GOVERNMENT REGULATION OF BUSINESSES IN NIGERIA
GOVERNMENT REGULATION OF BUSINESSES IN NIGERIA
The Nigerian business environment is very complex and prone to fraudulent activities and scams. There are a lot of good businesses that are in operation to help better the economic sphere of the country and also, there are a host of others that are trying to bring down the economic structure by introducing to the market substantial goods, escalating prices, hurdling goods, exploiting the innocent citizens in order to generate a quick profit.
On this note, the government took up itself the responsibility of regulating the business environment in order to protect its citizens and ensure the safety of the economy.
In regulating the economy, the government has enacted and implemented several laws to guide the conduct and operation of businesses in the country. The government does this through its various agencies, department, ministries, and parastatals.
If you are interested in doing business in Nigeria, you need to get familiar with the various government regulatory bodies and the respective laws that regulate business activities in Nigeria.
The Corporate Affairs Commission (CAC)
The CAC was established by the Company and Allied Matters Acts to carry on the incorporation of businesses in the country. The CAC is responsible for implementing the laws enacted by the Company and Allied Matter Acts (CAMA). It is the first agency that every business entity must interact with prior to its formation for proper documentation and registration. For any business to be registered in Nigeria it must meet certain criteria which require the provision of some vital information such as the nature of the business, the proposed name of the business, the names, address, contacts, occupation of the owner(s), or members of the board, detail information about the directors, share capital, registered address of the business, etc. they also provide information on meetings, voting rights, duties and rights of directors, etc. This information will be documented in the article of association and presented alongside the memorandum of association to the registrar of the Corporate Affairs Commission for accreditation.
In light of the latest CAMA publication released in 2020, it is now legal for one person to form a company in Nigeria with the freedom of choice of either appointing a secretary, members of the audit committee, or not. The following companies can operate in the country;
- Private limited liability company,
- Public limited liability company,
- Limited liability partnership,
- Unlimited partnership
- Unlimited company,
- Company limited by shares or guarantee,
- Incorporated trustees, and
- Business name.
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GOVERNMENT REGULATION OF BUSINESSES IN NIGERIA
The Central Bank of Nigeria (CBN)
The CBN was established by the Central Bank of Nigeria Act and charged with the responsibility of regulating financial institutions and their activities in Nigeria. CBN collaborates with the bank and other financial institutions acts to makes regulations regarding activities of financial institutions including; minimum share capital, issuing the legal tender, etc.
The Bank and Other Financial Institution Act was enacted in 1991 by the Nigerian government to regulate the banking industry. BOFIA works hand in hand with the central bank of Nigeria to ensure that adequate provisions are made for the smooth operation of the banks and financial institutions. Part one of the acts made provisions for licensing and operation of banks such as license & grant application, power to revoke or vary conditions of license, restructuring, reorganization, merger, and disposal of banks, operation of foreign banks in Nigeria, revocation of banking license, etc.
Part two of the acts dwells on the duties of banks, making provisions for maintenance of reserve fund, restriction of dividend, acquisition of shares in small and medium scale industries, display of information, restriction on operations of merchant banks, etc.
The remaining parts of the BOFIA made provisions for the book and records of account, failing banks and rescue tools, general and supplement, the establishment of specialized banks and other financial institutions, etc. Every investor interested in the banking business must get familiar with the provisions of this regulation.
The Security and Exchange Commission (SEC)
The security and exchange commission is the regulatory body for the Nigerian capital market. The institution which was established in 1979 is controlled and supervised by the federal ministry of finance to initiate laws and ensure that corporate bodies adhere to them. their principal functions are to register and oversee the activities of security dealers and brokers, to register securities and their issuers to ensure full disclosure of the necessary financial information, to issue rules that regulate securities transactions, to register and control the activities of mutual funds and investment companies, to register investment advisers, to promote the interest of purchasers of publicly issued debt securities, to participate in corporate reorganization proceedings, etc.
An important role of the security and exchange commission is to protect the interest of investors. This is performed by improving the quality of information available in the Nigerian Stock Exchange. The agency requires;
- Corporations whose securities are traded in the capital market provide certain current information on their financial and managerial condition to be made public.
- Officers, principal stockholders, and directors of companies whose securities are registered with the commission are required to report all their transactions in equity securities of their corporation. Etc
The National Investment Promotion Commission (Nipc)
NIPC was birthed in 2004 by the Nigerian Investment Promotion Act to promote, coordinate and encourage investment in Nigeria. It is a specialized institution designed to proactively promote investment activities including foreign direct investment in the Nigerian economy. Any person interested in investing in the Nigerian market must get acquainted with the provisions of the commission. The functions of the agency include;
- To coordinate and monitor investment activities in the Nigerian economy;
- Initiate and implement measures that will enhance the investment atmosphere in Nigeria for both foreign and indigenous investors;
- Collect, analyze, collate and disseminate information about sources and opportunities of investment capital;
- Register and store information of companies to which the act applies;
- Maintain liaison between investors and government, ministries, departments, and other authorities involved with investment;
- Provide support services to assist incoming existing investors, etc.
Companies that have foreign investors must register with the commission before they start operations in the country. The requirement for this registration is the documents obtained upon the incorporation of the business with the corporate affairs commission. There are incentives attached to the foreign investor upon registration with the NIPC. For example, the investor will be granted the permit to remit all proceeds in the event of sale or liquidation.
Federal Inland Revenue Service (Firs)
FIRS is a government institution charged with the responsibility of assessing, collecting, and accounting for tax and other revenue generated by the Nigerian government. Businesses operating in Nigeria except those exempted from paying tax, such as incorporated trustees, are compelled to remit their taxes under the supervision of the FIRS to ensure that such taxes are properly remitted to the designated account. The 2020 finance act made it mandatory for eligible persons and businesses chargeable with tax to acquire a Tax Identification Number (TIN). The TIN is very important because when seeking to obtain a license or carrying out certain activities such as obtaining a money lenders license, certificate of residence, department of petroleum resources permit, opening a bank account, etc. your tax identification number or that of your business will be required before granting your request.
The responsibility of the corporation is as follows;
- The timely provision of accurate data and publication of the annual reports to the government and other users of the information,
- The provision of tax advisory services, rules, guidelines, and certificates to the general public and upon request,
- Issuance of Tax Identification Number without charging the taxpayer,
- Prompt processing of payment and refund of tax request within a stated timeframe.
- Provision of tax education, information, and assistance to taxpayers, etc.
The Corporate Income Tax; This is a tax charged on the revenue of corporate bodies operating in the country. The CIT has different charges to businesses depending on the total annual turnover rate of the business. The various rate charged include;
Large Company CIT Rate; the corporate income tax rate for large companies, that is, companies that record a gross turnover greater than 100 million nairas annually, is 30% of their total turnover for the accounting year preceding the year of assessment.
Small Companies Cit Rate; small companies with a gross turnover of 25 million nairas or less are charged a 0% tax rate. That means these companies don’t pay taxes in Nigeria.
Medium Companies; the CIT rate charged on companies that records a gross turnover above 25 million nairas and less than 100 million annually is 20% of the turnover.
Petroleum Profit Tax (PPT) is another type of tax charged on companies operating in the upstream petroleum sector. The petroleum profit tax rates vary as follows;
- 30% rate charged on the profit of corporations involved in the upstream gas sector.
- 85% rate charged for corporations that are not involved in production sharing contracts (PSC) with the Nigerian National Petroleum Corporation.
- 75% for non-production sharing contract corporations and including joint ventures
- 50% charge for corporations operating under PSC with the Nigerian National Petroleum Corporation.
However, for the companies whose gross turnovers are nontaxable or whose profit is below the minimum tax are charged a minimum tax rate of 0.25% of their gross profit. During the first four years of operation, small businesses and businesses that are into agriculture are exempted from the minimum tax.
Value Added Tax (VAT); These are taxes charged on value added to a product or service. The taxes are paid by customers who consume the goods or services, the companies involved are mandated by the government to collect and remit the VAT to the designated body. The rate charged for this tax is 7.5%.
The National Agency for Food and Drug Administration and Control (NAFDAC)
It is established in 1993 by decree no. 15 of the national agency for food and drug administration and control act. The agency is charged with the regulation and control of manufacturing, distribution, sales, advertisement, exportation, importation, and use of food, drugs, medical devices, cosmetics, and other related products.
The main functions of the body include:
- Registration and regulation of manufacturing, packaging, and distribution of food products to ensure the quality and safety of the products for human consumption.
- Develop, evaluate and continually improve the standard and quality of medicinal products, allied products, and cosmetics.
- Grant authority to registered entities to import or export chemicals into the country.
- Carry out an inspection into the facilities of entities dealing with the chemical and hazardous substance to maintain safety and standard.
- Conduct tests and ensure compliance to specified standards, etc.
Standard Organization of Nigeria (SON)
The standard organization of Nigeria was established in 1971 by the Standard Organization of Nigeria Act, this agency is mandated to regulate the standard and quality every product must meet. The institution, therefore, certifies products that have attained such standard for production and importation. The agency may seize, prohibits, and confiscate, the distribution of any products that fail to meet the required standard. Basically, it is mandated to prepare standards relating to products, certification of products, improvement in the standardization, and quality of products released into the Nigerian market to protect the consumer of such products.
Conclusion
This article has listed the major agencies through which government regulates businesses in Nigeria. However, the list is not exhausted; there are other agencies and laws that regulate business operations in Nigeria. Some of them include; Nigerian Copyright Commission, Nigerian Investment Promotion Commission, Nigerian Investment Promotion Commission, labor law, intellectual property protection law, etc. any person willing to go into should first of all study the regulation of businesses and understands how the activities of these agencies would affect his business.
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