Nigeria is the most populous nation in Africa, and its second-largest economy. Situated on the continental west coast, and bordered by Benin, Niger, Chad, and Cameroon, Nigeria represents a gateway to Africa, facilitating trade links with partners across the Atlantic Ocean and the rest of the world. Classified as an emerging economy, Nigeria went through a period of financial mismanagement in the 20th century, but after government reforms, saw rapid growth in the 21st century - a trend driven by its abundant natural resources, including valuable oil reserves. Beyond its oil sector, Nigeria is diversifying its economy: agriculture, mining, manufacturing, real, estate, telecommunications, and financial services have all become important sectors, while Nigeria itself has become one of Africa’s major banking markets, drawing a range of international investment interests. Although Nigeria still faces challenges characteristic of African economies - such as high capital costs, corruption and supply shortages - its government is laying the foundation for further economic development, through membership of OPEC, the United Nations and the MINT group of countries. In 2011, Citigroup predicted Nigeria would experience the highest GDP growth in the world between 2010-2050.
Why invest in Nigeria?
Interested investors should find a range of reasons to target Nigeria, including:
Nigeria has substantial resources, most of which are yet to be fully exploited. They include mineral, agricultural and human resources. The Government has created a favourable climate for business and industrial ventures. Administrative and bureaucratic procedures have been greatly streamlined. The Government has put in place policies and programmes that guarantee a free market economy.
The company is required to have a legal entity established in order to process a payroll. There are various types of entity available including:
The incorporation of local companies in Nigeria normally involves the following procedure:
It is mandatory to have an in-country bank account in Nigeria to process payroll. Generally, banks are open to the public for business from 0800 to 1600 hrs, and closed on Saturdays and Sundays.
The working days in Nigeria are Monday to Friday. The working day for commercial offices is usually eight hours, typically from 0800 to 1700. Lunch breaks range from half an hour to one hour.
Nigeria lies on the northwest coast of continental Africa, neighbouring Benin, Niger, Chad, and Cameroon. Civilisation in Nigeria dates back to prehistory, but in the 18th and 19th centuries the country was colonised by European powers, and became part of the British Empire in the early 19th century. In 1960, Nigeria declared its independence, and went through a period of political turmoil, including rule by military junta, until it emerged as a democratic nation in 1999. Since its democratisation, Nigeria has emerged on the world stage as a member the Commonwealth of Nations and the United Nations, and a founding member of the African Union. Thanks to its proximity to the equator, Nigeria is covered in lush, tropical rainforests and swamps, and by desert landscapes close to the Sahara region. Nigeria’s climate varies between a wet season and a dry season but temperatures remain high throughout the year.
Full Name: The Federal Republic of Nigeria
Population: 182 million (NPC 2016)
Largest City: Lagos
Main Industries: Oil & Gas
Main Language: English
Monetary Unit: 1 Naira = 100 Kobo
Internet Domain: .Ng
International Dialling Code: +234
Dates are usually written in the date, month and year sequence. For example, 1 July 2016 or 1/7/16. Numbers are written with a comma to denote thousands and a period to denote fractions. For example, N 5,000.20 (five thousand naira and twenty kobo).
The Tax Year in Nigeria runs from 1st January to 31st December.
All companies are required to register with tax authorities and obtain TIN (Taxpayer Identification Numbers). The registration process takes two to three weeks to be completed.
The contributions payable in respect of each month shall fall due on the last day of the month concerned.
You must register with the following statutory authorities:
Note that some of these processes can overlap, i.e; they can be processed concurrently, excluding registrations with FIRS and LIRS where the former is a prerequisite for the latter.
Also, please note that some of these registrations may attract statutory fees that are not expressly stated.
Income tax is imposed on employees in Nigeria, and includes any salaries, wages, gains or profits - including bonuses, premiums and benefits - derived from employment. Income tax is processed using the PAYE system and reported each month to the State Internal Revenue Service (SIRS). All Nigerian tax ‘residents’ are liable for income tax - that is, employees with duties of employment performed wholly or partly in Nigeria for up to 6 months per year. Nigerian tax residents are taxed on all income sourced from Nigeria, and all worldwide income.
Tax rates in Nigeria are graduated across income bands, ranging from 7-24%. Income thresholds are as follows:
Both Employer and Employees contribute to approve provident funds. In some cases, Employees do not make any contribution to pension funds. The eligibility of a worker to benefit from pensions, retirement or gratuity schemes varies from one employment to another. Invariably, the terms are contained in contracts of employment. Social security schemes are approved by the Joint Tax Board and subject to renewal annually.
An Employee is required to contribute a minimum of 8% of their earnings.
The deadline for filling of annual returns is 31st January every year. The penalty for non-compliance by an individual and a corporate body is N50,000 and N500,000 respectively.
A new Employee is expected to register in their state of residence either directly for a self-Employed person or through their Employer as a payee agent.
Once an Employee leaves the employment of a company, the Tax Authority must be advised according.
Employers in Nigeria have withholding obligations towards their employees as part of the payroll process - and must deduct income tax and social security contributions at source. Tax and social security contributions may be process using a PAYE system, and reported to the relevant State Internal Revenue Service.
Income tax: Income tax deductions in Nigeria are made at a rate graduated across income bands. Income tax rates range from 7% to 24%.
Social security: Social security contributions in Nigeria cover benefits for retirement, disability, sickness and maternity. Employees contribute a minimum of 8% of their salary, while employers must contribute around 10% to the various benefit schemes.
Employees must be provided with payslips for each pay-cycle (these may be provided online), and payroll reports must be kept for a statutory minimum period of 6 years.