Reasons you should invest in Nigeria

By Alice Muigai

Topics covered in this article:

• Economic overview of Nigeria
• Business in Nigeria
• How to set up a business in Nigeria
• Investment opportunities in Nigeria
• Tax in Nigeria
• Why you should invest in Nigeria

Economic Overview of Nigeria

Nigeria is the largest economy in Sub-Saharan Africa (SSA) with a GDP of over US$460 billion and a population of over 190 million people.

It is forecast to become one of the world’s top 20 largest economies by 2030, which is supported by the rapid expansion of its infrastructure.

Nigeria has significant natural resource wealth, making it the main oil exporter in the sub-Saharan region, although recently agriculture and telecommunication have taken over as the key driver of the economy.

The country provides an attractive investment destination backed by robust economic fundamentals for businesses to thrive.

Also, the Nigerian economy has achieved steady improvement and relative stability across many key macroeconomic indicators during recent years.

Rankings

The World Bank’s Doing business, 2020, considered Nigeria as one of the ten most improved economies.

Nigeria’s 15-place climb up the World Bank’s Doing Business Index in 2020 is primarily due to wide-ranging reforms and initiatives introduced by the Government.

Nigeria’s growth ranks in the top five because it‘s the world’s 10th largest producer of oil. Its per capita income of $2028.2 is 84% higher than the African average of US$ 1,720.

Nigeria’s financial market is one of the largest in Africa with a capital market capitalizing rate of over 45-40 billion. It has an economic growth rate of 1.9%.

Inflation rate was 8.5% as at first quarter of 2015 which was less than the Central Bank of Nigeria (CBN) annual target estimate of 8.7%, and well within the federal government‘s target of maintaining a single-digit figure.

The (CBN) sets the benchmark interest rate in the form of a Monetary Policy Rate (MPR) which was 13% as of the end of June 2015.

Business In Nigeria

Nigeria is a hub of successful global brands and businesses, some of whom have been operated locally for decades.

In the last decade, Nigeria has recorded several successful investments from multinational entities including UK-based investors.

The Nigerian government has also created an enabling environment for PPP projects to thrive in the country which has attracted successful private investments from UK-based entities in Nigeria.

Furthermore, the Federal Government of Nigeria in its effort to grow the business has implemented reforms to promote business in Nigeria.

Key reforms implemented by the Nigerian government to promote the ease of doing business include the introduction of an online platform for paying stamp duties.

The reforms have Accelerated the registration of new businesses and eradication the need for on-site inspections when registering business premises.

Also, in the launch of e-payment systems to reduce the time taken for international trade.

Finally, the easing of access to electricity services by allowing certified engineers to conduct inspections for new connections.

How to set up a business in Nigeria

The Corporate Affairs Commission (CAC) has made the business registration process straightforward, with a completion time of fewer than 24 hours.

Businesses can be registered online via the CAC Company Registration Portal. Through this site, investors can conduct name searches, complete the required forms, submit all relevant incorporation documents, and pay associated fees.

Furthermore, Investors may also visit the CAC office for further help.

In Nigeria, private companies limited by shares are the most common form of business organization adopted by foreign investors.

Apart from private companies, a business can be carried out in Nigeria through any of the following entities.

Sole-proprietorship

The sole proprietorship form of business is used by individuals intending to do business on their account.

The prerequisite requirement is the registration of a business name, where a name other than the sole proprietor’s actual name is used as the trading name.

Partnership

In a partnership, the partners are joint owners of the partnership property and are personally liable for the firm’s obligations.

In the case of a limited partnership, there must be at least one general partner who will have unlimited liability concerning all the debts and obligations of the firm.

Incorporated companies

A ‘company’ is an entity incorporated with limited or unlimited liability and registered under CAMA.

CAMA provides that no foreign company shall carry out business in Nigeria unless it is incorporated in Nigeria as a separate entity.

Therefore, foreign companies have a choice to set up wholly-owned or partially-owned subsidiaries or affiliates in Nigeria.

Investment Opportunities in Nigeria

Agriculture Sector

In Nigeria, the agriculture sector plays a vital role in the economy contributing the highest to Nigeria GDP.

The country has placed over 84 million hectares of Agriculture land in areas to support the production of a variety of Agriculture commodities.

Also, the presence of Nigeria’s 249m3 billion surface water constitutes untapped irrigation potential.

Investment Opportunities

Investment opportunities in the Agriculture sector exist in the supply of agricultural inputs and the production of Nigeria’s agricultural produce.

Also in the setting up of a fertilizer manufacturing facility with extensive distribution networks.

More opportunities are available in public-private partnership storage, factories, and development of private silos, commodity trading for commodities such as wheat, maize, and sorghum.

Apart from Agriculture, Nigeria also offers other investment opportunities in markets across the infrastructure space, amidst huge supply gaps which include the transport sector etc.

Transport sector

The key players in the Nigerian transport sector include; The Government, contractors, investors, and regulators. The entry and exit power is moderate, while the buying power and selling power are high and low respectively.

Nigeria currently has six ports, with Apapa recording the largest annual cargo traffic. The costs of transportation into and out of Nigeria is primarily influenced by the value of the goods, the mode of transport and the delivery time

Investment Opportunities

Investors dealing with infrastructure have the opportunity to carry out the construction of major roads such as the second Niger bridge, among others

In the Railway sector, investors have the opportunity to carry out the concession of Lagos – Kano railway line, and, the completion and concession of Port Harcourt – Maiduguri railway line, etc

In the Aviation industry, the port Harcourt, and Kano offers opportunities for both local and foreign investors.

Also, Investors have the opportunity to develop sea infrastructure. Among them include Development of Ibom deep sea port, to ease congestion of Apapa port and increase access of goods to Eastern Nigeria.

Information, Communication and Technology

The key players in the ICT sector are the Governments, regulators, and Investors.

Telecommunications in Nigeria continues to evolve with rapid technological advancements and increasing broadband penetration.

Investment Opportunities

Opportunities exist in the Investments of new generation Telecommunication infrastructure and in the licensing of more broadband services on the 5.4 GHz Spectrum Band

There is an ongoing process for the allocation of frequencies in the 70/80 GHz band (E-Band) which offers investment opportunities to Investors in that field.

Also in the Approval for the deployment of 4G LTE by NATCOM Development and Investment Limited.

Power Sector

The key players in Nigeria’s Power sector comprise Investors, generation companies, and Regulators.

The competitive landscape as far as buyer power is concerned is low, while the supply power is high. Also, the entry and exit of the sector are moderate.

Opportunity and sample priority projects 

The investment opportunities and priority projects in Nigeria Include the construction of 215MW LPFO/Gas Power station Kaduna.

There are three unities in the Afam Fthet Power Program. Accelerated Gas and Solar Power Generation.

Also, there is the Availability of concession-ready hydroelectric power plants including Zungeru (7,00MW), Kano (100MW), and Kashimbilla (40MW).

Water sector

The key players in the water sector include investors, government, and regulators controlling dams, springs, and rivers.

In these sectors the buyer and seller power are moderate with the barriers to entry and exit being low.

Investment Opportunity

There exist opportunities in the Partnership for Expanded Water, Sanitation and Hygiene (PEWSH)

Other Opportunities in the water sector are the rehhabilitation of dams and irrigation projects nationwide.

Tax

Tax administration is vested in the three arms of the government, with the Federal Government solely allocating CIT and VAT. The taxes charged in Nigeria include

Value Added Tax (VAT)

VAT is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.

Only registered businesses for VAT purposes can charge and collect VAT.

5% of VAT is a consumption tax paid when goods are purchased and services rendered.

VAT inputs such as VAT on goods purchased directly for resale are recoverable. The VAT rate in Nigeria, which took effect in 2020 is 7.5%.

Goods and services exempt from VAT include basic food items, baby products, Books and educational materials, Medical services, and All exported services.

Capital Gains Tax (CGT)

10% CGT is Payable on capital gains accruing to companies or individuals making chargeable disposal of an asset.

Company Income Tax (CIT)

Every company regardless of whether it is a local or foreign company is liable to pay tax on income accruing in, disabled from, brought in, to, or received in Nigeria.

A a non-resident company is also liable to pay tax on income accruing in or derived from Nigeria.

30% of CIT is Levied on profits of companies accruing in, derived from, or received in Nigeria.

Personal Income Tax (PIT)

The taxation of individuals is guided by the provisions of the Personal Income Tax Act (PITA) 2011 (as amended).

The Act requires an employer to deduct and remit its employees‘ Income Tax under the Pay-As-You-Earn (PAYE) scheme and grants certain allowances and reliefs to individuals to reduce their tax payable.

All individuals are liable to tax on income accrued in, brought into, derived from, and received in Nigeria.

Personal income taxes are imposed on the income of individuals, corporation sole, or body of individuals.

Tax Relief

Several Tax reliefs and allowable deductions are available to tax residents. They include Pension relief, National Housing Fund, National Health Insurance Scheme, and Consolidation relief allowance of 20% of income

Multilateral and Bilateral Treaties

Nigeria has entered into tax treaties with several countries to avoid double taxation on income and capital gains.

The government has also implemented various incentives and initiatives to improve the attractiveness of the Nigerian venture landscape.

Why You Should Invest In Nigeria

The country provides an attractive investment destination, backed by strong economic fundamentals for businesses to thrive.

The Nigerian economy became the largest African economy following the 2013 GDP rebasing exercise.

It has remained Africa’s largest economy over the last seven-years with a geographical land mass, bigger than France and UK combined, endowed with diverse natural resources

In addition, it is considered one of the ten most improved economies in the World Bank Doing Business Report 2020 which makes it the largest market across Africa with a projected population of 402m and the world’s 3rd largest population by 2050.

The country is home to many international brands who have recorded success operating their business such as PZ, GSK, Unilever, Diageo and MTN

Nigeria’s Financial market is one of the largest in Africa. The country witnessed 20 years of uninterrupted democracy and general political stability.

Also, the Federal government has provided numerous initiatives and policies to incentives investment across various sectors.

The country is Projected to project a CAGR of 2.50% over the next five years. Nigeria has a very young, energetic, tech-savvy, and enterprise, neural population of youth below the age of 25years.

Nigeria is the most populous nation on the African continent. It dominates the region economically and culturally, spreading the benefits, of its rapid development throughout Africa. Lagos, its capital, is a hub for technology and the telecommunications industry.

Nigeria’s developed legal system, investor-friendly business, reformation policies, and developed infrastructure make it an enticing place for investors.

The country is Africa’s foremost business destination. It operates a market economy dominated by crude oil exports with the revenue earnings from the sector accounting for over 90% of forex earnings and 65% of budgetary revenues.

In Conclusion

Nigeria’s abundant resources, free market, and unrestricted movement of investment capital have made investors able to expand and diversify their operations with confidence.

These facts are the reason Nigeria is a conducive place for you to Invest, and conduct your business ventures.