Feature case

Nigeria - The Best Kept Secret

June 9th 2017

The African business environment provides a positive platform and influence on the development of various sectors in different countries. In the context of increased economic viability, the present boom in Africa creates a new pattern of opportunities for investors to improve the business climate. Recent oil discoveries in different African countries and the array of investment opportunities makes Africa especially Nigeria an Investors secret.

The driving force for the African Market is the surging external demand, especially oil and mineral resources whilst the key to Africa's growth surge is the improved political and macroeconomic stability and microeconomic reforms.

It is projected that at least four groups of industries—consumer-facing industries, agriculture, resources, and infrastructure—together could generate as much as $2.6 trillion in revenue annually by 2020, or $1 trillion more than today.

As growth opportunities continue to move away from the traditional markets, most multinationals have Africa in the sights of their expanding global footprint.

Early entry into African economies provides opportunities to create markets, establish brands, shape industry structures, influence consumer preferences, establish long-term relationships and create enabling environment for the gainful  employment of Africa’s numerous youths who will drive the economic growth and provide support for the measures to sustain the attained growth.

Nigeria has emerged the number one frontier-market economy in Africa in terms of attracting the most attention from European and American multinationals especially its association with the New Partnership for Africa’s Development [NEPAD] which major attraction is to lure Foreign Direct Investment [FDI] to Africa and ultimately, Nigeria. The determinants of FDI in Nigeria which include: market size, infrastructure development, stable macroeconomic policy contributes positively to economic growth.

THE NIGERIAN PERSPECTIVE

With a foreign reserve of about 50 billion dollars, strong banking sector, massive human and natural resources, Nigeria has indeed become one of the most attractive investment destinations in the world.  

A burgeoning middle class has created huge opportunities for businesses in consumer markets like Power, Agriculture, Education, Health, financial services, Energy and telecommunications. It is without doubt that the Nigerian economy is a viable one which can be fully harnessed for greater socio-economic value

As the largest economy in Africa with a GDP of over $500 billion post re-basing, there is no doubt that the country is set for the world stage sitting as the world’s 26th largest economy.

DOING BUSINESS IN NIGERIA

The impact of Regulatory Agencies on business transactions in the Nigerian makes it imperative that its implementation cannot be ignored. Hence, the effect of business-friendly regulations in Nigeria is exemplified in the following ways:  Simplified investments and/or business registrations which have created opportunities for foreign investment in Nigeria, Increase trade openness, Flexibility of Labor market, Strengthen entrepreneurship  and economic performance, Taxation, Effective Commercial Justice System.

Some of the prominent regulatory agencies and Institutions which govern and or regulate businesses in Nigeria include:

  • Corporate Affairs Commission (CAC)– The Commission is vested with  the responsibility of regulating and supervising the formation, incorporation, registration, management and winding up of companies under or pursuant to the enabling law.
  • Securities & Exchange Commission (SEC)- The Commission is made the apex regulatory organization for the Nigerian capital market.
  • Nigerian Investments Promotion Commission (NIPC)- The Commission has the responsibility to encourage, promote and co-ordinate investments in Nigerian economy.
  • National Office for Technology Acquisition and Promotion (NOTAP)- Amongst other functions is responsible for the encouragement of a more efficient process for the identification and selection of foreign technology
  • Nigerian Stock Exchange (NSE)- This has the responsibility of regulating the Nigerian stock market.
  • Central Bank of Nigeria (CBN)- The apex bank has the responsibility of regulating banks and other financial institutions.
  • Federal High Court – The Court has the jurisdiction amongst others for hearing matters arising under the Companies and Allied Matters Act.

Several incentives designed by the Federal Government to boost investment in Nigeria include:

ü  Pioneer Status – This is one of the incentives provided by the Nigerian Government to foreign investors which exclude an investor from paying tax in the first five (5) years of doing business in Nigeria.

ü  Relief in respect of commonwealth Income Tax- otherwise known as ‘double taxation’ is a relief granted where a Nigerian company liable to pay tax proves to the satisfaction of the Board that it has paid, by deduction or otherwise or is liable to pay, commonwealth income tax for that year, it shall be entitled to a relief from tax paid or payable by it under the Act.

ü  Relief in respect of Interest on any foreign loan- These are exemptions from foreign loans  which are made in the course of carrying on business in Nigeria which is not repayable until after a period of ten (10) years but not less than five (5) years. 

ü  Duty Drawback/Suspension Scheme- This incentives come to play where an import fee has already been paid for a good, a refund can be obtained.

ü  Currency Retention Scheme- The scheme allows the investor making an export to retain some portion of the earnings made in their domiciliary accounts.

 SO WHY INVEST IN NIGERIA?

Abundant Human & Material Resources: Nigeria has enormous resources, most of which are yet to be fully exploited. They include: mineral, agricultural and human resources. In terms of agriculture, Nigeria has a vast expanse of arable land which has over the years turned out to be a viable investment opportunity waiting to be explored.

Large Market: Nigeria offers the market in sub-Saharan Africa, with a population of about 120 million people. The Nigerian market potential also stretches into the growing West African sub-region.

Political Stability: In view of the recently concluded peaceful elections in the country, Nigeria offers a stable political environment.

Free Market Economy: The Government has created a favorable climate for business and industrial ventures. Administrative and bureaucratic procedures have been greatly streamlined. The Government has put in place policies and programmes that guarantee a free market economy.

Robust Private Sector: The country has a dynamic private sector, which has assured greater responsibilities under the new economic environment. Some areas of the private sector where investors can make a niche include the educational sector, importation and distribution of medical and health facilities and general health care.

Free Flow of Investment: Exchange control regulations have been liberalized to ensure free flow of international finance.

AEC LEGAL is available to fine tune the above processes based on each investor’s unique requirement depending on your proposed area of investment and be assured that the medium to long term prospects for our market is positive.

Contact:  Ijeoma Uzuana [email protected] 

www.aeclegal.com

Nigeria - The Best Kept Secret