Nigeria is West Africa’s most populous country, and one of the most developed. So it has attracted foreign investors over time. Nigeria government welcomes 100 % foreign ownership in any new venture except that of banking, oil, insurance, and mining. In 1992, the Nigerian Free Zone Act was passed to establish the Nigerian Export Processing Zone Authority (NEPZA), renamed as Free trade zones (FTZ) in 2001, they are expanses of land with improvised ports and/or transportation, warehousing facilities, electricity and water supplies, advanced telecommunications services and other amenities to accommodate business operations. These zones are developed to include industrial production, offshore banking, insurance and reinsurance, international stock, commodities, and mercantile exchanges, agro-allied industry, mineral processing, and international tourist facilities.
Starting a branch of a poultry farm in Nigeria is not as simple, mainly because the Nigerian government does not allow the starting of a new branch by a foreign company unless the company is incorporated in Nigeria. Branch operations are not legal in the country; the law does not allow foreign entities to operate in Nigeria without incorporating locally. Even the local incorporation’s branch is deemed to be a corporation and it comes under taxation, regardless of the kind of activity undertaken by the branch.
Like any country, Nigeria gets a major part of its income through taxation. The sources of revenue include companies’ income tax (30 per cent of assessable profit), capital gains tax (10 per cent of capital gains), various types of licenses, and personal income tax. In 2000 the tax rate varied from 5 to 25 per cent of cumulative or total taxable income. Non-Nigerian companies are not subjected to further income tax on the dividend after the withholding tax of 10 per cent. The Companies Act 1968 asks for the deemed incorporation under Nigerian law of the “Nigerian operation” of a foreign company that was incorporated outside Nigeria and that had an established place of business in Nigeria.
“The Companies Income Tax Act 1979 governs the taxation of companies incorporated in Nigeria; foreign companies operating in Nigeria, whether incorporated in Nigeria or not; and “branches” of foreign companies operating in Nigeria”.
As a foreign company intending to start a branch in Nigeria, it should take all necessary steps to obtain incorporation as a separate entity in Nigeria as conducting business through a branch operation is not permitted. So initially the company has to be incorporated. A new name has to be decided, as it is starting a branch, it is advisable to choose the same name as the parent company, here Delix Corporation Nigeria Limited. While drafting the Memorandum and Articles of Association the objects mentioned should be close to that of the parent company. It should contain the list and particulars with the consents of the persons who are to be the first directors of the company. Then a statement should be made, which contains the authorized share capital, signed by at least one director, on which stamp duty has been paid.
A share capital structure has to be formed as a new company, the non-Nigerians can own 100% (One hundred per cent) of a company but it is politically advisable to have some Nigerian participation. At least 25 % of the share allotted should be used for incorporation, and stamp duty should be paid in respect of the share capital and also, the amount paid as filing fees depends on the share capital. The minimum authorized share capital must be not less than µ10,000 for a private company but in the case of a foreigner investment, it would be µ2 million.
Certain other fee has to be paid to Corporate Affairs Commission (CAC) as specified in the Companies and Allied Matters (Fees) Regulation 2003. The costs incurred during the incorporation of the company includes filling fees, Fess for Availability and Reservation of Name, procurement of Incorporation Forms, and costs of engrossment (printing) of the Memorandum and Articles of Association. The registration fee of Private Companies whose nominal share capital does not exceed N1,000,000.00 (One million naira), the fee would be N10,000.00 (Ten thousand naira).
All the payments are made in the national currency of Nigeria which is the Naira and the symbol is N (the capital letter N double struck through) It is also denoted in international notation as NGN. The exchange rate of Euro and Nigerian Naira is € 1 = N 173.72.
For financing of the company, local help is also available from the commercial, merchant and industrial banks and certain other sources. Likewise, unskilled labour is readily available. Labour costs are a significant component of total production costs but compare favourably with those in other countries.
Inflation has caused the per capita GDP to remain lower, even lower than when Nigeria first got independence. In 2005 Nigeria’s inflation rate was an estimated 15.6 per cent. Nigeria has been trying to reduce the inflation rates to single digits. The table below shows the inflation rates of Nigeria.
Tabl 1. The inflation rates of Nigeria
Nigeria, once the biggest poultry producer in Africa, corporate poultry output has been slashed from 40 million birds annually to about 18 million. Import constraints limit the availability of many agricultural and food processing inputs for poultry and other sectors. Nigeria ranks nineteenth worldwide and first in Africa in farm output. To increase the outputs setting up new farms is advisable and the government too will be encouraging business in this sector. The government has set up the Investment Information and Promotion Center of the Ministry of Industries for further clarification regarding setting up business in Nigeria.
References
- Nigeria Inflation rate (consumer prices). Web.
- Guide to business in Nigeria: International centre for Nigerian Law.8 2007.Waziri, Idris. Companies and allied matters Act, Laws of the federal Republic of Nigeria, 1999.