adeolaoyinlade.com

Mobile: +234 803 826 7683 / +234 802 686 0247/ +234 814 198 3314