STRACHAN PARTNERS

Doing Business
in Nigeria
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Contents
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A. INTRODUCTION

3
7

1. General overview
7
2. Sources of Nigerian Law
3. Political system
4. Economic Outlook

9
10
10

5. International relations

14

B. LEGAL AND REGULATORY REGIME

15

1. Key laws and regulatory agencies

2. Foreign exchange control

15
18

C. KEY AUTHORISATIONS AND APPROVALS AND

OTHER RELATED MATTERS

19

1. Incorporate a separate entity

19
2. Foreign investment approvals
20
Business Registration
(Certifcate of Registration of Company with Foreign Participation)
Business Permit
Expatriate Quota Approval
Resident Permits and Visas
Certifcate of Capital Importation
National Offce for Technology Acquisition and Promotion certifcation
3. Sector-regulator approvals
22
4. Tax registration
22
5. Miscellaneous opening a bank account
22
D. LEGAL PROTECTION FOR FOREIGN INVESTORS
23
E. NIGERIAN CONTENT POLICY IN THE
25
OIL & GAS INDUSTRY
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F. OTHER PROTECTIONS - INTELLECTUAL PROPERTY
29
1. The Trademarks Act
29
2. The Patents and Designs Act
29
3. The Copyright Act
30
4. Priority of registration
5. Judicial Interpretation of IP Laws
G. FISCAL INCENTIVES
1.
2.
3.
4.

Pioneer Status
31
Export Incentives
Tax Incentives
Tax relief for Research and Development
32

30
30
31
32
32

5. The Debt Conversion Programme

32
6. Approved User Scheme
33
7. The Duty Drawback Scheme
33
8. Downstream Gas Sub-sector
9. Export processing zones
10. Double Taxation Treaties
H. FISCAL REGIME ADMINISTRATION OF TAXES
1.
2.
3.
4.

Companies Income Tax

Capital Gains Tax
Value Added Tax
Personal Income Tax
36
5. Education Tax
36
6. Stamp Duties
7.
8.
9.
10.

33
33
34
35
36

36

36
Withholding Tax
37
Customs and Excise Duty
Information Technology Development Levy
Contributions
37
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37
37

I. NIGERIAN EMPLOYMENT LAW

40
1. Outline of Nigerian employment law
40
2. Collective agreements with trade unions
42
J. DISPUTE RESOLUTION

43

1. The court system

2. Alternative dispute resolution arbitration
3. Enforcement of foreign judgments
44
K. CONCLUSION AND RECOMMENDATION
L. STRACHAN PARTNERS

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44

45
46

1. Firm Overview
46
2. Key areas of expertise
47
3. Ranking and international recognition
48
4. Contact information
50
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7
1. INTRODUCTION
1. General overview of Nigeria
Nigeria is located in West Africa on the Gulf of Guinea between the Republic
of Benin and Cameroon. It shares its land borders with Cameroon in the east,
Niger in the north, Republic of Benin in the west, and Chad in the northeast,
and its coast in the south lies on the Gulf of Guinea on the Atlantic Ocean.
The country became an independent State on 1st October, 1960, having being

colonized by Britain in 1861. It is a multi-lingual society with over 250 langua

ges.
The 3 major languages spoken in Nigeria are Hausa, Igbo and Yoruba, while
the offcial language is English. The main religions are Christianity, Islam, and
indigenous beliefs. The latest data published by the National Bureau of Statist
ics
in 2011 on the national population of the country puts the total population of
Nigeria at 164 million. The largest population concentration is in Lagos which
is also where most of the economic and industrial activity takes place in. Othe
r
major cities and industrial centres include Port Harcourt, Onitsha, Kano, and
Aba. The federal capital territory of Nigeria is located in Abuja.
SECTION A
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The countrys natural resources include natural gas, petroleum, tin, iron
, ore,
coal, clay, limestone, niobium, lead, zinc, bitumen, bauxite and fertile arable
land.
Agriculture is an important component of the economy and the cultivation of
cash crops like cocoa, peanut, palm oil, rubber, is extensively exploited.
The countrys monetary unit is Naira (N). The current offcial exchange
rate
published by the Central Bank of Nigeria as of 22 September, 2014 is =N=
199.55 to EUR 1.00, =N=253.67 to GBP 1.00 and =N= 155.25 to US$1.00.
Nigerian time is one hour ahead of the GMT.
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2. Sources of Nigerian law
Nigeria can be described as falling within what is generally called a common
law system. More specifcally, the sources of Nigerian law are:
a. The Constitution of the Federal Republic of Nigeria, (Chapter C23)
Laws of the Federation (LFN) of Nigeria 2004 (the Constitution).
The Constitution is Nigerias supreme law from which all other laws
derive their validity;
b. Statutes passed by legislative bodies in Nigeria i.e. the National
Assembly, which makes laws for the Federation, and which comprises
of a Senate and a House of Representatives, and the various Houses
of Assembly which make laws for each of Nigerias 36 States;
c. English Law comprising of the received English law (Received
English Law) and some English statutes made before October
1, 1960 that were extended to Nigeria by an order-in-council. The
Received English Law comprises of:
the Common Law of England;
the Doctrines of Equity;
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Statutes of General Application in force in England on January
1, 1900.
d. Customary law of the various communities in Nigeria, including
Islamic Law which is accepted as the customary law of various
communities in the Northern part of the country; and
e. Judicial Precedents.
Nigeria, like most common law countries with
a hierarchical system of courts, operates a system of binding judicial
precedent where the decisions of a higher court are binding on the
courts that are lower in hierarchy.
3. Political system
Nigeria is a federation made up of thirty-six (36) federating states,
a Federal
Capital Territory (Abuja), and a central government that is referred to as the

Federal Government of Nigeria (the FGN or Federal Government). Each

State of the federation is in turn made up of local government areas.
There are, therefore, three tiers of government in Nigeria, namely, federal, st
ate
and local governments, with each tier having legislative, executive and, in the
case of the federal and state governments, judicial powers, allocated
to it by
the Constitution. The constitution is the supreme law, which distributes power
between the FGN and the federating States.
4. Economic Outlook
It is noteworthy that the attributes that make the Nigerian economy a
good
destination for investment include the following:
a. Democratic Government: The country has a stable democratic
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government having now had democratic elections every 4 years since 1999.
b. Large Population: With a population size of over 164 million people and a
huge domestic market, there are investment opportunities in diverse sectors
of the economy such as agricultural; oil and gas; banking; manufacturing;
construction; transportation; information technology; telecommunications
sectors etc. There is growing consumerism resulting primarily from the
rapid expansion of the middle class with increased spending power.
c. Abundant Natural Resources: The country has abundant mineral,
agricultural and human resources that have yet to be fully utilized.
It
is noteworthy that Nigeria is the biggest oil exporter in Africa, wit
h
the largest natural gas reserves in Africa which are still yet to be
fully
exploited.
d. Investment Incentives: The country provides attractive incentives to
encourage foreign investment.
There are tax holidays for pioneer companies that establish new industries
or expand production in important sectors of the economy (please refer
to section F1). Also non-tax incentives are granted to non-pioneer frms
(please refer to section F3).
A company granted pioneer status is not required to withhold tax on
dividends paid to its shareholders during this period, and persons making
payments to the company will not be required to deduct withholding
tax when they are making payments for services rendered to them by a
pioneer company. Losses made by the company during the tax holiday
can be carried forward indefnitely after the expiry of the 5 year t
ax
holiday and the company can also offset capital allowances in respect
of qualifying capital expenditure incurred by the company during the
tax holiday. Any unutilized allowances may also be carried forward
indefnitely.
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There are also export incentives to manufacturing exporters aimed
at encouraging and assisting the exporters to increase and diversify
the total value and volume of non-oil exports from the country. The
incentives are designed to address the major problems of supply,
demand and price competitiveness of Nigerias export and include
the Export Development Fund, the Export Expansion Grant Fund,
the Export Adjustment Scheme Fund, the Duty-Draw-back Scheme,
the Duty Suspension Scheme and the Manufacture-in-Bond Scheme
(please refer to section F2).
Other incentives include the creation of export processing zones
for special development purposes, where manufacturing can be

undertaken under conditions that exempt entities operating within a

zone from all Federal, State and Local Government taxes, levies and
rates (please refer to section F9).
e. Infrastructure: Government infrastructure spending has increased
in the recent past and the federal government and state governments
are developing their infrastructure using public and private
partnership mechanisms.
f. Labour Force: Nigeria has a reasonably well educated labour force
and the cost of labour is relatively low.
The major economic risks that investors have however encountered in
the past few years, however, consist of the following:
a. infrastructural constraints; and
b.
Corruption, which has been acknowledged as the single most
important factor militating against economic progress and democracy
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in Nigeria.
Investors should also be aware of the developments in the following sectors:
i. The Petroleum Industry
The federal government has introduced a Petroleum Industry Bill (the PIB)
to the National Assembly with a view to having it passed into law. It is expecte
d
that this legislation will revise, update and consolidate current petro
leum
legislation in Nigeria, and also provide additional incentives for comp
anies
operating in the oil and gas industry. Nigerian Oil and Gas Industry Content
Development Act (Local Content Act): The Local Content Act was signed
into law by Nigerias President on 22nd April 2010. The general philoso
phy
of the Act is to increase and, in certain cases, to make exclusive,
Nigerian
participation and the use of Nigerian resources in the Nigerian oil
and gas
industry.
ii. The Power sector
The Federal Government is currently implementing reforms in this sector
through the Electric Power Sector Reform Act and the institution of
the
Presidential Task Force on Power. The Electric Power Sector Reform Act was
passed into law in 2005 to allow private companies to invest in and
operate
power companies in Nigeria. Prior to the enactment of the Electric P
ower
Sector Reform Act (EPSR Act) in March 2005, the Federal Government of
Nigeria was wholly responsible for policy formulation, regulation, opera
tion,
and investment in the Nigerian electric power sector.
The EPSR Act also provides for the creation of institutions required to protect
consumers and stimulate investment in a power sector market with competing
frms.
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5. International relations
Nigeria is a member of several international, regional, and sub-region
al
organizations, which includes the United Nations (UN) and several of it
s
special and related agencies, World Trade Organization (WTO), the Non-

Aligned Movement, African Union (AU), The Commonwealth of Nations,

Organization of Petroleum Exporting Countries (OPEC), International
Maritime Organization and other organizations. It is also a member of
the
Economic Community of West African States (ECOWAS), which seeks
to harmonize trade and investment practices for its West African Membe
r
countries and ultimately to achieve a full customs union. Nigeria has also has
consistently committed itself to the cause of peacekeeping.
Nigeria has also entered into Bilateral Investment Agreements (BITs) with a
number of countries.
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LEGAL AND REGULATORY REGIME
1. Key laws and regulatory agencies
The principal statutes that govern foreign investment in Nigeria are as
follows:
a. Companies and Allied Matters Act (Chapter C20), LFN 2004
(CAMA)
This is the principal statute regulating the establishment and operation
of companies in Nigeria. The CAMA establishes the Corporate Affairs
Commission (CAC) as Nigerias companies registry, and the body
responsible for the regulation and supervision of the formation,
incorporation, registration, management and winding up of companies.
The CAMA also makes provision for the registration of business names
and the incorporation of trustees.
SECTION B
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Foreign companies that wish to do business in Nigeria are required to
do so through a separate locally incorporated entity. Section 54(1) of
the CAMA provides that every foreign company intending to carry on
business in Nigeria must take steps necessary to incorporate as a separate
legal entity with the CAC. Section 56 of CAMA empowers the Federal
Executive Council to grant exemptions from the mandatory incorporation
requirement to a limited category of foreign companies. It is an offence
for a foreign company to carry on business in Nigerian without being
formally incorporated.
b. Nigerian Investment Promotion Commission Act (Chapter N117),
LFN 2004 (NIPC Act)
The NIPC Act established the Nigerian Investment Promotion
Commission (NIPC) as an investment promotion agency of the
Federal Government, responsible for registering foreign investments
in Nigeria.
The NIPC operates as a one-stop shop for the grant of
business permits, licenses and incentives that foreign investors require to
do business in Nigeria.
c. Immigration Act, (Chapter I1), LFN 2004 (the Immigration Act)
Any foreigner wishing to take up employment in Nigeria (other than
employment with the federal or a state government) is required by Section
8(1) of the Immigration Act, to have a residence permit or a work permit
issued by the Comptroller General of Immigrations.
Such persons are
also required under section 9 of the Immigration Act to apply for visas at
the appropriate diplomatic Nigerian Mission abroad. The required visas
could be either a Subject to Regularization visa or a Combined Expatriate
Residence Permit and Alien Card (CERPAC).
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d. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act,
(Chapter F34), LFN 2004, (the FEMM Act)
The FEMM Act sets out the rules and regulations which govern the
operation of the foreign exchange market and provides a framework for

the remittance of interest, dividends and principal payments in foreig

n
currency by foreign investors.
e. Investment and Securities Act No. 29 of 2007 (the ISA)
The ISA governs investments in the capital markets generally, and provides
for the establishment of the Securities and Exchange Commission (the
SEC) as the apex regulatory authority for the Nigerian capital market.
Also relevant are the Securities and Exchange Commission Rules and
Regulations (the SEC Rules), which are made by the SEC pursuant to
powers which it has been granted by the ISA to regulate capital mark
et
activities and operators, including mergers, acquisitions, take-overs, an
d
collective investment schemes.
f. The Industrial Development (Income Tax Relief) Act, Chapter I7
LFN 2004 (Tax Relief Act)
The Tax Relief Act is the basis for the grant of Pioneer Industry Status
(or Pioneer Status).
g. Central Bank of Nigeria Act, Act, No. 7 of 2007 (CBN Act)
The CBN Act established the Central Bank of Nigeria and conferred upon
it the role and responsibility as the apex regulator of banks, the fnancial
system as manager of Nigerians foreign currency reserve. The CBNs
major function is to promote an effcient and effective fnancial system in
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Nigeria and to act as banker to the Federal and State governments and also
to other banks. The CBN also provides economic and fnancial advice to
the Federal Government.
2. Foreign exchange control
Nigerias foreign exchange control regulations are contained in the FEMM Act
(see section B1 (d) above) and in regulations issued by the CBN from time to
time. The FEMM Act places no restrictions on the infow of foreign currency
but requires Authorized Dealers (i.e. banks that are licensed by the
CBN to
deal in foreign exchange) to notify the CBN of any cash transfers to or from
a foreign country of any sum exceeding US$10,000 (ten thousand Dollars) or
its equivalent.
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KEY AUTHORISATIONS AND APPROVALS AND
OTHER RELATED MATTERS
1. Incorporate a separate entity
The principal legislation that governs the registration and activities
of
companies in Nigeria is the Companies and Allied Matters Act Chapter
C20
Laws of Federation of Nigeria 2004 (CAMA). The CAMA requires a foreign
company, which intends to do business in Nigeria, to be incorporated
as a
separate entity in Nigeria for this purpose or to operate subject to an exemptio
n
granted to it by the Federal Government of Nigeria. The exemption is usually
granted for specifc government related projects.
Foreign ownership of a Nigerian company
By virtue of the provisions of the Nigerian Investment Promotion
Commission Act, Cap N117, LFN 2004 (the NIPC Act) it is possible for
foreign investors to own 100% of the equity of a limited liability
company.
Accordingly, there is no requirement that the company to be establishe
d in
SECTION C
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Nigeria should have Nigerian shareholders and other than certain matters set
out in the negative list, and regulated sectors like the broadcasting and oil and
gas sectors, a Nigerian company that is 100% foreign owned may engage in the
same businesses as a Nigerian company that is wholly or partially own
ed by
Nigerians. There are areas of business that are prohibited - the negative list.
2. Foreign Investment Approvals
2.1 Business Registration (Certifcate of Registration of Company with
Foreign Participation)
In order for a company registered in Nigeria with foreign shareholders to do
business it must register its business. The NIPC Act provides that all companies
with foreign participation in their capital structure should register w
ith the
NIPC after they are incorporated.
2.2 Business Permit
Following the registration of the business at the NIPC, a company registered
in Nigeria with foreign shareholders, must apply for a business permit in order
to do business. A business permit is the authorisation that must be obtained in
order for the company to carry on business in Nigeria.
2.3 Expatriate Quota Approvals
Where the company intends to employ expatriates, it must apply for expatriate
quota positions for the relevant number of expatriate personnel it intends to
employ. An expatriate quota is the authorisation that establishes the maximum
number of expatriates that a company may employ.
2.4 Resident permits and visas
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After the grant of the expatriate quota positions, the expatriate employees of
the company placed on the quota positions will need to obtain a Subject-ToRegularisation (STR) visa from the Nigerian Embassy / High Commission in
their country of usual residence to enable them to come into Nigeria for the
purpose of taking up employment.
2.5 Certifcate of Capital Importation (CCI)
Nigerian law permits foreign investors to purchase any amount of fore
ign
exchange for the purpose of remitting e.g. dividends and repatriating capital i
n
the event of a disinvestment, subject to providing appropriate documentation.
One of such documents is the Certifcate of Capital Importation (the CCI))
required to have been obtained from an authorized dealer (a Nigerian
bank
or fnancial institution authorized by the Central Bank of Nigeria to
engage
in foreign exchange activities) as evidence that it has actually brought capital
/
funds into Nigeria at the time that the funds were brought in e.g. for making it
s
equity contribution to a Nigerian company. The CCI is necessary to repatriate
royalties, fees and dividends.
2.6 National Offce for Technology Acquisition and Promotion (NOTAP)
certifcation
If a foreign company intends to provide technology, management or technical
assistance to a Nigerian entity, it will be advisable for the foreign company to
enter into a technical services, training or management agreement with
the
Nigerian company. This agreement will have to be registered with NOTAP

in accordance with the provisions of the National Offce for Technolog

y
Acquisition and Promotion Act LFN 2004 (the NOTAP Act).
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3. Sector regulator approvals
In addition to the authorizations and approvals discussed above, there
are
sector approvals required in order to carry on business in those sect
ors,
such as but not limited to banking, securities, oil and gas, aviation, insurance
,
telecommunication, manufacturing of food and beverages and the hospitality
sectors. In the oil and gas industry, for instance, approvals are required from
the Department of Petroleum Resources - which regulates the Nigerian oil and
gas industry, and the Nigerian Content Development and Monitoring Board
(the NCDMB) which is the body that is responsible for the implementation
of the provisions of the Local Content Act.
4. Tax Registration
A company incorporated in Nigeria is required to be registered with the relevant
tax authorities for tax purposes.

Following the incorporation of the company,

an application is made to applicable tax offce requesting the issuance of a tax

clearance certifcate and value added tax (VAT) registration.
5. Miscellaneous opening a bank account
Although there is no legal requirement to do so, for practical purposes, it will
be advisable for the local company to open an account with a Nigerian bank.
For instance, any capital in the form of cash that will be injected
into the
local company by any offshore partners through the offcial foreign exchange
market will need to be paid into a bank account held with a Nigerian bank, and
as such it would be neater (and create a proper document trail) if those funds
will be paid directly into an account held in the name of the local company.
Once the local company is incorporated, the process of opening an account
with a Nigerian bank should be quite straightforward.
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LEGAL PROTECTION FOR FOREIGN INVESTORS
There are various levels of legal protection for foreign investors.
Nigerian law
provides for compensation in the event of expropriation.
Under Nigerian law no movable property or interest in any immovable p
roperty
may be compulsorily acquired except in accordance with a law which, a
mong
other things, requires prompt payment of compensation and gives to an
y person
claiming such compensation the right of access to a court of law or tribunal h
aving
jurisdiction in the relevant part of Nigeria in order to obtain a d
etermination of
the right and the amount of compensation payable. This right applies not just
to
Nigerian citizens, but also to any person owning or having an interest in proper
ty
in Nigeria.
The Government has also shown a willingness to enter into investment protection

agreements with private organizations wishing to invest in Nigeria, and

has also
entered into bilateral agreements to provide protection for foreign investors.
SECTION D
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In addition Nigerian law provides for a large measure of capital mob
ility, for the
protection for intellectual property, for dispute resolution through arb
itration as
well as in national courts. All these are rights that are available to a foreig
n investor
on a non-discriminatory basis.
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SECTION E
NIGERIAN CONTENT POLICY IN THE OIL & GAS INDUSTRY
With Particular reference to oil and gas, a foreign consortium or a joint ventur
e may
obtain qualifcation acceptance, participate to tenders and thereafter carry out
and
implement operations or transactions falling within the scope of the Nigerian
oil
and gas industry. It is necessary to demonstrate local shareholding and complian
ce
with the Nigeria local content policy applicable to the oil and gas industry.
For ease of understanding, we have broken this chapter into two part
s; (i) Local
content policy (ii) Local Shareholding.
(i) Local Content Policy
The Nigerian Oil and Gas Industry Content Development Act, 2010 (the
Content Act) provides the legal basis for the determination of local content
compliance of companies operating Nigerian oil and gas industry (the
Industry). The local content policy drive of the Nigerian government is aimed
primarily at building local competencies in the Industry by ensuring indigenous
participation through the provision of manpower, services and the ownership
of interests in the Industry. To this extent, the Content Act places emphasis o
n
the promotion of Nigerian Content among companies bidding for contracts
in the Industry.
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Highlights of Content Act
Following our summary of the thrust of the Content Act above, we have set out
a
synopsis of the major highlights of the Content Act as follows:
All operators and alliance partners to maintain a bidding process for all job
offers and the bid selection process shall not be based solely on principle of
the lowest bidder but shall, where the bids are within 1% of each other at the
commercial stage, be considered with preference for the bid with the highest
Nigerian content.
Where applicable or where directed by the Board, the operator shall
prior
to commencing work, establish a project offce in the area where the
job is
to be executed and such project offce shall have staff with decision
-making
authority and the Board shall ensure reasonable number of personnel from the
signifcant areas of operation of the company are maintained by the operator
together with a requirement that Nigerians shall be given frst conside
ration
for employment and training in any project executed by any operator i
n the

Industry.
Operators are encouraged to train and develop a Nigerian labour force for its
operations and all expatriate positions shall after a maximum four-year period,
be occupied by a Nigerian albeit that a maximum of 5% of managemen
t
positions may be reserved for protecting investor interests albeit that
any
application for expatriate quota for such positions must be pre-approve
d by
the Board. However, staffng in the junior and intermediate cadre or any other
corresponding grades shall be held exclusively by Nigerians.
International/multinational companies working through their Nigerian
subsidiaries must demonstrate that a minimum of 50% of the equipment
deployed for execution of work are owned by Nigerian subsidiaries.
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All insurable risks related to oil and gas business, operations or contracts are
required to be insured through insurance brokers registered in Nigeria.
Only services of Nigerian legal practitioners would be permitted to
be
retained by companies in the Industry.
Except where impracticable only Nigerian fnancial institutions shall be
retained by companies in the Industry;
The conduct of any project contrary to the provisions of the Content Act is
an offence for which the operator would be punishable by a fne of 5% of the
value of the contract or a cancellation of the project.
A fscal framework and tax incentives are to be put in place for foreign and
indigenous companies that establish facilities, factories, production uni
ts or
other operations in Nigeria for providing support services to the Industry.
1% of every contract awarded is to be deducted at source for the funding of
the Nigerian Content Development Fund.
(ii) Local Shareholding
The Content Act does not provide any threshold of share capital distribution
as one of the Parameters. The Content Act however provides a defniti
on
of a Nigerian Company as a company formed and registered in Nigeria
in
accordance with the provision of the Companies and Allied Matters Act with
not less than 51% equity shares [held] by Nigerians. Notably, the Cont
ent
Act does not indicate that it would be a general requirement for eligibility in
respect of any company desirous of operating in the Industry to be a Nigerian
Company, either at contract bidding or contract execution.
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It is however worth mentioning that the Content Act vests exclusivity
for
certain contracts and services in the Industry on Nigerian indigenous service
companies, where such Nigerian indigenous service companies demonstrate
ownership of equipment, (Nigerian) personnel and capacity to bid for contracts
and services on land and swamp operating areas of the Industry.
Consequently, a company operating in the Industry would be in complian
ce
with the Content Act where: (i) its operations meet the requisite Parameters;
and (ii) at least 51% of its shares are held by Nigerians.
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OTHER PROTECTIONS - INTELLECTUAL PROPERTY

Intellectual property rights are protected under statute and judicial decisions.
1. Trademarks
The Trade Marks Act Chapter T13, LFN 2004 regulates the registration
of
trademarks in Nigeria.
2. Patents & designs
Patents and Designs are governed by the provisions of the Patent and Designs
Act Chapter P2 LFN 2004. The Act provides that an industrial design must
be registered by the issue of a registration certifcate containing th
e number
of the design, the name and address of the registered owner, the date of the
application and of issue of the certifcate, details of any priority claim, if
any, a
reproduction or representation of the design and an indication of products for
which it will be used, and the name and address of the true creator.
SECTION F
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3. Copyright
Copyrights in Nigeria are governed by the Copyright Act, Chapter C28 LFN,
2004, (the Copyright Act). Generally, the Copyright Act provides that the
following works are eligible for copyright in Nigeria: literary, musical, artist
ic and
cinematograph works, sound recordings and broadcasts. This list is conclusive
and as such, copyright cannot subsist in any other category of works.
4. Priority of registration
Nigeria is a party to the International Convention for the Protection
of
Industrial Property 1883, as amended (the Paris Convention).
The Pari
s
Convention has been incorporated into local law in the case of paten
ts and
industrial designs. This means that if Xs country of origin/registration is als
o
a party to the Paris Convention, and if X seeks to fle an application for a pat
ent
or an industrial design, it will enjoy a right of priority for a period of 12
months
from the date on which it made an application for the registration of such a
patent or design in a Convention Country.
The Paris Convention has not been incorporated into local law in the case of
trademarks. Consequently, although as a matter of law no priority ought to be
accorded in respect of prior flings in a Convention Country in pract
ice, the
Registrar of Trademarks accords priority to such prior flings.
5. Judicial Interpretation of IP Laws
The courts in Nigeria have held that trade mark, when registered, will entitle
the proprietor to sue or institute an action for any infringement of the trade
mark and registration entitles the proprietor to the exclusive use of the trade
mark and also the right to sue for passing off the goods of the proprietor.
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31
FISCAL INCENTIVES
Duly incorporated Nigerian companies can participate in a number of p
rograms
and take advantage of certain incentives, some of which have been designed wit
h
the foreign investor in mind.

1. Pioneer Status
A company having Pioneer Status is exempt from corporate income tax and
education tax for a non-renewable fve-year period.
The company will
not
be required to deduct withholding tax on dividends during this period,
and
persons making payments to the company will also not be required to deduct
withholding tax when they are making payments for the services.
Loss
es
made by the company during the tax holiday can be carried forward fo
r a
period of up to four years beginning from the date following the expiry of the
5-year period and the company can also offset capital allowances in respect of
qualifying capital expenditure incurred by the company during the tax holiday
against the assessable proft for the tax year following the 5 year tax holiday.
Any un-utilized allowance may be carried forward indefnitely.
SECTION G
32
STRACHAN PARTNERS
2. Export Incentives
An exporter can take advantage of the incentives provided in the Exp
ort
(Incentives and Miscellaneous Provisions) Act, Chapter E19, LFN, 2004.
This Act provides for the establishment of various funds that may pr
ove
useful to an exporter, such as the Export Development Fund, which hel
ps
cover the costs of export promotion activities, and the Export Adjust
ment
Scheme Fund, which subsidizes production costs of Exports. There is also
an Export Credit Guarantee and Insurance Scheme, which insures exporters
against various risks including political risk and the risk of payment defaults
.
There are also a number of tax incentives, designed to encourage exports.
3. Tax Incentives
There are other bonuses and incentives - mainly arising from the provisions
of the Companies Income Tax Act, 2007 (CITA) - that are available to all
companies.
Applicable incentives will depend on the nature of the fore
ign
investors proposed activities in Nigeria.
4. Tax relief for Research and Development
Profts reserved by a company for purposes of research and development are
from tax provided such reserves do not exceed 10% of the total assessable
profts of that company.
Companies and other organizations engaged in
research and development activities for commercialization are allowed a 20%
investment tax credit on their qualifying expenditure for that purpose.
5. The Debt Conversion Programme
A company may wish to take advantage of the Debt to Equity conversi
on
programme to fnance its investment in Nigeria.
Under this programme,
STRACHAN PARTNERS
33
the company would be permitted to redeem specifed dollar-denominated
promissory notes and use the proceeds to fnance the local costs of
its
Nigerian projects.
6. Approved User Scheme
Manufacturers of certain items for which imported raw materials are required
may be granted either a concessionary rate of or complete relief from, import
duty for a period not exceeding three years. To qualify for relief the importe

r
must comply with certain statutory requirements.
7. The Duty Drawback Scheme
Under this Scheme importers can claim a refund of import duty paid on goods
used to manufacture products for export. This Scheme was set up under the
Customs and Excise Management Drawback (Customs) Regulations, Chapter
C45, LFN 2004.
8. Downstream Gas Sub-sector
The CITA also provides specifc incentives for companies that utilise gas
.
9. Export processing zones
For special development purposes, the government has created export
processing zones where manufacturing can be undertaken under conditions
that exempt companies within a zone from all Federal, State and Local
Government taxes, levies and rates. This in effect means that companie
s
income tax, value added tax, withholding tax, capital gains tax, custo
ms
duties and all state taxes and local government taxes, levies and rat
es
will not apply to companies operating within an export processing zone
.
34
STRACHAN PARTNERS
10. Double Taxation Treaties
As noted in section A1(5), Nigeria currently has double taxation agree
ments
with Canada, France, Belgium, Romania, Pakistan, the Netherlands, the United
Kingdom and the Czech Republic, allowing persons liable to tax in tho
se
countries to obtain credit for any taxes paid in Nigeria.
STRACHAN PARTNERS
35
FISCAL REGIME ADMINISTRATION OF TAXES
The administration of tax in Nigeria is vested in the three tiers o
f government.
Taxes payable to the Federal Government are administered by the Federal Inland
Revenue Service Board through its operational arm, the Federal Inland
Revenue
Service (FIRS), while those payable to the State Governments are admin
istered
by the Internal Revenue Boards of the thirty-six states of the Fede
ration and
the Federal Capital Territory of Abuja through their respective operat
ional arms,
known as the State Internal Revenue Service. Local Governments also administer
taxes collectible by them through their various councils. State Boards apply uni
form
rules in respect of tax deductions and their activities are co-ordinated by the
Joint
Tax Board (JTB).
Several categories of tax are levied. Those that are likely to prove of most
interest
to a foreign investor are companies income tax, personal income tax, capital gain
s
tax, value-added tax, education tax, stamp duties and the various withholding ta
xes.
Other categories of tax include local government rates and levies. Penalties m
ay be

imposed for failure to pay taxes when due.

All taxes, except for value added tax, stamp duties, customs and excise duties a
nd
capital gains tax, are calculated in accordance with a tax year that runs from J
anuary
1st to December 31st in each year. Provided taxes are duly paid, a taxpayer wil
l be
issued a Tax Clearance Certifcate. This Certifcate confrms that all taxes due in
the
three years immediately preceding the year in which it is issued have been paid.
A
Tax Clearance Certifcate is required for virtually all offcial transactions.
SECTION H
36
STRACHAN PARTNERS
Key taxes chargeable in Nigeria, their application and rates:
Applicable tax Tax rate
Governing legislation
and comments
Companies Income tax/
Corporate tax
30% of adjusted proft Companies Income Tax Act.
Capital gains tax
10% of gains realised upon
disposal of a business asset
Capital Gains Tax Act. Tax may
be deferred if gains are used to
purchase replacement equipment
Value added tax (VAT)
5% on the supply of goods
and services
Value Added Tax Act
Education tax 2% of assessed proft Education Tax Act
Stamp duty
Varies depending on
nature of the document to
be stamped
Stamp Duty Act.
Import/Customs duty
5% or 25% of assessed
value of the goods
Customs and Excise
Management Act.
Personal Income Tax
Chargeable Proft Income Rate of tax
First 300,000.00 7%
Next 300,000.00 11%
Next 500,000.00 15%
Next 500,000.00 19%
Next 1,600,000.00 21%
Above 3,200,000.00 24%
1. Stamp Duties
Stamp duty is a tax on documents, which is payable by virtue of the Stamp Dutie
s Act,
(Chapter S8), LFN 2004 (the Stamp Duties Act). The rate of stamp duties depends
on the type of document. Some examples of stamp duty levels are as follows:
STRACHAN PARTNERS
37
Lease agreements 16k for every =N=200.00 (0.08%)
Mortgages 75k for every =N=200.00 (0.375%)
Incorporation of a
Limited Liability

Company
0.75% of the authorised share capital.
2. Withholding Tax
Nigerians tax laws provide for the withholding of tax from payments d
ue to
any person or company (whether or not resident in Nigeria) that provides goods
services to another person or company in Nigeria.
Withholding tax is
not a
separate category of tax but simply represents an advance payment of income
tax.
Please see the table below for the rates that are applicable to the various tran
sactions.
Nature of payment Rate of tax
Dividends, interest and rent 10%
Royalties 10%
Hire of equipment, motor vehicles, plants and machinery 10%
Commission, consultancy, technical and management fees, legal fees,
audit fees, and other professional fees
10%
Construction 5%
All types of contracts and agency arrangements, other than sales in
the ordinary course of business
5%
Where the recipient of the dividends, interest, or rents is a national or com
pany
from a country with which Nigeria has a double taxation agreement, the rate at
which tax would be withheld from the dividends, interest or rents will be reduce
d
from 10% to 7.5%. In the case of non-resident companies the tax withheld from
dividends, interest, rent or royalty payments due to them will, when remitted to
the FIRS be regarded as the fnal tax due from such non-resident companies
38
STRACHAN PARTNERS
3. Customs and Excise Duty
The Customs and Excise Management Act (CEMA) Chapter C44 LFN 2004
imposes customs duty on specifed imported goods and empowers the Customs
and Excise Management Authority to restrict the movement of goods into and
out of Nigeria. Any company operating in Nigeria is liable under CEMA to
pay customs duty on all goods which it imports into Nigeria for its operations,
for hiring or for sale. The rates range from 5% to 30%, depending on the goods
imported.
4. Information Technology Development Levy
The National Information Technology Development Agency (NITDA) Act,
2007 imposes on the companies and enterprises listed in the Act, and which
have an annual turnover of =N=100,000,000 (one hundred million Naira) and
above a levy amounting to 1% of their profts before tax. The NITDA
Act
also empowers the Federal Inland Revenue Service (the FIRS) to assess and
collect the levy and where a company fails to pay the levy within 60 days of th
e
being served with notice of an assessment, a penalty of 2% will be added to
the levy. In addition, failure to pay the levy will attract a fne of not less
than
=N=1,000,000 (one million Naira) on conviction.
5. Contributions
Although not taxes in the proper sense, below are certain categories
of
mandatory contributions that would apply to a corporate employer/investor, if
it were to set up a local entity in Nigeria.
Pension Contributions: The Pension Reform Act, 2014(PRA)

introduced a pension scheme whereby both employer and employee are

required to make a minimum of 10% and 8% respectively of the
employees monthly emoluments to a Pension Fund Administrator as a
contribution towards the employees pension upon retirement.
STRACHAN PARTNERS
39
Emoluments include all items that are paid on a monthly basis (in addition to
basic, housing and transport).. The scheme is compulsory for all private sector
employers that employ ffteen or more employees. The Act stipulates that where
an employer chooses to bear full responsibility, the rate of employers
contribution a minimum of twenty percent.
Employees Compensation Deductions: The Employees Compensation Act 2010
(the ECA), which was signed into law on 17th December, 2010 imposes an
obligation on employers in both the private and public sector to deduct 1% from
the monthly salary of their employees, and remit the deduction to an Employees
Compensation Fund, established under the ECA for the compensation of any
death, injury, disease and disability of an employee arising out of
or in the
course of employment.. The ECA gives the Nigeria Social Insurance Trust Fund
Management Board (the NSITF Board) the power to implement the fund.
National Housing Fund Deductions: The National Housing Fund Act (Chapter
N45), LFN 2004 requires an employer to deduct an amount equal to 2.5% (two
and half percent) of the monthly salary of any employee whose annual salary
is up to three thousand Naira (=N=3,000 about US$20.02) and to remit
the
amount deducted to the National Housing Fund as the employees contribution
to the National Housing Fund. The Act makes it an offence for an employer to
fail to remit the appropriate amount as prescribed. It is also an offence not to
comply with the Act and an employer will be liable upon conviction to pay a fne
of ffty thousand Naira (=N=50,000 about US$333.62).
Industrial Training Fund Deductions: Every Nigerian company that employ
s
5 or more employees or having less than 5 employees but with a turn
over of
N50 million and above per annum, is required by the Industrial Training Fund
(Amendment) Act, 2011, to contribute 1% of its total annual payroll
to the
Industrial Training Fund not later than 1st April of every year. Section 16 of
the Act defnes Payroll to mean the sum total of all basic pay allowances and
other entitlements payable within and outside Nigeria to any employee
in an
establishment, public or private.
40
STRACHAN PARTNERS
NIGERIAN EMPLOYMENT LAW
1. Outline of Nigerian employment law
Under Nigerian law, the relationship between an employer and an employee is
regulated by the Common Law of contract as applied by the Nigerian courts,
and a raft of other statutes which in one way or the other, affect the right of
employees. These statutes and other laws operate against the backdrop of the
Constitution of the Federal Republic of Nigeria 1999 (the Constitution)
and will be void to the extent that any of their provisions confict
s with the
provisions of the Constitution.
The principal statutes and laws that are relevant to the employment of persons
in Nigeria are:

a. Labour Act, (Chapter L1), LFN 2004.

SECTION I
STRACHAN PARTNERS
41
b. The Trade Unions Act, (Chapter T14), LFN 2004 as amended by the
Trade Union Amendment Act, No.8 of 2005.
c. The Trade Disputes Act, (Chapter T8) LFN 2004.
d. The Trade Disputes (Essential Services) Act, (Chapter T9), LFN
2004.
e. The 3rd Amendment to the Constitution incorporates the National
Industrial Court into the Constitution, with powers to hear civil
and criminal causes and matters relating to labour, including trade
unions and industrial relations, matters between employers, their
organisations, employees and their trade unions/representatives
respectively.
f. The Employees Compensation Act 2010.
g. The National Minimum Wage Act, (Chapter N61) LFN 2004
prescribes the minimum wage payable to employees regardless of
whether such persons are employed in the public or private sector
of the economy.
h. The Pension Reform Act, (Chapter P4), LFN 2004 establishes a
contributory pension scheme (the Scheme) for the payment of
retirement benefts to employees in both the public service and
private sectors of the Nigerian economy.
i. The National Health Insurance Scheme Act, (Chapter N42), LFN
2004: The underlying objective of the NHIS Act is to ensure that
every Nigerian has access to good health care and to protect Nigerian
families from the rising cost of health care service.
42
STRACHAN PARTNERS
j. National Housing Fund Act (Chapter N45), LFN 2004 requires an
employer to deduct an amount equal to 2.5% (two and half percent)
of the monthly salary of any employee whose annual salary is up to
three thousand Naira (=N=3,000 about US$20.02) and to remit the
amount deducted to the National Housing Fund as the employees
contribution to the National Housing Fund.
k. The Employees Housing Schemes (Special Provisions) Act, (Chapter
E8), LFN 2004 makes it obligatory for an employer so designated by
an order of the Minister of Employment, Labour and Productivity to
establish, execute and maintain a housing scheme for its employees
if it employees not less than 500 (fve hundred) employees.
l. The Industrial Training Fund (Amendment) Act, 2011regulates the
training and development of employees.
2.
Collective agreements with trade unions
Collective agreements are not, in themselves, legally binding under
Nigerian law. Nigerian courts will, however, enforce such agreements
if, for instance, a collective agreement or a part of it is incorporated
expressly or by implication into an executed contract of employment
between an employer and its employees, or into a company hand
book that is deemed to form part of the contract of employment.
The courts may also enforce the provisions of a collective agreement
if it can be established that, in relation to its employees in othe
r
matters, an employer has had dealings in which it accepted or treated
the collective agreement (or certain provisions contained therein) as
being legally binding.
STRACHAN PARTNERS
43
DISPUTE RESOLUTION
1. The Court System
The Nigerian courts have evolved and the rules of court are constantly being
modernised to achieve the expeditious trial of cases and to encourage
the

amicable pre-trial resolution of disputes.

In 2004, Lagos State adopted new rules of court and thus set the p
ace for
other courts in Nigeria. Several states such as Rivers, Akwa Ibom, Cross River
and Abuja among others have followed suit. The 2004 rules have now b
een
repealed by new rules of court adopted by Lagos State in 2012, with
effect
from 1st January, 2012.
The Federal High Court also adopted new rules of courts in 2009. The new
rules provide, among other things, for a detailed case management syst
em
where parties are required to provide advance notice of the evidence that they
will rely on during the trial, at the time they fle their suits. Most steps in t
he
course of a proceeding are required to be taken within specifed time-frames,
with daily penalties that will be paid if a party fails to take the step.
SECTION J
44
STRACHAN PARTNERS
The rules of Court also provide for amicable settlement of a dispute before th
e
matter proceeds to trial, through pre-trial conferences and for the settlement
of issues prior to trial.
2. Alternative Dispute Resolution: Arbitration
The Arbitration and Conciliation Act Chapter A18, LFN 2004 makes
provision for the recognition and enforcement of arbitral awards by t
he
courts.
The Act incorporates the 1976 UNCITRAL rules on International
Commercial Arbitration so that once obtained, an international arbitral award
may be registered and enforced in Nigeria by virtue of the Foreign Judgment
(Reciprocal Enforcement) Act an act which makes applicable the New York
Convention on the Recognition and Enforcement of Arbitral Awards 1958.
3. Enforcement of foreign judgements
The Nigerian courts recognize parties choice of foreign law and jurisdiction.
The attitude of the Nigerian courts in matters of choice of law and jurisdict
ion
has, generally, been to hold parties to their bargains.
However, the
courts
have demonstrated that in certain limited circumstances they will be prepared
to assume jurisdiction notwithstanding the express choice of some othe
r
jurisdiction by the parties.
STRACHAN PARTNERS
45
Conclusion
and Recommendation
Nigeria is ripe for investment, long term investment. It has a huge domestic mar
ket,
an aggressive private sector, and a reasonably well educated labour force.
As lawyers, we would recommend the following:
a. a. Knowledge is key - necessary to seek legal advice from
r
on the type of business you need to register because
types of
businesses recognized under Nigerian law, which we have
different legal effect.
b. carry out thorough due diligence.
c. follow the rules - abide by laws and regulations and avoid
d. be ethical.

a reputable lawye
the different
mentioned have
shortcuts.

e. be apolitical; and
f. use trusted advisers with an established track record.
SECTION K
46
STRACHAN PARTNERS
STRACHAN PARTNERS
1. Firm overview
Strachan Partners is a leading Nigerian commercial
law frm offering an array of legal services in
support of its local and international based
clientele, which ranges from local and national
corporations to foreign international undertakings
and foreign governmental organizations. The frm
maintains offces in Lagos - Nigerias commercial
hub and Abuja - the capital city of Nigeria.
From when it was established in 1991, by the
founding partner Charles Adeyemi CandideJohnson, SAN, Strachan Partners has consistently insisted on proffering
commercially-focused legal advice to facilitate legal solutions second t
o
none and as such is known for taking an innovative approach when advising
institutions on their most challenging commercial transactions and dispu
te
resolution matters. Such dedication has commanded a high success rate with
regards to matters prosecuted by the frm, and commendable global recognition
& awards.
In its over 20 years of experience, Strachan Partners has progressively become
a legal resource as it has garnered a wealth of in-depth knowledge and industry
know-how applicable to numerous facets of the Nigerian economy, in particular
the budding sectors of the Nigerian economy to which the fnancial industry
is one of. We challenge the industry norms and deliver a customized
quality
service to our clients laced with a cost-transparency policy.
STRACHAN PARTNERS
47
2. Key areas of expertise
As a full-service commercial law frm, Strachan Partners specializes in
the
following areas of practice:
banking and fnance;
business establishment and corporate immigration;
corporate restructuring including mergers, take-overs and acquisitions;
corporate fnance;
foreign investment;
oil and gas;
telecommunications;
intellectual property;
insolvency and debt recovery;
power and energy;
corporate advisory including due diligence reviews;
public and private partnership;
property, conveyancing and estates;
tax;
labour and employment;
regulatory compliance;
maritime and admiralty; and
litigation and alternative dispute resolution.
In addition to legal advisory work, the frm has a dedicated company secretarial
arm, Strachan Nominees Limited, which provides company secretarial services
to several Nigerian companies, ensuring that all its retainer clients
are aware

of and comply with their respective reporting and record-keeping obligations

under Nigerian law.
48
STRACHAN PARTNERS
3. Ranking and international recognition
Strachan is:
ranked as a leading Nigerian frm in The Legal 500 Series: Europe,
Middle East & Africa 2013.
ranked as a leading Nigerian law frm in both Litigation and Arbitration
in the Chambers Global: The Worlds Leading Lawyers for Business
2012.
listed as a recommended law frm in the 2011 IFLR1000 series.
listed as a second tier law frm in Dispute Resolution in the Legal 500
Series: Europe, Middle East & Africa 2011.
ranked as a leading Nigerian law frm in the Chambers Global: The
Worlds Leading Lawyers for Business 2009.
ranked as a Band 1 leading Nigerian law frm in Dispute Resolution in
the Chambers Global: The Worlds Leading Lawyers for Business 2006.
ranked as one of the top 4 leading frms in the area of General
Commercial Litigation in Nigeria in Chambers & Partners Chambers
Global The Worlds Leading Lawyers for Business 2004 2005
ranked by Chambers & Partners as a Band 2 leading Nigerian law frm
in Corporate/M&A Practice in the Chambers Global The Worlds
Leading Lawyers 2003.
STRACHAN PARTNERS
49
The frm is a legal awards winner of Corporate International 2013 &
2014,
respectively, and has received recognition in the Lawyers World Law Aw
ards,
Nigeria awards as the best law frm in Nigeria in Arbitration, Litigation and Dis
pute
Resolution Law for the year 2011.
In addition, the frms senior partner, Adeyemi Candide-Johnson, SAN is recognised
in the 2012 IFLR1000 series and described as excellent and talented in t
he
Legal 500:
Europe, Middle East & Africa 2012 and 2013 editions, res
pectively.
Mr Candide-Johnson, SAN is also ranked as a top tier individual and is described
by Chambers Global 2013 as a stickler for detail. He is listed as a leading expert
in the Emerging Markets Practitioner (Commercial Arbitration) category o
f The
Expert Guides.
In addition, the frms senior partner, Mr. Candide-Johnson is recognised
in the
2012 IFLR1000 series and described as excellent and talented in the Legal 500
Series: Europe, Middle East & Africa 2012.
50
STRACHAN PARTNERS
Lagos Offce:
5
th
Floor, Akuro House,
24, Campbell Street,
Lagos Island,
Lagos, Nigeria
Tel: (+234 1) 2700721, 2700722, 8720107
Email: info@strachanpartners.com
Web: www.strachanpartners.com
Abuja Offce:
Suite 313,

2
nd
Floor, Oakland Centre,
48 Aguiyi Ironsi Street,
Maitama,
Federal Capital Territory, Abuja,
Nigeria.
Tel: (+234 9) 46029163
Email: info@strachanpartners.com
Web: www.strachanpartners.com