Lawyer Monthly Magazine - February 2019 Edition

FEB 2019 70 Doing Business In... www. lawyer-monthly .com COMMERCIAL LAW Why Nigeria? Despite the negative publicity from years of bad leadership, Nigeria remains an important destination for business. This is evident from the high number of expatriates to be seen on Nigeria-bound flights and the high profile figures and brands that have been coming into the country in recent times: from Mark Zuckerberg of Facebook, Sundar Pichai of Google, to Kentucky Fried Chicken. With a population approaching two hundred million people with an 83% youth dependency, the country remains a market that cannot be ignored, especially with oil reserves estimated at 37.2 billion barrels in 2011 and production at 2.28 million barrels a day (ranking 13th in the world), the country remains the largest oil producer in Africa. With a projected annual population growth of 2.43% (as at 2017), the Nigerian Economy is set to be one of the largest economies in the world by the year 2050. Doing Business in Nigeria: The Essentials You Need to Know ---------- Why Now? The economy’s over- dependence on oil has been long-standing and so it was no surprise that when the price of crude oil fell back in 2015, the country fell into recession. The present administration was forced to intensify its effort to diversify the economy by introducing policies and programmes to encourage the conduct of business in the country. Historically a major bottleneck for the conduct of business in Nigeria has been the bureaucracies of regulatory authorities (Government ministries, Departments and Agencies, as well as delays occasioned by the obsolete statutory provisions). The Vice- President, Professor Yemi NIGERIA Osinbajo, a former commercial lawyer, took a personal lead to correct this through the Presidential Enabling Business Environment Council, which he created to simplify and fast- track the process of starting and incorporating a company, registering property, obtaining work permits as well as import licences. Thus, in some cases an approval that has been applied for is given by default in cases where the relevant Ministry, department or agency fails to respond to an application within the published time limit. The Nigerian Investment Promotion Commission also coordinates a one-stop investment centre which serves as a meeting point to several relevant government agencies (presently 27) to simplify the business entry processes for the investors. Nigeria also has a liberal immigration policy which helps to assist foreign investors travel into Nigeria, obtain Business permits and expatriate quotas. The country also has several incentives in the form of tax holidays offered to investments made in qualifying sectors. General elections this month will determine who will lead this resource-rich country for the next four years. The incumbent, retired Gen. Muhammadu Buhari and his party, the All Progressives Congress (APC) are vying for a second term of four years. They face a stiff challenge from the former ruling-party, the People’s Democratic Party (PDP), who selected the former customs officer and Vice President (1999-2007), Abubakar Atiku as their Presidential candidate. Both parties will be seeking to outbid each other on strategies to boost the economy which will make the investment climate more attractive. How can you do business in Nigeria? Foreign persons can now do business inNigeria throughwholly foreign owned companies (WFOC) subject to the requirement for all enterprises with foreign participation to apply to the Nigerian Investment Promotion Commission for business registration before commencing business. Another favoured model for businesses coming into Nigeria is by way of franchising and licensing agreements. International brands that have entered in this way in the past include Coca Cola and Pepsi. More recent entrants are Krispy Kreme, Kentucky Fried Chicken, Domino’s Pizza and it is reported that Burger King is likely to be a new entrant. What are the common withholding tax traps in Nigeria? As in most countries, withholding tax in Nigeria is a payment on account of the ultimate tax liability of a taxpayer and it is available to be set-off against the taxpayer’s final tax assessment. In Nigeria, whether a payment will be subject to withholding tax depends on the nature of the payment, while the rate of tax to be withheld depends on the character of the recipient (i.e. whether corporate or individual). Withholding tax is typically levied on income streams (interest, dividends,