Starting a Business in Nigeria in 2023

Nigeria, the giant of Africa, is the largest economy on the continent. It offers a vast playground for foreign investment, swarming with immense potential. The nation has been busy laying the foundation for an economic revolution, with significant strides in infrastructure development.

Notably, Nigeria is not exclusively reserved for corporate giants; it welcomes startups and visionary entrepreneurs. You will find supportive ecosystems within its borders, including business incubators and accelerators designed to nurture and guide emerging businesses. 

But are there any untouched, untapped business opportunities left in Nigeria? The answer is Yes! But before that, it is essential to understand Nigeria's economy and legal compliance for the successful establishment of the business. So, read on to learn how to start a business in Nigeria.

Types of Businesses to Start in Nigeria

Nigeria offers a wealth of untapped business opportunities for aspiring entrepreneurs, such as:

1. Private Limited Company

This type of business entity is the most prevalent one seen in Nigeria's corporate environment. In Nigeria, a private limited company is a distinct legal entity formed by two or more partners and is permitted to operate under certain rules. Some salient features of a private limited company in Nigeria include:

• The allotted share capital should not be less than 10,000 Naira.
• The company must possess a registered office in Nigeria.
• The company name must not exist in the directory of the CAC.
• Minimum 2 partners above the age of 18 are required along with minimum capital investment to start a business.
  

2. Sole Proprietorship

In essence, a sole proprietorship can be referred to as a "one-man show" since, in addition to being the most straightforward business structure, it is also one of the most usual. Some salient features include:

• The founder of the company must do the initial company funding.
• The CAC does not request Sole Proprietorship firms to publish their accounts.
• The founder is the licensed promoter of the business, making him answerable to the law in case of detection of any illegal activities.

3. Public Limited Company

Public limited companies are more transparent commercial entities that operate in the market. They are required, by corporate governance requirements, to publish their financial records and performance status annually. The ideal candidates for this kind of corporate structure are larger companies with more ambitious goals. 

• Minimum members starting the company must be seven.
• The allotted share capital must be 500,000 Nigerian Naira.
• The subscribers must comprise twenty-five percent of the authorized share capital.
• The company must publish the disclosure of company financial records and performance-related documents in the form of annual reports yearly.

Advantages of Starting a Business in Nigeria

Here’s why starting a business in Nigeria can be a smart move:

1. Growing Economy

Nigeria's economy is the largest economy in Africa, with a GDP of about $477 billion. Moreover, it is expected to become one of the world's 15th largest by 2050. This means many great opportunities exist for businesses to start and grow here.

2. Access to Abundant Resources

Nigeria has abundant natural resources, creating business opportunities across various sectors, such as energy and agriculture. Access to these resources can significantly benefit businesses in terms of raw materials and market potential.

3. Favorable Business Climate

The Nigerian government has imposed policies and regulations favorable to foreign investments. These measures have made it easier for businesses to operate in the country. 

The Nigerian Investment Promotion Commission (NIPC) and other agencies promote and support foreign investments. They also offer guidance and incentives to encourage business growth.

4. Strategic Location

Nigeria's strategic location in West Africa positions it as a gateway to a vast market. Nigeria has 400 million people in the Economic Community of West African States (ECOWAS) region. 

Hence, businesses operating here will have access to a substantial consumer base. Nigeria's well-connected transportation infrastructure also provides access to international shipping routes and connects the country to major

Steps to Start a Business in Nigeria

Starting a business in Nigeria requires careful planning and an understanding of the local business environment. Here are the essential steps to guide you through the process:

1. Incorporation/Registration of a Business

Get your business registered with the Corporate Affairs Commission (CAC) and obtain a Certificate of Incorporation. The registration process varied depending on the type of business structure.

2. Registration with the Nigerian Investment Promotion Commission (NIPC)

This registration helps facilitate foreign investments in Nigeria and provides certain benefits and incentives to investors.

3. Approval for Business Permits

You must obtain approval for work permits from the Ministry of Interior. 

4. Immigration Requirements and Residence Permit (CERPAC)/ Application for Expatriate Quota

If you plan to work and live in Nigeria, you legally need to obtain the necessary immigration and residency permits. This includes obtaining a Combined Expatriate Residence Permit and Alien Card (CERPAC). 

Furthermore, you must apply for an Expatriate Quota if you plan to hire foreign employees.

5. Bank Account Opening

Open a domiciliary account with a bank in Nigeria to receive and manage foreign capital. This account will facilitate international transactions and the repatriation of profits.

6. Procurement of Certificate of Capital Importation (CCI)

You must obtain a Certificate of Capital Importation (CCI) to certify the inflow of foreign capital into Nigeria. This is essential for repatriating profits and capital when needed.

7. Taxation Registration

All businesses operating in Nigeria must register for taxation and obtain a Tax Identification Number (TIN). You'll need to comply with Nigerian tax laws and regulations.

Processes Involved in Registering a Business in Nigeria

The process of registering a business in Nigeria can be complex. Here’s how to register a company in Nigeria:

1. Choose a Business Name

The first step is to select an appropriate name for your business. This means that the name should comply with naming regulations.

2. Conduct a Name Search

After selecting a name, you must search at CAC to ensure the name is available for use. You must ensure this is the only business with the chosen name. This is one of the significant requirements for registering a business name in Nigeria.

3. Reserve the Business Name

If the name is available, you can reserve it for 60 days. This reservation can be made online or at a CAC office.

4. Prepare and File the Registration Documents

The next step involves preparing and filing the necessary registration documents with the CAC. These documents typically include the required forms and information about the business structure and shareholders.

5. Pay the Fees and Stamp Duty

You must pay the registration fees to proceed with the registration. After paying the fees, you can submit your application for registration.

6. Obtain the Certificate of Incorporation

After submitting your registration documents and fees, the CAC will review and process your application. If everything aligns with legal requirements, you will receive a Certificate of Incorporation confirming your business's legal registration.

Document Requirements in Registering a Business in Nigeria

For registering a company in Nigeria, you will need the following documents:

1. Memorandum and Articles of Association

These legal documents outline the company's structure, objectives, and internal rules. The Memorandum of Association defines the company's external activities and powers, while the Articles of Association govern the internal management and operation.

2. Form CAC 1.1 (Application for Registration)

Form CAC 1.1 is the official application form for the registration of a company in Nigeria. It contains essential information about the company, its directors, shareholders, and other critical details required for registration.

Setting up a Company vs. Partnering with an Employer of Record in Nigeria

Setting up a company in Nigeria grants you greater authority and autonomy. It offers a foundation for sustainable development and future expansion. 

Nonetheless, it's essential to recognize that forming an entity in Nigeria may not be the best choice for everyone. Partnering with an EOR is more suitable for businesses with restricted resources or a goal to minimize administrative complexities and costs of hiring new employees. So, here's the comparison between establishing a company in Nigeria and partnering with an Employer of Record (EOR):

Learn more: Pros and cons of hiring international employees with an EOR

Hire Talent in Nigeria Compliantly

Starting a business in Nigeria as a foreigner can be beneficial due to its strong economy and strategic location. But, setting up an entity in Nigeria may be expensive and time-consuming. Understanding Nigerian employment laws and managing payroll can also be overwhelming. 

By partnering with Skuad, you can easily expand to Nigeria without the hassle of establishing a local entity. Our platform enables companies to hire, onboard, pay and manage employees and contractors in Nigeria, seamlessly and compliantly.

Book a demo to speak to our experts.

FAQs

Q1. How much does it cost to start a business in Nigeria?

To start a business in Nigeria, you must invest at least N10 million to meet the legal requirements.

Q2. Can an American start a business in Nigeria?

Yes, foreigners, including Americans, can start businesses in Nigeria.

Q3. Is it safe to start a business in Nigeria?

Yes, Nigeria is a safe place for conducting business. However, similar to any setting, it's important to exercise caution and implement necessary precautions to ensure a secure business environment.