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Exploring Investment Opportunities in Nigerian Infrastructure: An analysis of the applicable Legal Framework and Regulatory Environment.

Exploring Investment Opportunities in Nigerian Infrastructure: An analysis of the applicable Legal Framework and Regulatory Environment.

Nigeria, characterized by a rapidly increasing population and a thriving economy, offers an enticing prospect for investors keen on exploring opportunities in infrastructure development. In response to the country’s imperative to bridge its infrastructural gaps, a dedicated endeavor has been underway to establish an appealing milieu for local and international investors. This piece thoroughly examines Nigeria’s infrastructure sector’s investment prospects, emphasizing the legal framework and regulatory landscape dictating such investments.

LEGAL FRAMEWORK

NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC) ACT

The NIPC Act serves as a fundamental legislation directed at promoting and safeguarding investments in Nigeria. It established the Nigerian Investment Promotion Commission (NIPC), tasked with coordinating, monitoring, and fostering investments. Offering assurances for the repatriation of capital and profits, the Act cultivates a favorable environment for both domestic and foreign investors. Enacted in 1995 and subsequently amended in 2004, the NIPC Act dismantled controls on foreign direct investment (FDI), permitting 100% foreign ownership across all sectors, barring those restricted by law for both local and foreign entities—such as arms, ammunition, narcotics, and military apparel. Some regulators, however, may impose a domestic equity requirement before granting operational licenses to foreign companies. Despite this, foreign investors generally receive similar treatment to domestic counterparts, inclusive of tax incentives.

In specific sectors, such as oil and gas, 100% foreign ownership is permitted, but mineral resources remain under federal government ownership. Common models for oil extraction involve joint ventures and production-sharing agreements between oil companies (both foreign and local) and the federal government. Foreign investors, post-incorporation under the 2020-reviewed Companies and Allied Matters Act, must register with the NIPC. A foreign company intending to operate in Nigeria typically incorporates a subsidiary, though exemptions are possible under specific conditions—such as engagement in a government-specific project or a project funded by a multilateral/bilateral donor or foreign state-owned enterprise. Investment in a Nigerian company by a foreign entity is also feasible without incorporation.

The NIPC, mandated to encourage and facilitate investment, features a One-Stop Investment Center (OSIC) comprising 27 governmental and parastatal agencies. This aims to consolidate and streamline administrative procedures for new businesses and investments. The NIPC, authorized to negotiate special incentives for significant and strategic investments, establishes guarantees against nationalization and expropriation except in cases of national interest. In the event of such occurrences, modalities for “fair and adequate” compensation are stipulated. While the NIPC occasionally facilitates meetings between investors and government agencies to address specific complaints, its role is limited to that of a convenor and moderator, lacking the authority to enforce compliance. Consequently, the NIPC faces limitations in its ability to attract new investment due to constraints in resolving certain investment challenges.

BUSINESS FACILITATION (MISCELLANEOUS PROVISION) ACT (BFA)

The effective date of this legislation was February 8, 2023, aiming to eliminate bureaucratic obstacles and improve the business environment in Nigeria for both domestic and foreign companies registered in the country. The Business Facilitation Act (BFA) implemented mandatory requirements for Ministries, Departments, and Agencies (MDAs) while amending certain corporate legislations to promote adaptability, transparency, and collaboration within Nigeria’s business sphere. The BFA mandates all MDAs to disclose (a) a comprehensive list of requirements for obtaining their products and services, and (b) the corresponding timelines and fees.

The BFA induced amendments to various laws, including:

The Companies and Allied Matters Act (CAMA), which now allows virtual meetings, and electronic share certificates, and empowers the board of directors to increase a company’s share capital through resolution, as opposed to requiring a resolution from the members in a general meeting.

The Nigeria Customs Service Act, 2023 introduced a technology-based single-window platform for lodging all necessary importation, exportation, and transit documents, streamlining regulatory requirements.

The Immigration Act, stipulates that entry visas to Nigeria should be issued or rejected within 48 hours of the application.

The National Office for Technology Acquisition and Promotion Act, exempts companies in their first two years of operation from penalties for late registration of foreign technology acquisition contracts, provided registration occurs before the end of the second year of business operation, diverging from the prior requirement of registration within 60 days of contract execution.

NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP) ACT

The enactment of the NOTAP Act serves the purpose of overseeing the transfer of foreign technology to Nigeria, inclusive of associated or ancillary matters. This legislation establishes the National Office for Technology Acquisition and Promotion (NOTAP), entrusted with the administration of its stipulations. According to the provisions of this law, any contract or agreement on the transfer of foreign technology to entities in Nigeria must be registered with NOTAP within sixty (60) days from the execution or conclusion of such contract or agreement. The Central Bank of Nigeria (CBN) is empowered to withhold the repatriation of fees, profits, or royalties related to any contract facilitating the transfer of foreign technology to Nigeria that remains unregistered with NOTAP.

FOREIGN EXCHANGE (MONITORING AND MISCELLANEOUS PROVISIONS) ACT

The Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, referred to as the FEMMP Act, regulates the movement of foreign capital into and out of Nigeria. According to the FEMMP Act, foreign investors are permitted to invest in enterprises or securities using foreign currency or capital that has been officially imported into Nigeria through an Authorized Dealer, typically a licensed bank. The authority to issue guidelines and circulars under the FEMMP Act is vested in the Central Bank of Nigeria (CBN).

REGULATORY FRAMEWORK

NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)

The NIPC was established with the mandate to encourage, promote, and coordinate investments within the country. Functioning as a corporate entity, the NIPC bears the responsibility of coordinating and overseeing all activities related to investment promotion. This encompasses the facilitation of investment opportunities for both domestic and foreign investors, the administration of the Pioneer Status Incentives Framework, and the management of investment registration. Foreign companies are obliged to undergo registration with the NIPC, which maintains a comprehensive database of all foreign entities conducting business in Nigeria. To streamline this process, investors have the option to register online through the Single Window Investors’ Portal (SWIP).

Operating within the NIPC, the One-Stop Investment Center (OSIC) serves as a centralized hub co-locating 27 pertinent government agencies, including the Central Bank of Nigeria (CBN), the Corporate Affairs Commission (CAC), and the Immigration Service. This collaborative effort aims to deliver expedited, efficient, and transparent services to investors. The OSIC facilitates various services, including visa processing for investors, company incorporation, business permits and registration, tax registration, immigration assistance, and resolution of customs issues. Investors can conveniently obtain necessary documents and approvals required by statutory regulations for establishing an investment project in Nigeria through the OSIC.

In a bid to enhance accessibility and efficiency, the NIPC launched the electronic OSIC in 2021, enabling investors to remotely register businesses, submit documents, and make payments through SWIP. The participating government agencies in the OSIC include the Federal Capital Territory Administration, Federal Inland Revenue Service (FIRS), Nigeria Export Promotion Council, Nigeria Immigration Service, National Agency for Food and Drug Administration (NAFDAC), and Nigerian Copyright Commission (NCC).

CORPORATE AFFAIRS COMMISSION

Prior to commencing operations, all businesses, regardless of their origin—whether foreign or local—are mandated to undergo registration with the Corporate Affairs Commission (CAC). As part of the Presidential Enabling Business Environment Council (PEBEC) reforms, the CAC introduced an online registration system to streamline the process. This digital registration involves three key steps: name search, reservation of the business name, and the final registration stage. A comprehensive registration guide is available on the CAC website, accompanied by a post-registration portal for effecting changes to company details.

The registration process necessitates the endorsement of a Legal Practitioner and attestation by a Notary Public or Commissioner for Oaths. While the initial business registration can be completed online, the certificate of incorporation is typically retrieved at a CAC office, presenting the original application and requisite supporting documents. The online registration process can be accomplished in as little as three days, barring any complications with the application. On average, the establishment of a Limited Liability Company (LLC) in Nigeria spans seven days—a notably prompt duration compared to the 22-day average in Sub-Saharan Africa and the nine-day average in the OECD.

Registration with the Federal Inland Revenue Service (FIRS) is mandatory for tax payment purposes, and if a company operates outside the Federal Capital Territory, it must also register with the relevant state tax authority. Following the completion of registration, the CAC issues a Tax Identification Number (TIN) to all businesses, which must undergo validation on the FIRS website and subsequently be employed for tax registration and payment. The FIRS then designates a tax office for the business to engage with for tax payment matters. Certain taxes can be conveniently filed and paid online through the FIRS website, further enhancing the efficiency of the taxation process.

CONCLUSION

In conclusion, the legal landscape governing foreign investments in Nigeria is multifaceted, with pivotal legislations such as the NIPC Act, CAMA, ISA, Immigration Act, NOTAP Act, and FEMMA playing integral roles in creating an environment conducive to investment. These laws collectively aim to provide protection, streamline processes, and foster transparency for both domestic and foreign investors. Moreover, recent legal developments, as exemplified by the Business Facilitation Act (BFA), demonstrate the Nigerian government’s commitment to continuously enhance the ease of doing business in the country.

Olawunmi Ojo heads the corporate and commercial law practice group at The Trusted Advisors
Chiamaka Anyanwu is an associate at the Corporate and commercial law practice group at The Trusted Advisors