FAQ ON DOING BUSINESS IN NIGERIA
Last updated: October 2013
What is the economy like?
Where are the business opportunities?
Why should I invest in Nigeria?
How do I set up a company?
What do I need to know about tax and employment law?
How can I find a partner or distributor?
How do I get my product to market?
Can I export anything to Nigeria?
How do I sell my product?
How are payments made in Nigeria?
Is it difficult to get paid?
What is the local business culture like?
Is Nigeria a cheap place to do business?
What are the challenges to doing business?
How can you deal with corruption?
What sort of visa do I need to visit for business or to move to Nigeria?
What should I think of before travelling?
Isn’t Nigeria a dangerous country?
Is there any other advice that you can give me?
What is the economy like?
Nigeria, the “Giant of Africa”, has a strong emerging economy with a yearly growth of around 7%. The 2012 GDP stood at $270bn, and Nigeria is set to overtake South Africa as the largest economy in Sub-Saharan Africa by 2014. According to Renaissance Capital, the Lagos State economy is bigger than that of Ghana as a whole. Nigeria also dwarfs other countries when it comes to population: with an estimated 162.5 million inhabitants Nigeria is the 7th most populous country in the world and several of its cities are larger than an average country by population.
Nigeria is one of the most developed economies in Africa. It is a middle income, mixed economy and emerging market, with expanding financial, service, communications, and entertainment sectors. Its emergent, though currently underperforming manufacturing sector is the third-largest on the continent, producing a large proportion of goods and services for the West African region. In fact, Nigeria is an effective springboard for the rest of West Africa/ ECOWAS. Nigeria is on track to becoming one of the 20 largest economies in the world by 2025.
The economy is characterized not only by its strong and continued growth, but also by heavy reliance on the oil industry. Nigeria has many natural resources including a diversity of solid minerals, but for the last 50 years or so has focused on building a near-mono economy at the detriment of its once vibrant agricultural & manufacturing sectors. The government is now actively boosting the non-oil sector through various schemes and incentives. Nigeria still very much depends on imports for everything from food products to cars and technology. Despite the impressive growth record and general economic development, Nigeria is still battling with challenges such as substantial unemployment, insufficient electricity generation, corruption and infrastructural challenges. The Economic Intelligence Unit (EIU) estimates that the total GDP growth could be over 20% if the country weren’t plagued by structural problems like it is.
Most international businesses will take off either in Lagos, Abuja or Port Harcourt. The latter is the centre of the oil & gas industry,while Abuja is dominated by the government, and Lagos is the undisputed commercial capital. With an estimated population of 21 million is it the largest city in Africa and it is host to headquarters of most financial institutions and multinational corporations based the country. Lagos also harbours a large manufacturing and service sector.
Nigeria is a democracy with 36 federal states ruled by a Governor, plus the Federal Capital Territory around the capital Abuja where the President is based. Religion plays an important role in everyday life. Just over half of the country is Muslim, 40% is Christian and the remainder has indigenous beliefs. Nearly 50% of the population live in cities and this share is increasing. About 10 cities have over a million inhabitants. Nigeria is geographically diverse with the capital Abuja situated in the savannah heart of the country, while Lagos is situated on the tropical coast. The country is also the most ethnically diverse country in Africa with over 250 ethnic groups. The Yoruba, Hausa and Igbo are the largest among them. English is the official language.
Where are the business opportunities?
Nigeria is an underdeveloped country, and opportunities can be found in every economic sector. For example, Nigeria used to be a major exporter of agricultural produce and is now the largest importer of rice in the world. Some of the more prominent growth sectors with opportunities for International companies are:
- Internet & telecom: Nigeria is the most interesting ICT market in Africa with 122mn active mobile lines and 45m internet subscribers. Sector leader MTN had a turnover of $4.8bn in 2012. Creating coverage and bringing value-added services is a major challenge/ opportunity.
- Financial services: Nigeria has some of the continent’s largest banks by assets. They are a springboard to the region, e.g. dominating the Ghanaian financial sector. The sector is well regulated. Still, only 21% of the population is banked. Cashless applications, mobile banking and software in general are in high demand by the leading banks.
- Construction: Nigeria is in the top 3 of biggest construction markets in the world (Oxford Economics). Continued growth in oil and gas, hospitality, retail and power sectors will drive demand for construction activities. The country currently needs 20 million new houses, as well as commercial constructions and large infrastructure projects.
- Education & training: insufficient capacity and/or poor quality of Nigerian education institutes ensures a huge opportunity for both setting up schools in Nigeria and attracting Nigerian students to study in abroad. In 2012 over 18,000 Nigerians went to universities in the UK, spending $40,000/student per annum. The opportunity is equally huge in (vocational) training.
Other sectors with great potential include health care, mining, logistics, oil & gas, hospitality and power.
Why should I invest in Nigeria?
Since 2005 Nigeria is considered among the “Next Eleven”: the countries identified by Goldman Sachs investment bank as having a high potential of becoming, along with the BRICS, the world's largest economies in the 21st century. The “MINT” countries (Mexico, Indonesia, Nigeria and Turkey) was coined in late 2013 and further highlights that Nigeria is the new frontier for doing business.
The growth is driven by the massive population (growing at over 3% per annum) and especially the elite and an increasing middle class. The “cosmopolitans” (higher middle class) and the affluent, together 10% of the population or 17 million people, account for 40% of total consumption. Another 21% of the population, or 36m people, could be considered “rising strivers” and are therefore still of interest to multinationals. About 65% of the Nigerian population is less than 25 years old. Most would be literate, and are a ready workforce –even though they often require extra training.
In recent reports, advisory companies McKinsey and KPMG claim that the profit on investments in Sub-Saharan Africa is larger than in any other region in the world. Nigeria receives the largest amount of foreign direct investment (FDI) in Africa, and the inflows have been increasing over the last few years: from $1.14bn in 2001 to $11bn in 2009. These figures provided by UNCTAD show that Nigeria is the 19th recipient of FDI worldwide. While most of the investment is directed at the oil & gas sector, the FDI flows are diversifying. Furthermore, the 1995 Nigerian Investment Promotion Commission Act ensures that investors can repatriate 100% of profits and dividends, and that 100% ownership of companies is allowed in all industries apart from oil & gas. Other incentives include a favourable Companies Income Tax, Pioneer Status Grants, Free Trade Zones and Tax relief for research and development. These measures have further facilitated the inflow of investment in sectors outside those that traditionally receive FDI. A full list of government incentives can be found on
How do I set up a company?
Any company conducting business in Nigeria is required to register with the Corporate Affairs Commission.
Foreign companies/ individuals can own 100% of the Nigerian entity, although registration is usually faster if one of the directors is a Nigerian (entity). Furthermore, there are no restrictions on repatriating money for foreign entities, while there are restrictions if all directors are Nigerian.
The exemption is the oil & gas industry. The Local Content Act stipulates that 51% of a Nigerian subsidiary will have to be owned by Nigerians. More details can be found on the website of the Nigerian Content Development and Monitoring Board:
The process or registering any entity has to be completed by a solicitor who has the approval to deal with the Corporate Affairs Commission (CAC). The steps to processing the company registration are as follows:
- Full payment of professional fee for registration of company with CAC
- A form for Availability check / reservation of name of name is completed by the solicitor you appoint. Usually “Nigeria Limited” is added to the international name.However it is always best to provide an alternate name in the event that the first choice is not approved (for whatever reason). An alternate name always ensures that the client has an option.
- A set of incorporation forms are made available to the client to be completed by:
- Two directors (a form of identification of each of the directors, international passport preferably, must be provided)
- A company secretary, appointed by the directors, whose details will be filled in one of the incorporation forms to be provided. Most solicitors that can register a company can also serve as company secretary against an annual retainer fee.
- A draft memorandum and Articles of Association of the proposed company will be sent to the client by the solicitor, wherein the client will provide details of the type of business it seeks to engage in, the ratio of its shareholding etc.
Upon receipt of the completed incorporation forms and the signed memorandum and articles of association, the solicitor can proceed with the registration of the company. The registration should be completed after one week of commencement of the filing process, if all of the documents are filled correctly and the business name is approved.
The Companies and Allied Matters Act (CAMA) of 1990, however, sets out exceptions to the general rule that all foreign companies doing business in Nigeria must incorporate in Nigeria. These exceptions include companies engaged by the Federal Government to execute specific projects, companies undertaking approved loan projects on behalf of donor countries or international organizations, and foreign government owned companies engaged wholly in export promotion activities.
Foreign companies may also set up Representative Offices in Nigeria. A Representative Office however, cannot engage in business, conclude contracts or open or negotiate any Letters of Credit. It can only serve as a promotional and/or liaison office. In this circumstance, its local operational expenses have to flow in from the foreign company. A Representative Office also must be registered with the CAC.
Complete information on all registration issues can be found on Moreover, it is advisable to engage a reliable and experienced service provider and/or lawyer to guide you through the process.
What do I need to know about tax and employment law?
After setting up a company, it can be registered with the Federal Inland Revenue Service (FIRS) to obtain a Tax Identification Number (TIN) which is a requirement for paying VAT and other taxes. There is a 30% Corporate Income Tax in Nigeria which has to be paid over all earnings in Nigeria. There are tax treaties between Nigeria and several countries. Other taxes include:
- Education tax (2%),
- IT tax (1%),
- Capital Gains Tax (10%),
- Withholding Tax (5-10%),
- Value-Added Tax (5%),
- Personal Income Tax (max 24%),
- Industrial Training Fund tax (1%)
Pension contributions (for companies with 5 or more staff) are 7.5% of monthly salaries. Some taxes are dependent on the number of staff or the turnover of the company. In addition, there are local and State taxes which sometimes leads to a burden of multiple taxation –having a good tax advisor is essential for companies of a certain size. Nigerian companies have a poor track record in paying tax, but cities such as Lagos have revamped their tax collection system –and are implementing public works to justify tax collection. The Lagos taxes are also among the highest in the country. All information on taxes can be found on the FIRS website
Nigeria is a highly unionized country where labour unions can wield considerable power. Strikes can occur, though hardly affect private entities. However, labour laws are quite conducive for business owners. A contract of employment may be terminated by either the employer or employee on the expiration of notice given by one party to the other party of his intention to do so, and the written notice shall be for a period ranging from one week to one month depending on the duration of the contract.Wages and salaries are normally paid weekly, bi-monthly or monthly. Fringe benefits usually paid to workers including housing allowance, travelling allowance annual holidays with pay, leave bonus, pension and gratuity contributions, meal subsidies, provision of housing, medical and transportation. Employers are not permitted to make deductions from employees' remuneration other than those prescribed by law and collective bargaining agreements such as taxes under the Pay As You Earn (PAYE) system, contributions to trade union and contributions to provident and pension funds. Always ensure you have input from a lawyer and/or HR specialist in order to comply with the latest laws and regulations.
How can I find a partner or distributor?
The most frequently employed market-entry strategy in Nigeria is to work with a local partner. This strategy’s popularity can be easily explained by the local knowledge and connections you acquire in an instant. In Nigeria, connections are everything. Very rarely will a contract be given out to a company that has no relationship whatsoever with the management of the client company. Moreover, Nigeria has a relatively difficult operating environment and working with people who know their way greatly simplifies matters. This applies to dealing with local licenses, the government, but also some of the other issues mentioned in this FAQ, including importation of materials and security.
Unlike common perception about Nigeria, the most dangerous mistake is not to engage with a fraudulent partner, but with one that is ineffective. A partnership decision must be based on legal due diligence, industry recommendations, financial strength and most of all: a personal meeting. This meeting should preferably hold at the company’s premises in Nigeria and not in a hotel, as the premises alone will give you a lot of interesting insights into the company.
Moreover, it is important to find a partner who sees equal opportunity and profit in the relationship; many Nigerian companies engage in too many activities and work with several foreign partners. As a result, they often opt only for the most attractive project, the most profitable one, rather than to invest in a long-term strategy. It will remain important to dedicate resources to the market; to be successful you cannot rely only on your partner.
Please contact us to see how we can support you in selecting a suitable partner.
How do I get my product to market?
Lagos is the number 1 destination for items sent to Nigeria. The largest ports and airport are located here. Abuja, Kano and Enugu have functional international airports, and Nigeria is currently upgrading/ constructing new international and cargo airports. Air freight is expensive but far quicker than shipment by sea as the congestion in the port is notorious and clearance processes can be murky.
There are literally thousands of clearing agents in Nigeria and it can be difficult to find established players with a proven track record. Do not engage those that claim they can import “anything” into the country, as they can drain your resources by asking for money to “settle” one official or another. Better would be to ask your usual shipping company for recommendations, or to get introduced by fellow exporters.
Shipment to the (air)ports in Nigeria is only one step; the next one is warehousing and distribution. It often pays off to work with a local partner who has the required distribution network and storage facilities. Alternatively you can work with specialized distribution companies. Again it would be essential to get recommendations and to work with distributors who have other international clients who can give you feedback on the services. The best ones may not be cheap, but will save you a lot of trouble at the end of the day.
The Nigerian government has launched a new website in September 2013 to facilitate trade and information about procedures, regulations and costs. It also features useful tools such as a duty calculator and information about legal requirements. The information can be accessed through
Can I export anything to Nigeria?
Nigeria depends on imports, but has a prohibitive import regime with several import bans in place. The main reason for the restrictions is the protection of the local industry or, in more recent times, to attract investment in local alternatives to imported goods. This may result in goods being banned before local supply can meet demand, thereby increasing costs for buyers. Where goods are not banned, they may be subjected to high importation tariffs and duties. A full list of import restrictions as well as tariffs can be found on the customs website: