How to Start a Business in Nigeria
You may have been thinking of starting a business in Nigeria but weren’t sure where to begin. If so, then you’ve come to the right place. We cover what goes into a good business plan, as well as registration and legal requirements so you can hit the ground running.
Begin with a Plan
Every successful business starts with a good business plan. This means formulating a document that addresses the following:
- What you want to sell
- Whether you’ll be online only, or have a physical storefront
- Who your target market is (may include doing some market research)
- How much financing you’ll need
- How you’ll advertise your Nigerian business
- How to grow your business
By creating a well-crafted business plan, you’ll know exactly what steps you need to take to move forward, including lining up necessary financing, and will have a general idea of when you’ll be ready to work with customers, investors, and the public.
Your next step is determining which business structure best aligns with your business model.
Choose the Correct Business Structure
Because different types of business structures have different fee schedules and registration requirements in Nigeria, you’ll want to get this right the first time around.
You have several options here, including:
- Sole proprietorships
- Partnerships
- Unlimited Liability Companies (Ultd)
- Limited Liability Companies by Share (Ltd/Plc)
- Limited Liability Companies by Guarantee (Ltd/Gte)
- Incorporated Trustees (not-for-profit)
Companies limited by share have a certain number of shareholders. Share capital is the value of all the issued shares of a company.
Companies limited by guarantee are protected from financial insolvency by a group of individuals known as subscribers, who pledge to use their financial resources to cover any debts and liabilities the business may incur, or costs to wind down the business if it ceases operation.
Once you’ve determined the business structure you have, it’s time to get registered with the country of Nigeria.
Get Registered in Nigeria
A business in Nigeria must be registered with the Corporate Affairs Commission (CAC). This can be done online, but you’ll need to be sure the name you want to use for your business isn’t already in use in the country by another business.
You can do this by searching company names on the CAC website and then reserving the name of your business online.
If you attempt to skip this step, you won’t be able to complete the business registration process.
You’ll also need to pay fees with your registration, including filing and stamp duty fees. These can run anywhere from ₦500 to ₦30,000, depending on the business structure.
While that may seem high for those who aren’t familiar with the Nigerian naira exchange rate, it’s actually quite reasonable for foreigners to make an investment in Nigeria by operating a business.
For example, investors from the United States would pay a maximum of just under $80 at the current exchange rate to register a new business. For investors using the euro, that equals about €66. Finally, for those using the British pound, ₦30,000 would be around £53.
All business owners who wish to operate in Nigeria must also have an accredited agent. This is someone who can file business documents on the company’s behalf.
Depending on the kind of business you have, it could take 9-12 business days to complete the registration process; however, this timeline is subject to change.
Some types of businesses in Nigeria must also be approved by the Attorney-General, such as companies limited by guarantee. This may lengthen the overall time it takes to register your business.
The size of your business may also determine which registration documents you’ll need to file. In Nigeria, a micro business is defined as having 10 or fewer employees, while a small business is defined as having 10-49 employees.
Once you’ve registered your business, you’re ready to get a special license (if applicable for your business) and obtain a tax ID number.
Obtain a Nigerian Tax ID Number
All businesses operating in Nigeria are required to obtain a Tax Identification Number or TIN. In addition, businesses that provide taxable supplies (including certain services) in Nigeria will also need a Value Added Tax (VAT) number.
This is true regardless of whether you live in Nigeria and operate the business, or your business is operating as a foreign entity in the country.
Some companies considered to be “pioneers,” either because of the type of industry they’re in or the type of products they produce, may be given a 7-year tax holiday, meaning the company would be exempt from taxes for seven years.
Once you’ve acquired all the necessary tax IDs, you can obtain any special licenses required by the government.
Obtain Special Licenses
In addition to getting the relevant TIN and VAT numbers, your business may be required to get a special license from the government depending on the type of industry you’re in or the service provided.
The following business types will need to get a license through the National Agency for Food and Drug Administration and Control (NAFDAC):
- Cosmetics (if made in Nigeria)
- Food businesses (including small-scale bread makers)
- Pharmaceuticals
- Veterinary businesses
- Herbal Medicines
Some businesses/business activities, such as real estate investments, may need to be registered with other government agencies, including the National Office for Technology Promotion and Acquisition (NOTAP), or Nigeria’s Central Bank.
This is not an exhaustive list of all industries that must obtain a special license or all agencies that a business may be required to obtain a license from.
You may want to speak with a business attorney registered in Nigeria if you’re unsure whether you need to obtain a special license for your business.
Other business essentials
Nowadays, nearly every successful business needs to have a standout website and e-commerce options, and of course, a strong marketing strategy is key—if no one hears about your business, you won’t have any customers no matter how innovative your product is.
You’ll also need a great location if you’ve got a brick-and-mortar storefront. You may have the best products and the best prices in town, but if no one can find you, customers won’t be pounding down your door.
But what often gets overlooked is a robust and secure point of sale system. After all, it doesn’t do much good to get customers in the door (or to your online checkout screen) if you can’t provide them with safe and secure payment methods.
Epos Now offers several solutions for businesses, including mobile point-of-sale options for both Android and Apple devices. Not only that, but Epos Now partners with payment processing companies so you can accept most major credit/debit cards.
Whether you have existing hardware and only need POS software, or you need an entire;y new system, Epos Now is here to help. We have won awards across the globe and are dedicated to only providing the latest technology.