Guide to overseas investing in Korea: investment rules, agencies and dispute resolution in Nigeria
NOTNigeria is among the most promising growth areas in Africa and attracts many investors in the sectors of hydrocarbons, shipping, energy, mining, agribusiness, manufacturing and infrastructure.
It is a federation of 36 states and a federal capital territory. Each of the states is a semi-autonomous political unit that shares power and foreign direct investment (FDI) with the federal government as enumerated in the constitution of the Federal Republic of Nigeria.
Nigeria intends to diversify its economy away from oil by creating a competitive manufacturing sector, which should facilitate integration into global value chains and boost productivity.
Some of the main advantages of the country are a partially privatized economy, an advantageous tax system, significant natural resources, low labor costs and the growth of free zones (in Calabar, the capital of Cross State River, and the port city of Lagos).
However, the business terrain can be difficult, and the formation of good preliminary legal and investment strategies with experienced legal advisers, coupled with in-depth due diligence investigations, are essential tools for success in any proposed endeavor.
Nigeria has signed bilateral investment agreements with Algeria, Bulgaria, China, Egypt, France, Finland, Germany, Italy, Jamaica, Montenegro, the Netherlands, South Korea, North Korea, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda and the United Kingdom.
Four of these treaties (with France, the Netherlands, South Korea and the United Kingdom) have been ratified by both parties. Nigeria has also expressed interest in negotiating a bilateral investment treaty with the United States.
Nigeria’s main trading block in Africa has been the Economic Community of West African States since its inception in 1975, made up of 15 countries mandated to promote economic integration in all areas of country activity. constituents.
An additional and relatively new trade bloc in Africa to which Nigeria belongs is the African Continental Free Trade Area. Its main objectives are cross-border cooperation and frictionless trade between African countries.
This new zone officially came into being on May 30, 2019, after a minimum threshold of 22 countries confirmed having ratified the founding treaty of 2018 by incorporating it verbatim into their national laws. The Nigeria-South Korea Bilateral Investment Treaty and other multilateral treaties create important entry points to Nigeria and other African markets.
The organized private sector remains the main driver of investment. However, FDI can come from public sector projects through federal government agencies.
In addition, successive economic reforms have prompted state governments to develop as gatekeepers of FDI in Nigeria. It is now common to hear that state governments are introducing specialized agencies to facilitate and coordinate investment flows.
Some states have also launched development-oriented business entities in which they hold majority stakes and pursue regional economic integration strategies. FDI flows are usually done through the incorporation of a company (or the acquisition of shares in a registered company) from the Commission des affaires des entreprises (CAC). Any foreign-invested enterprise must also be registered with the Nigerian Investment Promotion Commission (NIPC). A business license and an expatriate quota must be obtained from the Home Office, while the company’s financial statements must be prepared annually and submitted to
Foreign portfolio investments represent another route of foreign investment in Nigeria, through the purchase of securities and other financial assets by foreign investors interested in short-term investments, or investments that can be easily sold once. that the investor decides to withdraw.
Foreign portfolio investments can be made in a variety of stocks or other securities that are traded on the Nigerian Stock Exchange (NSE) and the Financial Markets Stock Exchange (FMDQ).
Relevant agencies and laws
Nigeria Investment Promotion Commission Act (NIPC). The NIPC is the agency designated by the federal government to coordinate and monitor all investment promotion activities, such as initiating and supporting measures that will improve the investment climate in the country for Nigerian and non-Nigerian investors.
The commission operates a one-stop-shop investment center, where it provides services for the granting of business entry permits, licenses, permits and incentives. Other key investment assistance agencies include the Nigerian Small and Medium Enterprise Development Agency, the Nigerian Export Processing Zone Authority and the Nigerian Export Promotion Council.
Foreign exchange law (supervision and various provisions). Chapter F34 (Decree No. 17 of 1995) Laws of the Federation of Nigeria. This law regulates foreign exchange transactions in the country by establishing an autonomous foreign exchange market, and provides for the control and supervision of transactions carried out on the market. With the approval of the Minister, the Central Bank of Nigeria, from time to time, issues guidelines for regulating the procedures of market transactions and other matters which may be deemed appropriate for the efficient functioning of the market.
Companies and Allied Affairs Act (CAMA) 2020. It is the main legislation regulating business in Nigeria. It was amended and re-enacted in 2020. The CAMA provides, among other things, for the nature of business organizations permitted in the country, the incorporation or registration of companies and other types of businesses, the filing of statutory declarations and the general corporate governance. One of the strengths of CAPA is the incorporation of a one-member company, a limited partnership and a limited liability company.
Immigration law. This law consolidates and amends the law on immigration. It applies to foreigners entering, staying or leaving the country. It controls the issuance of passports and residence and work permits. By law, the Comptroller General of Immigration is empowered to issue a Nigerian residence permit, under the supervision of the Federal Ministry of the Interior, to a foreigner.
The Nigerian residence or work permit is officially known as the Combined Residence Permit for Expatriates and Foreigners Card (CERPAC). CERPAC grants a foreigner permission to live and work for up to two years, subject to the renewal and validity of the expatriate quota. Under section 18 (2) of the Immigration Act 2015, a foreign national who has obtained a residence permit does not need an entry visa.
Law on the National Office for the Acquisition and Promotion of Technology (NOTAP). The NOTAP Act of 2004 was established to govern the entry of foreign technology into the Nigerian economy and to design acceptable mechanisms for adapting acquired technology. The mandate is executed by evaluating, recording and monitoring all technology transfer agreements entered into by Nigerian entrepreneurs, institutions and international technology partners. NOTAP assesses agreements based on their legal, economic and technological value to the economy.
Investments and Securities Act 2007 This law regulates the capital market to ensure investor protection in order to maintain a fair, efficient and transparent market, to reduce systemic risks and for related matters. The Securities and Exchange Commission is the supreme regulator of the Nigerian capital market.
The Corporate Income Tax Act (ITA). The Nigerian tax system provides for various tax obligations for individuals and companies doing business in the country. The most important of these taxes is that of the CITA, which imposes a corporate tax rate of 30% of the company’s profits, subject to a list of allowable deductions and donations.
There are also a number of tax incentives and investment guarantees that make the country an attractive destination for foreign investment. These incentives apply to investments that involve the use of raw materials, the use of gas, tourism, research and development, infrastructure, labor-intensive modes of production, value local addition in the mechanical industry, factory training, export-oriented industry and investments in economically disadvantaged areas.
The NIPC law. The NIPC law also provides for certain incentives and guarantees. Under Article 24 of the Law, a foreign investor registered with the Commission is guaranteed the unconditional transferability of funds, through an authorized broker, of its dividends, profits and payments in respect of the service of the loan, when a foreign loan has been obtained, and the payment of the proceeds in the event of the sale or liquidation of
Under article 25 of the law, investors are also guaranteed to protect their businesses against nationalization or expropriation by the government, and when the expropriation is carried out, it must be in the national interest or in for public purposes. The right of the investor to go to court to determine his rights and fair and adequate compensation is also guaranteed.
When there is a dispute between the investor and the government which cannot be resolved amicably through mutual discussions, reference may be made to arbitration. When the Nigerian government and the investor’s country have a bilateral investment protection agreement, arbitration will be done under the agreement.
In the absence of such a bilateral agreement, arbitration will be carried out within the framework of any multilateral agreement on the protection of investments to which the two countries are parties. The Convention of the International Center for Settlement of Investment Disputes will apply.
Adedolapo Akinrele is a partner at FO Akinrele & Co. You can contact him at +234 813 474 2333 and [email protected]
Adewale Sontan is a partner at FO Akinrele & Co. You can contact him at +2341 4630 4702 and [email protected]
Abraham Otene is a partner at FO Akinrele & Co. You can contact him at +2341 4630 4702 and [email protected]
FO Akinrele & Co
188 Awolowo Road, SW Ikoyi, Lagos
Phone. : +234 1 4630 4702, 4630283
Email: [email protected]