Globally, foreign direct investment (FDI) has become a key component of national economic development strategies. It is considered to be an essential tool for economic growth through its bolstering of domestic capital, productivity and employment. The important benefit of FDI is its contribution to the growth of the economy by increasing labour standards and skills, enhancing the transfer of new technology, innovative ideas and improvement of infrastructure, skills and the general business climate.


With an estimated population of over 160 million and still growing, Nigeria is Africa’s most populous nation and potentially the largest domestic market in sub-Saharan Africa. It is projected that Nigeria will be among the 20 largest economies of the world by the year 2020. Since the emergence of a democratically elected government in 1999, the Nigerian economy is gradually gaining ground as an investment haven for foreign investors. To this end, Nigeria is currently enjoying foreign interest in various sectors of its economy like oil and gas, manufacturing, telecommunications and so on.

An alien or foreign company may join in forming a company subject to the provisions of any law regulating the rights and capacity of alien or foreign companies to engage in trade in Nigeria. Section 17 of the Nigerian Investment Promotion [NIPC] Act, Laws of the Federation of Nigeria, 2004 provides that a non-Nigerian, whether an individual or a company may invest and participate in the operation of any enterprise in Nigeria.

Several reasons can be adduced for a foreign investor to invest in Nigeria These reasons include but are not limited to the following:

    1. Abundant Resources: Nigeria has enormous natural resources, most of which are yet to be fully explored. They include several mineral, agricultural and human resources.

    2. Large Market: Nigeria offers the largest market in Africa, with a population of over 160 million people. The Nigerian market potential also stretches into the growing West African sub-region.

    3. Political Stability: Nigeria now offers a stable political environment with the continued democratic dispensation that has structured a succession plan for continuing democratic regime.

    4. Free Market Economy: The Government has created a favorable 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.

    5. Robust Private Sector: The country has a dynamic private sector, which has assumed greater responsibilities under the new economic environment.

    6. Free Flow of Investment: Exchange control regulations have been liberalized to ensure free flow of international finance. There is now unrestricted movement of investment capital.

    7. Attractive Incentives: A comprehensive package of incentives has been put in place to attract investment.

    8. Fast Growing Financial Sector: There is a well-developed banking and financial sector. The investor has easy access to working capital and other credit facilities.

    9. Skilled and Low Cost Labour: There is an abundance of skilled labour at an economic cost, resulting in production costs, which is among the lowest in Africa.

    10. Revitalized Judicial System: The medium of dispute resolution has improved drastically. The use of alternative dispute resolution has gradually gained ground and the judiciary has become more independent.
    This document therefore offers practical advice to a foreign investor desirous of investing in Nigeria, as well as providing checklist of governmental approvals required by government agencies with respect to foreign investment in Nigeria.


There is no judicial or statutory definition for foreign investment in Nigeria but foreign investment can be said to be cross-border transfer of investment in assets (tangible or intangible) made by a citizen (natural or juristic) resident in a country known as the capital exporting country in a business enterprise of another country known as the capital importing state with the sole aim of making extra return on his/their investment from the economy of the capital importing country by either direct or indirect participation. With this definition two classes of FI have emerged namely:
  1. Portfolio (Indirect) Investment.
  2. Direct Investment


Foreign portfolio investment represents passive holdings of securities such as shares, bonds, debentures or other financial assets, none of which entails active control or management of the securities’ issuer by the investor.

In recent times, Nigeria has experienced a boom in portfolio investment largely due to the increased interest by foreign portfolio investors in the Nigerian Stock Exchange (NSE). The return on investment in the NSE is one of the highest in the world and this has attracted some of the largest private equity firms and Nigerians in Diaspora (NID) to invest in equities of Nigerian companies.



There are basically three major government agencies regulating foreign participation in Nigeria and these are;

  • Nigerian Investment Promotion Commission (NIPC);
  • National Office of Technology Acquisition and Promotion (NOTAP)
  • Nigerian immigration service.


Upon incorporation, the newly established company is required to register with the Nigerian Investment Promotion Commission (NIPC), which is the regulatory body responsible for the grant of foreign investment approvals.

The NIPC was set up for the following reasons;

  • To initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;
  • To be the agency of the Federal Government to coordinate and monitor all investment Promote investments in and outside Nigeria through effective promotional means;
  • Provide and disseminate up-to-date information on incentives available to investors;
  • Assist incoming and existing investors by providing support services;
  • Evaluate the impact of the Commission in investments in Nigeria and recommend appropriate recommendations;
  • To act as liaison between investors and ministries, government departments and agencies, institutional lenders and other authorities concerned with investments.

An application for such registration is required to be supported by the following documents:

  • A duly completed NIPC application form 1; and
  • A copy of the applicant’s certificate of incorporation.


Where there are agreements relating to the transfer of technology, such as Management, Engineering Services, and Technical Services, (which may be relevant for the purpose of the company achieving its objectives in Nigeria), such agreements are required to be registered with NOTAP in the prescribed manner, not later than 60 days from the execution of the agreement.

The primary objective of NOTAP is to monitor on a continuing basis, the transfer of foreign technology to Nigeria, by ensuring the effective assimilation and diffusion of foreign technology in the country.  These fees for such services are also regulated by NOTAP and range from 1% – 5% of net sales for technical assistance and 2% – 5% of profit before tax for management services.
Application to NOTAP is accompanied with form A (duly completed), and other sector specific requirements requested by NOTAP.


The immigration service, by virtue of the Immigration Act, LFN 2004, is saddled with the responsibility of regulating the entry of foreigners into Nigeria, through the issuance of visas and entry permits.

In an investment scenario such as this, it is usually advisable for the foreign investor to employ the services of professionals such as a firm of solicitors and/or investment advisers who are experienced in the capital market to structure an Investment plan applicable to the Nigerian market.


Foreign Direct Investment is still by far the more popular of the two mediums of FI in Nigeria. With the deregulation and privatization program of the federal government of Nigeria in recent times, the interest Public Private Partnership (PPP) continues to generate, the level of FDI flowing into the country continues to increase steadily. There are two major modes of entry for a foreign investor desirous of carrying on business in Nigeria namely:


A foreign investor would incorporate and register a company with a minimum of 10 million shares of One Naira each with the Corporate Affairs Commission (C.A.C). Thereafter the company will then register with the Nigerian Investment Promotion Commission (NIPC) the regulatory body responsible for the grant of foreign investment approvals.

In order to facilitate the process, it will become necessary for an investor to instruct a firm of solicitors to handle the registration and incorporation processes. A foreign shareholder may grant a power of attorney to its solicitors in Nigeria, enabling them to act as its Agents in executing incorporation and other statutory documents pending the grant of a Business Permit.


The second option open to an investor is to acquire majority shares in an existing Nigerian company in any convertible currency. The company may either be a private limited company or a public limited company. The requirements of acquiring a public company are more stringent than that of a private company.

In these two investment scenarios, the investment will be effected with foreign currency imported freely into Nigeria through an authorised dealer and converted into Naira at the official foreign exchange market. The advantage of this is that imported capital is guaranteed unconditional transferability. Repatriation of funds with regard to both earnings and capital is also guaranteed. The unconditional transferability of funds in freely convertible currency of dividends and profits (net of taxes), which are attributable to investment is guaranteed by law. A foreign investor who wishes to repatriate his dividends or profits need only advise an authorized dealer (a licensed bank) to transfer the related funds in a specified currency upon the presentation of appropriate documentation evidencing the declaration of dividends.

No formal approval is required for the repatriation of dividends and profits. It should however be noted that where the amounts to be repatriated are of significant value, the verification and approval of such transactions by the Central Bank of Nigeria (CBN) are usually required, although such approval is routinely granted since the CBN’s verification in these instances is required for record purposes only


  1. Companies and Allied Matters Act

  2. Nigerian Investment Promotion Commission Act

  3. Foreign Exchange (Monitoring and Miscellaneous Provisions) Act

  4. Companies Income Tax Act

  5. Immigration Act

  6. National Office for Technology Acquisition and Promotion Act

  7. Labour Act

  8. Petroleum Act


The Companies and Allied Matters Act (CAMA) established the Corporate Affairs Commission (Company House). The Corporate Affairs Commission is the agency of government saddled with the responsibility of regulating how companies are registered and their subsequent activities after registration. For the requirements for the registration of a limited liability company


The NIPC Act empowers NIPC to serve as a central investment approval agency. NIPC streamlines the activities of ministries, government departments and agencies involved with investment promotion. It helps in matters such as registration or incorporation of foreign enterprises, obtaining expatriate quotas or finding out specifics about the different tax regimes for sectors like cargo, oil or mining.   Foreign investors are allowed to own up to 100% shares in investments in the country. However they are exempted from free and unrestrained participation in:
  • Production of arms and ammunition;
  • Production of and dealing in narcotic drugs and psychotropic substances
  • Production of military and para-military wears and accoutrement, including those of the Police and the Customs, Immigration and Prison Services; and
  • Such other items as the Federal Executive Council may, from time to time, determine.
Some of the functions of NIPC include:
  • Providing up-to-date information on investment opportunities available in the country.
  • Providing information on available incentives for investment.
  • Issuing business permits to foreign investors.
  • Coordinating the issuance of expatriate quota.
  • Entering directly into bilateral agreement with investors for purposes of investment protection.
For the requirements for the application for investment approvals and permits, which are obtainable at the NIPC.


This Act established an autonomous Foreign Exchange Market for Nigeria. The Central Bank of Nigeria regulates and supervises the transactions conducted in this market. Upon incorporation, the company should open a domiciliary account with any of the licensed banks in Nigeria through which it may import its capital. A Certificate of Capital Importation which is statutorily required to be issued by the bank through which the capital is imported within 24 hours of importation will evidence such importation.


The Companies Income Tax Act (CITA) established the Federal Board of Inland Revenue whose operational arm is the Federal Inland Revenue Service. The Board administers the Act and all other things relating to taxes payable by business enterprises in Nigeria (Foreign or Local). CITA was recently amended to encourage potential/existing investors and entrepreneurs.


This Act established NOTAP the body responsible for monitoring on a continuous basis the transfer of foreign technology to the country. Where there are agreements relating to the transfer of technology, such as Management, Engineering Service, and Technical Services Agreements registration by NOTAP is required. This registration is one of the prerequisites to the deduction of technology transfer payments from income for tax purposes. Furthermore, where this registration is not effected as required, the offshore remittance of fees payable under the relevant agreement will be disallowed. For the list of monies payable to NOTAP for the registration of a Technical Service Agreement.


The Immigration Act empowers the Minister charged with the responsibility for immigration to appoint a Director of Immigration to administer its provision. The Act provides for the issuance of visas and permits for foreigners interested in staying permanently and/or working or establishing a business enterprise in Nigeria. For a list of visas and permits provided for under this Act


Matters concerning the employment of workers are governed by the Labour Act. The Nigerian Labour Congress (NLC) represents blue-collar and clerical employees (the junior workers) and there are various Senior Staff Associations that represent middle-management (white-collar) employees (the senior workers). Management level workers do not belong to unions.


The Petroleum Act provides for exploration of petroleum from the territorial waters and the continental shelf of Nigeria. However all technical issues of policy nature, regulatory control of the industry, revenues, royalties and fiscal provisions, and licensing of operations under the Act are handled by the Department of Petroleum Resources (DPR). If the company will be servicing the oil industry, an application to DPR for accreditation to carry on business as an Oil Industry Service Company shall be required. The company’s application should be supported by evidence of the expertise of its offshore parent company or other affiliates who will provide the technical expertise needed to justify the DPR accreditation. The company may be accredited for more than one category depending on the type of service it provides. However there is an on-going reform in the sector which is expected to facilitate investment process for both local and foreign investors.


The Nigerian Government has put in place a number of incentives for the stimulation of private sector investment from within and outside the country. While some of these incentives are general, others are limited to some specific sectors. The nature and application of these incentives have been considerably simplified. The general incentive is:


The grant of Pioneer Status to an industry is aimed at enabling the industry concerned to make a reasonable level of profit within its formative years. The profit so made is expected to be ploughed back into the business. Pioneer status takes the form of a five-year tax holiday to qualified or eligible industries anywhere in the Federation and seven-year tax holiday in respect of industries located in economically disadvantaged local government areas of the Federation.The above incentive is available to local and foreign investors who decide to explore the opportunities available in any of the following:


Industrial establishments are expected to engage in R&D for the improvement of their processes and products. Up to 120% of expenses on R&D are tax deductible, provided that such R&D activities are carried out in Nigeria, and are connected with the business from which income or profits is derived. Also, for the purpose of R&D on local raw materials, 140% of expenses are allowed. Where the research is long-term, it will be regarded as a capital expenditure and will be written off against profit. The result of such research could be patented and protected in accordance with internationally accepted Industrial Property Rights.

The amount of capital allowance to be enjoyed in any year of assessment is restricted in Nigeria to 75% of assessable profit in case of manufacturing companies and 66% in case of others, except such companies in agro-allied industries that are not affected by this restriction. If leased assets are used in agro-allied ventures, the full 100% capital allowance claimed will be granted. Moreover, where the leased assets are agricultural plants and equipment, there will be an additional investment allowance of 10% on such expenditure.


This is applicable to industrial establishments that have set up in-plant training facilities. Such industries enjoy a 2% tax concession for a period of 5 years.


A pioneer industry sited in an economically disadvantaged local government area is entitled to 100% tax holiday for 7 years and an additional 5% capital depreciation allowance over and above the initial capital depreciation allowance.


This form of incentive is granted to industries that provide facilities that ordinarily, should have been provided by government. Such facilities include access roads, pipe borne water and electricity. 20% of the cost of providing these infrastructural facilities, where they do not exist, is tax deductible.


Industries with high labour/capital ratio are entitled to tax concessions. These are industries with plants, equipment and machinery, which essentially are operated with minimal automation. Where there is automation, such automation should not be more than one process in the course of production. The rate is graduated in such a way that an industry employing 1,000 persons or more will enjoy 15% tax concession, while an industry employing 200 will enjoy 7% and those employing 100 will enjoy 6% and so on.


This applies essentially to engineering industries, where some finished imported products serves as inputs. This attracts 10% tax concession for five (5) years. The concession is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down parts.


A tax credit of 20% is granted for 5 years to industries that attain the minimum level of local raw material sourcing and utilization.


This incentive is granted to companies engaged in manufacturing which incur qualifying capital expenditure for the purposes of approved expansion and so on. The incentive is in the form of a generalized allowance of capital expenditure incurred by companies for the following:

  • Expansion of production capacity

  • Modernization of production facilities
  • Diversification into related products


  • Companies with turnover of less than N1,000,000 are taxed at a low rate of 20% for the first 5 years of operation if they are in the manufacturing business.

  • Dividends from companies in the manufacturing sector with turnover of less than N1,000,000 are tax-free for the first 5 years of their operation.

  • Dividends derived from manufacturing companies in petrol chemical and liquefied natural gas sub-sector are exempted from tax.


  1. Companies in the agro-allied business do not have their capital allowance restricted. It is granted in full, that is, 100%.

  2. The payment of minimum tax by companies that make little or no profits is not applicable to agro-allied business.

  3. Agro-allied plant and equipment enjoy enhanced capital allowances of up to 50%.

  4. Processing of agricultural produce is a pioneer industry; consequently, there is 100% tax free period for 5 years for projects into processing of agricultural produce.


  • Pioneer Status for Cassava Projects:
    This entails 5 years tax holiday with possible extension for another 2 years.

  • Special Grants to Agricultural Research Institutions:
    Funding of Research Institutes with Agriculture Special Grants dedicated to the development of cassava industrial technology.

  • Expansion of Credit Facilities by Nigerian Export-Import Bank (NEXIM):
    NEXIM dedicates more funds to processed cassava products for export with more favorable conditions.

  • Expansion Grant (EEG) Scheme Managed by the Central Bank of Nigeria:
    Grants are provided to support export oriented cassava industries.

  • Agricultural Credit Guarantee Scheme Fund (ACGSF) administered by the Central Bank of Nigeria:
    Up to 75% guarantee for all loans granted by commercial banks for cassava production and processing.

  • Interest Drawback Program Fund:
    60% repayment of interest paid by those who borrow from banks under the ACGS, for the purpose of cassava production and processing provided such borrowers repay their loans on schedule..


The following incentives are available in the solid minerals sector:

  • 3-5 years tax holiday.

  • Low companies income tax of between 20% and 30%.

  • Deferred royalty payments depending on the magnitude of the investment and the strategic nature of the project.
  • Possible capitalization of expenditure on exploration and surveys.

  • Extension of infrastructure such as roads and electricity to mining sites.

  • The holder of a mining lease shall also, where qualified, be entitled to:

    • Depreciation or capital allowance of 75% of the certified true capital expenditure incurred in the year of investment and 50% in subsequent years

    • Investment allowance of 5%

    • Exemption from payment of customs & import duties

    • Expatriate quota & residence permit for approved expatriate personnel

  • In addition to roll-over relief under the Capital Gains Tax (CGT), companies replacing their plants and machinery are to enjoy a once-and-for-all 95% capital allowance in the 1st year with 5% retention value until the assets is disposed, 15% will be granted for replacement of any asset.


The incentives in this sector are granted to companies that are into joint ventures with the Nigerian National Petroleum Corporation (NNPC) and have signed Memoranda of Understanding with the corporation. The incentives are:

  • Guaranteed minimum margin of US$2.50billion;

  • Accelerated capital allowances which provide that the capital allowances can be carried forward indefinitely;

  • Onshore production in territorial waters and continental shelf areas beyond 100 metres.

  • Investment Tax Allowances (ITA) are granted to a company in respect of any asset for the accounting period.  The ITA is graduated as follows:


In view of the enormous potentials in this sector, Government has approved the following fiscal incentives:

Gas production phase:

  1. Applicable tax rate is the same as the company income tax which is currently at 30%

  2. Investment tax credit at the current rate of 5%

  3. Royalty at the rate of 7% (on-shore) and 5% (off-shore)


Gas transmission and distribution

  1. Capital allowance at the rate of 20% per annum in the first 4 years, 19% in the fifth year and the remaining 1% in the books

  2. Tax rate as in production phase

  3. Tax holiday under pioneer status


Liquefied natural gas (LNG)

  1. Applicable tax rate under Petroleum Profits Tax (PPT) is 45%.

  2. Capital allowance is 33% per year on-straight line basis in the first 3 years with 1% remaining in the books

  3. Investment tax credit of 10%

  4. Royalty 7% on-shore, and 5% offshore, tax deductible.


Gas exploitation (Upstream Operation)

Fiscal arrangements are reviewed as follows:

  1. All investments necessary to separate oil and gas from reserves into suitable product are considered part of the oil field development.

  2. Capital investment facilities to deliver associated gas in usable form at utilization or transfer points will be treated for fiscal purposes as part of the capital investment for oil development.

  3. Capital allowances, operating expenses and basis for assessment will be subjected to the provisions of the Petroleum Profits Tax (PPT) Act and the revised Memorandum of Understanding (MOU).


Gas utilisation (Down Stream Operation)

  1. Companies engaged in gas utilization are to be subject to the provisions of the CITA.

  2. An initial tax-free period of 3 years renewable for an additional 2 years.

  3. Accelerated capital allowances after the tax-free period in the form of 90% with 10% retention in the books

  4. 15% investment capital allowance, which shall not reduce the value of the asset.

In 1998, the government approved additional incentives to support the gas industry in the following areas:

  • All gas developmental projects, including those engaged in power generation, liquid plants, fertilizer plants, gas distribution/transmission pipelines are taxed under the provisions of CITA and not the PPT Act;

  • All fiscal incentives under the gas utilization down stream operations since 1997 are to be extended to industrial projects that use gas that is power plants, gas to liquids plants, fertilizer plants, gas distribution/transmission plants;

  • The initial tax holiday is to be extended from 3-5 years;

  • Gas is transferred at 0% PPT and 0% Royalty;

  • Investment capital allowance is increased from 5% to 15%;

  • Interest on loan on gas project is to be tax deductible provided that prior approval was obtained from the Federal Ministry of Finance before taking the loan; and

  • All dividends distributed during the tax holiday shall not be taxed.



Government provides non-fiscal incentives to private local and foreign investors in addition to a tariff structure that ensures that they recover their investment over a reasonable period of time, bearing in mind the need for differential tariffs between urban and rural areas. Manufacture and installation of telecommunications related equipment is considered pioneer activity which will entitle the investor to a 5-7 years tax holiday depending on location.

8. ENERGY (Electricity)

Among the incentives put in place by Government to encourage investors in this sector are:

  • Tax holiday of 5-7 years to companies that manufacture transformers, meters, control panels, switchgears, cable and other electrical related equipment, which are considered pioneer products/industries;

  • Power plants using gas are assessed under CITA at a reduced rate of 30%.


In 1999, the tourism sector was accorded preferred sector status. This qualified the sector for incentives (available to similar sectors of the economy) such as:

  1. Tax holiday and import duty exemption on tourism related equipment.

  2. Provision of basic infrastructure that is, road, water, electricity, communications and so on to centre of attraction.

  3. Provision of land for tourism development at concessional rates.

  4. Availability of soft loans with long period of moratorium.


Investing in Shipbuilding, repairs and maintenance of vessels, boat, barges, diving and underwater engineering services, aircraft maintenance and manufacturing are considered pioneer products which will entitle the investor (local/foreign) to 5-7 years tax holiday depending on location.


The costs implications for foreign investments are in two folds. They are the payments made to Government Agencies for approvals, permissions, registration, taxes and so on. The other cost is professional fees to solicitors, accountants, management consultants and so on. The cost implication may vary depending on a number of factors such as the size of the company (share capital), sectorial requirements, logistics and so on.


Foreign investment has over the years improved drastically in Nigeria. This is attributable to the return to democratic governance. Since 1999 when the current democratically elected government assumed power, confidence has again returned to the Nigerian economy. This is largely reflected through major investment in Nigeria’s telecommunications, tourism and oil and gas to mention a few. To this end, one can rightly say that foreign investment is definitely on its ascendancy in Nigeria.