When you’re embroiled in the excitement of starting a new business, it’s easy to ignore the need for licenses and permits. Sure, getting licenses and permits is about as fun as visiting the dentist. But failing to do so-and doing it right from the beginning-is one of the most common mistakes new entrepreneurs make.
More often than not, business owners expect their license and business permit requirements to be simple and their certificates to be easily acquired. As for their renewal deadlines, they assume that those can be dealt with at a later date. However, the reality is not so simple—business owners are routinely fined, stores closed, and penalties levied for their lack of compliance.
This week we consider some important permits you may find necessary for doing business in Nigeria:
Registration of a business name or Incorporation of a Company is done with the Corporate Affairs Commission (CAC) and is an important step to take in starting your business in Nigeria. Benefits of registering your company include:
- It enhances your identity and adds credibility to your operation:
- It attracts business and funding opportunities:
- It makes the business real for you and keeps you focused:
- It establishes your company as a separate financial entity:
- It is hard to grow a business if you’re operating illegally.
Businesses that are profit oriented are expected to pay tax. After the commencement of business, you should ensure you stay tax compliant by registering with the Inland Revenue. Examples of taxes typically payable by Companies are listed below:
- Company Income Tax: Payable by Limited Liability Companies and computed from the profit of the Company in any given year
- PAYE: This is Income Tax that is expected to be deducted from te salaries of staff and paid to the Internal Revenue. This tax is collected by State Inland Revenue
- Value Added Tax: This is a consumption tax paid on all goods and services provided in or imported into Nigeria taxes and is currently 7.5%. You are expected to add this to the price of your good or service and remit to the government on a monthly basis.
Once a Company is fully compliant with its taxes it entitled to apply for a Tax Clearance Certificate which is document stating that an entity does not owe tax for a period of time specified in the certificate.
One of the requirements for foreigners intending to do business in Nigeria is registration with the Nigerian Investment Promotion Council (NIPC) and the benefits of registering with the NIPC are many for the investors, but the most important one is that the Nigerian Investment Promotion Commission Act ensures that no foreign-owned enterprise or establishment shall be expropriated or nationalized by any government in Nigeria after the due registration with the NIPC.
Business permit is strictly for foreigners that want to conduct business in Nigeria and is issued by the Ministry of Interior as an authorization for a foreigner to start a business in Nigeria. Without a business permit, a foreigner must not carry on business in Nigeria. Apart from obtaining a business permit, every foreigner who seeking to work in Nigeria as a worker or control any business must only do so through a company that has an Expatriate Quota which is a form of approval granted to companies and registered firms to employ the services of expatriates with relevant competences. Once a Company issued with Expatriate Quota its foreign employees can then apply for a work permit also known as Combined Expatriate Residential Permit and Alien Card (CERPAC). It is your responsibility as business owner to apply for the expatriate quota if you intend to employ foreigners in your organization.
To carry out business in the oil and gas sector, permits and license from the Department of Petroleum Resources (DPR) now known as (NUPRC) Nigerian Upstream Petroleum Regulatory Commission is required. There are different categories for registration under the Oil and Gas Industry Service Permit (OGISP) and they are listed below:
General category: This category covers works that does not require specialized or certified competence.
Major Category: Under this category, applicants must possess relevant technical/special skills.
Specialized category: Under specialized category, applicants must possess relevant and verifiable technical/special skills
CBN FINTECH LICENSE
There is a special license that has to be acquired from Central Bank of Nigeria for Company carrying out Financial Technology Services (Fintech companies) in order to start operating in Nigeria. This license depends on the type of Fintech company, there are 3 different categories.
Super License : This is required for Fintech companies that operate payment gateway platforms.
Standard License :This is required for Fintech companies that operate as e-money issuers, wallet creation managers and agent recruiters.
Basic License: This is required for Fintech companies that does point of sale deployment, payment processing gateways, portals and payment applications.
Under Nigerian law, no processed food, drug, drug product, cosmetic, medical device or water can be manufactured, imported, exported, advertised, sold or distributed in Nigeria unless it has been registered with NAFDAC. Products are classified as Micro, Small, Large depending on the type of product and size of operations.
There are certain requirements which must be fulfilled before a regulated product can attain a registered status in Nigeria. In addition requirements for registration of local manufactured products is a bit different from imported goods. It must be noted that a company producing different products must register each of them separately.
PRIVATE SECURITY LICENSE (PRIVATE GUARD COMPANIES)
The Nigerian Security and the Civil Defence Corps (NSCDC) has the responsibility of licensing, monitoring and the supervision of private securities companies in Nigeria so as to ensure that those working within the industry are fit and proper persons who have received adequate vocational training for the role they perform. Until a license is granted by the NSDC, a private security company cannot begin operations and before any license can be granted by the NSCDC, the company must first be registered by the Corporate Affairs Commission.
MINING LICENSE FOR SOLID MINERAL
The Ministry of Mines and Steel Development is responsible for issuing mining license and one of the types of licenses issued for exploitation of mineral resources is the Small Scale Mining Lease which allows the holder of the lease to conduct artisanal mining operations which does not include the extensive and continued use of explosives, toxic chemicals or agents on an area of land not less than 5 acres but not exceeding 3 square kilometers. The holder of a small scale mining lease is not allowed to employ more than 50 workers in a typical work day and not allowed to have underground workings more than 7 meters below surface nor galleries extending more than 10 meters from a shaft. Small scale mining lease is granted for a period of 5 (Five) years and may be renewed for further terms of 5 (Five) years and there is no limitation to the number of renewal.
A money lender Licence can be granted to a person or business whose sole business is lending money with the expectation of a higher amount in return. Money lender licenses are regulated by the various states money lending laws in Nigeria and is granted for a period of one-year term, (expires 31st of December ever year) and can be renewed. The provisions of the various States of Nigeria on Money Lending are basically the same and as such the requirements and procedure for obtaining a license share a lot of similarities in most States.
THE BOTTOM LINE
Every individual or corporate entity that intends to run a business in Nigeria without any hitch must ensure that it abides and complies with statutory requirements regarding business operations in Nigeria.
Although we’ve walked you through some important registrations and permits you need for your business, it is important to bear in mind that this list is by no means exhaustive. There are plenty of other business licenses you may want to consider, depending upon the sector you are operating and your location.
When in doubt, you can consult us at Kudi Konsult, to ensure that your company has obtained all of the applicable business licenses you’ll need to meet your legal obligations. That way, you’ll be able to spend less time worrying about compliance, and more time thinking about moving forward and achieving success.