DETAILS ABOUT NIGERIA’S ECONOMY, SOCIAL AND POLITICAL INDICES

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Description Nigeria’s Foreign Direct Investment Competitiveness

Details i. Economic Statistics: Macroeconomic Overview: Nigeria is rich in Oil & Gas which provides 95% of foreign earnings and about 80% of budgetary revenues. Great emphasis is on infrastructural development (electricity and roads) as a basis of economic growth. GDP (Purchasing Power Parity): US$330billion GDP (Official Exchange rate): $200b GDP (Real Growth Rate): 7.1% GDP (Per Capital):$2,100 GDP (Composition by Sector): Agriculture: 20% Industry: 47% Service: 33% Labour Force: 52million Labour Force by Occupation: Agriculture: 60% Industry: 10% Service: 30% Unemployment Rate: 12% Household Income or consumption by percentage share: Lowest 10%: 2% Highest 10%: 38% Distribution of Family Income: 45% Investment (Gross fixed): 22% Budget: Revenues: $30b Expenditure: Federal -$31b, States - $18b Public Debt: 12.3% of GDP Inflation rate (Consumer Prices): 15.1% Central Bank Discount Rate: 9.75% Commercial Bank Prime Lending rate: 20-22% Inter-Bank Rate: 18% Exchange Rate: US$1=N150 Page | 1

(naira) Foreign Exchange & Gold Reserve: $65b External Debt: $9.132b Stock of Direct Foreign Investment: $13b ii. Science and ICT Statistics Percentage of population using Computer: 10% (16m) Percentage of population using Internet: 8% (12.8m) Teledensity: 45% Literacy: 68% iii. Country Import Demand Overview Though a major exporter of Oil (crude), Nigeria import Oil (gasoline) Oil – Import: 162,000 bbl/day General Imports: $47b Imports – Commodities: machinery,

chemicals, transport equipment, manufactured goods, food & live animals Imports – ICT: Computer hardware and parts, software (banking, CRM, DMS, etc) Ease of doing Business1 Nigeria ranks: 118 starting a business rank: 91 procedures: 9 time: 31 cost (percentage of income per capita): 90.1. Protecting Investor: 53 What are required to start a business in Nigeria - Procedures to start a business 2 - Taxation 3 - Finance and Grant Support: Available through Commercial Banks and Counterpart funding through local Partner (Private/Public) Page | 2

Market Accessibility/Size - Nigeria’s ICT market is worth more than $16b (5% of GDP). It is estimated to grow at about 10% with the service sector 55% and products 45% driving it. Social & Political Environment - Language: English (Official), Hausa, Yoruba, Igbo (Ibo), Fulani - Ethnic Groups: Nigeria is Africa’s most populous country with population of about 160m. Hausa/Fulani: 29%, Yoruba: 21%, Igbo (Ibo): 18%, … - Religion: Christian (46%), Islam (44%), Traditional Beliefs (10%) - Government: Democratic Stable Federal Government with capital in Abuja. There are 36 states in the Federation. There are also 3 arms of Government: The Executive branch, the Legislative branch and the Judiciary. Infrastructural Support - Land or space at Export processing Zone are provided at a reasonable cost - Technology Park will soon be commissioned in Kano. New one under construction in Ogun State - Electricity is epileptic. Will be required to generate own electricity for 24/7 service - Telecommunication infrastructure: Available. More fibre connection and VSAT deployment still on going. SAT 3/WASC Fibre Optics passes through Lagos from Portugal to South Africa. - Air/land/sea logistic facilities: Modern and certified by ICAO - Custom Guidelines3 Human Capital - Population: 160m, Male:52%, Female: 48% Population Growth Rate: 2% Page | 3

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Key Drivers of the ICT Sectors Trade Restrictions in ICT sector

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Intellectual Property Rights

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Source of help and support

- Life Expectancy: 50years - Graduates per year: 150,000 Investment Incentive - 5year Tax Holiday with investment over or at $31,500 - Per capital: $2,200 per person - Minimum wage: $43.75/month i. Services ii. Products - Tariffs & Duties: In tune with ISA I http://www.lulu.com/items/volume_38/5790 00/579748/1/print/579748.pdf - Import & Export regulation…: liberal (pls see Doing Business in Nigeria below) Institution (Nigerian Copyright Commission: )exist to safeguide Intellectual Property Rights i. Federal Government of Nigeria (NITDA, SMEDAN) ii. Nigerian Investment Promotion Council (NIPC), iii. State Government, iv. Non-Government Organisations eg ITAN

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Doing Business in Nigeria1 Legal Framework for Business Activities Methods of Conducting Business All business enterprises must be registered with the Registrar-General of the Corporate Affairs Commission (CAC) (Registrar of Companies). A foreign investor wishing to set up business operation in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary. Business activities may be undertaken in Nigeria as a : 1. Private or Public limited liability company; 2. Unlimited liability company; 3. Company limited by guarantee; 4. Foreign Company (branch or subsidiary of foreign company) 5. Partnership/Firm; 6. Sole Proprietorship; 7. Incorporated trustees; 8. Representative office;

INCORPORATING A BUSINESS ENTERPRISE: The Companies & Allied Matters Act as Legal Framework for Business Activities The Companies and Allied Matters Act, 1990 (the Companies Act) is the principal law regulating the incorporation of businesses. The administration of the Companies Act is under-taken by the CORPORATE AFFAIRS COMMISSION (CAC) and its functions include: 1. the regulation and supervision of the formation, incorporation, registration, management and winding up of companies. 2. the maintenance of a Companies Registry; 3. the conduct of investigation into the affairs of any company in the interest of

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share-holders and the public.

Minimum Share Capital and Disclosures in Memorandum of Association The minimum authorised share capital is N10,000 in the case of private companies or N500,000 in the case of public companies. The Memorandum of Association must state inter-alia that the subscribers “shall take amongst them a total number of shares of a value not less than 25 per cent of the authorised capital and that each subscriber shall write opposite his name the number of shares he takes.” The law permits and acknowledges the roles of attorneys and other relevant professionals in facilitating business transactions provided, of course, that this “agency arrangement is disclosed". Membership of the Company - Prohibition of Trusts The Companies Act prohibits “notice of any trust, express, implied or constructive” and such shall not be entered on the register of members or be receivable by the CAC. Shares All categories of company shares to carry one vote. Shares with “weighted” voting right are prohibited. All shares (i.e. whether ordinary or preferential) issued by a company must carry one vote in respect of each share. Consequently, preference shareholders are entitled to receive notices and attend all general meetings of the company and may speak and vote on any resolution before the meeting. Disclosures To Be Published In Company Correspondence and Business Premises Every company is obliged to disclose on its letterhead papers used in correspondence, the following particulars: 1. Name of the company/enterprise 2. Address

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3. Registration/Incorporation Number 4. Names of Directors and Alternate Directors (if any) In addition, the law requires companies/enterprises to ensure that the Certificate of Registration be displayed in conspicuous positions at their principal and branch offices. INCORPORATING A BUSINESS ENTERPRISE: Operations of Foreign Companies in Nigeria A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria. However, a foreign company wishing to set up business operations in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary as a separate entity in Nigeria for that purpose. Until so incorporated, the foreign company may not carry on business in Nigeria or exercise any of the powers of a registered company. The foreign investor may incorporate a Nigerian branch or subsidiary by giving a power of attorney to a qualified solicitor in Nigeria for this purpose. The incorporation documents in this instance would disclose that the solicitor is merely acting as an “agent” of a “principal” whose name(s) should also appear in the document. The power of attorney should be designed to lapse and the appointed solicitor ceases to function upon the conclusion of all registration formalities. The locally incorporated branch or subsidiary company must then apply to the Nigerian Investment Promotion Commission (NIPC) for Business Permit and other requisite permits and licences. Exemption to the General Rule Where exemption from local incorporation is desired, a foreign company may apply in accordance with Section 56 of the Companies Act, to the National Council of Ministers for exemption from incorporating a local subsidiary if such foreign

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company belongs to one of the following categories: (a) “foreign companies invited to Nigeria by or with the approval of the Federal Government of Nigeria to execute any specified individual project; (b) foreign companies which are in Nigeria for the execution of a specific individual loan project on behalf of a donor country or international organisation; (c) foreign government-owned companies engaged solely in export promotion activities; (d) "engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.” The application for exemption from disclosing certain details about the applicant is to be made to the Secretary to the Government of the Federation (SGF). If successful, the request of the applicant is granted upon such terms and conditions as the National Council of Ministers may think fit. Representative Offices Foreign companies may set up representative offices in Nigeria. A representative office however, cannot engage in business or conclude contracts or open or negotiate any letters of credit. It can only serve as a promotional and liaison office, and its local operational expenses have to be inflowed from the foreign company. A representative office has to be registered with the CAC. LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS: Factories Act This Nigerian law makes general and special provisions for the health, safety and welfare of persons employed in places statutorily defined as “factories” and for

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which a certificate of registration is required by law. It makes general provisions as to the standards of cleanliness, crowding, ventilation, lighting, drainage of floors, and sanitary conveniences: e.g. all factories must have potable water and washing facilities. In respect of safety, there are general provisions as to the securing, fixing, usage, maintenance and storage of prime movers, transmission machinery, other machinery, unfenced machinery, dangerous liquids, automated machines, hoists and lifts, chains, ropes and lifting tackle, cranes and other lifting machines, steam boilers, steam receivers containers, and air receivers. There are in addition to these, standards set for the training and supervision of inexperienced workers, safe access to any work place, prevention of fire and safety arrangements in case of fire and first aid boxes. Also, the law provides that adequate arrangements should be made for the removal of dust or fumes from factories, provision of goggles to protect the eyes in certain processes and the prevention of eating and drinking in places where poisonous or injurious substances give rise to dust or fumes. It is mandatory that all accidents and industrial diseases be notified to the nearest inspector of factories and be investigated; it is prohibited for the occupier of a factory to make any deductions from the wages of any employee in respect of anything to be done or provided in pursuance of the Factories Act. Workmen's Compensation Act The laws provide for the payment of compensation to workmen for injuries suffered in the course of their employment.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:

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National Minimum Wage Due to inflationary factors, further wage increases have been recommended, and minimum wages are about N5,000 about US$40.00 per month. An employer, defined as someone employing 50 or more persons, is required to pay the minimum wage, defined as the total emolument payable to a worker. However, the wage level in the public service has been substantially increased since the restoration of democracy in 1999. All employers and trade unions in both the public and private sectors of the economy are permitted to make adjustments to total remuneration packages through the process of collective bargaining. The remuneration agreed requires the approval of the Federal Minister of Employment, Labour and Productivity. Approval will be given where the increases are moderate, non-inflationary and affordable. The agreed and approved remuneration will apply from the first day of the calendar month that follows such agreement. Back-dating of increments is not permitted. LABOR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS: Regulatory Bodies Standards Organisation of Nigeria The Nigerian Standards Organisation Act, 1971 was established as an integral part of the Federal Ministry of Industries, to carry out among other things, the following functions:* to designate, establish and approve standards in respect of meterology, materials, commodities, structures and processes for the certification of products in commerce and industry throughout Nigeria; * to provide necessary measures for quality control of raw materials and products in

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conformity with the standards specifications; * to compile Nigerian standards specifications; * to ensure compliance with designated standards; * to establish a quality assurance system including certification of factories, products and laboratories; * to develop methods for testing of materials, supplies and equipment items purchased for use by public and private establishments; * to undertake preparation and distribution of standards samples; * to establish and maintain laboratories necessary for the performance of its functions. On the payment of a nominal fee, it is possible to obtain from the offices of the Standards Organisation of Nigeria the prescribed standards for a number of products. National Agency for Food And Drug Administration and Control NAFDAC was established in 1993 with functions to regulate and control the importation, exportation, manufacturing, advertisement, distribution, sale and use of food, drugs, cosmetics, medical devices, bottled water and chemicals. Drugs and Related Products No drug product, cosmetic or medical device shall be manufactured, imported, exported, advertised, sold or distributed in Nigeria unless it has been registered in accordance with the provisions of and regulations made under a 1993 Act. Environmental Impact Regulation Similar to what obtains in several other convention countries, environmental protection is accorded a lot of prominence in Nigeria. The Federal Environmental

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Protection Agency (FEPA) now converted to a full-fledged Federal Ministry of Environment, is charged with overall responsibility for monitoring, supervising and coordinating Environmental Impact Assessment (EIA). A comprehensive Environmental Impact Assessment procedure for Nigeria, as well as EIA guidelines for various industrial sectors has been compiled. LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS: Trade Malpractices Decree 1992 This Law creates certain offences relating to trade malpractices and sets up a Special Trade Malpractices Investigation Panel to investigate such offences. The law provides against any person who: * falsely labels, packages, sells, offers for sale or advertises any product so as to mislead as to its quality, character, brand, name, value, composition, merit or safety; or * for the purpose of sale, contract or other dealing, uses or intends to use any weight, measure or number which is false or unjust; or * sells any product by weight, measure or number and delivers to the purchaser a less weight, measure or number than is purported to be sold, * advertises or invites subscription for any product or project which does not exist.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS: Consumer Protection Council A Consumer Protection Council has been established in Nigeria with the objectives to:-

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* provide speedy redress to consumer complaints through negotiations, mediation and conciliation; * seek ways and means of removing from the market hazardous products and cause offenders to replace such products with safer and more appropriate alternatives; * publish from time to time a list of products whose consumption and sale have been banned, withdrawn, restricted, or not approved by the Nigerian government or foreign governments; * cause an offending company, firm, trade association or individual to protect, compensate, provide relief and safeguards to injured consumers or communities from adverse effects of technologies that are inherently harmful, violent or highly hazardous; * organise and undertake campaigns and other forms of activities as will lead to increased public consumer awareness; * encourage trade, industry and professional associations to develop and enforce in their various field quality standards designed to safeguard the interests of consumers; * encourage the formation of voluntary consumer groups or associations for consumers’ well being. In the exercise of its functions, the Council is empowered to: * apply to the court to prevent the circulation of any product which constitutes an imminent public hazard; * compel a manufacturer to certify that all safety standards are met in their products Doing Business in Nigeria II FOREIGN INVESTMENT REQUIREMENTS AND PROTECTIONS: Principal Laws on Foreign Investments The principal laws regulating foreign investments are, the Nigerian Investment Promotion Commission Decree No.16 of 1995 and the Foreign Exchange (Monitoring Page | 13

and Miscellaneous Provisions) Decree No.17 of 1995, now incorporated as Acts of the National Assembly. Deregulation of Equity Structure in Nigeria Enterprises Effectively, the Nigerian Enterprises Promotion (Repeal) Decree No. 7 of 1995 has abolished any restrictions, in respect of the limits of foreign shareholding, in Nigeria registered/domiciled enterprises. The only enterprises which are still exempted from free and unrestrained foreign participation are those involved in: * Production of arms and ammunition; * production of and dealing in narcotic drugs and psycothropic substances; The Nigerian Investment Promotion Commission Decree No. 16, 1995 (NIPC Decree) This decree established the Nigerian Investment Promotion Commission (NIPC) as the successor to Industrial Development Coordination Committee (IDCC) Functions and Powers The Nigerian Investment Promotion Commission (NIPC) is an Agency of the Federal Government with perpetual succession and a common seal which is specially established, among other things, to: 1. co-ordinate, monitor, encourage and provide necessary assistance and guidance for the establishment and operation of enterprises in Nigeria; 2. initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors; 3. promote investments in and outside Nigeria through effective promotional means; 4. collect, collate, analyse and disseminate information about investment opportunities and sources of investment capital and advise on request, the availability, chance or suitability of partners in joint-venture projects; 5. register and keep records of all enterprises to which the NIPC legislation applies; 6. identify specific projects and invite interested investors for participation in those projects; 7. initiate, organise and participate in promotional activities such as exhibitions, conferences and seminars for the stimulation of investments; Page | 14

8. maintain liaison between investors and Ministries, government departments and agencies, institutional lenders and other authorities concerned with investments; 9. provide and disseminate up-to-date information on incentives available to investors; 10. assist incoming and existing investors by providing support services; 11. evaluate the impact of the Commission on investment in Nigeria and recommend appropriate remedies and additional incentives; 12. advise the Federal Government on policy matters, including fiscal measures designed to promote the industrialisation of Nigeria or the general development of the economy; and 13. perform such other functions as are supplementary or incidental to the attainment of the objectives of NIPC Decree. Provisions Relating to Investments Notable amongst the provisions relating to investments are the following: * A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria; * An enterprise in which foreign participation is permitted, shall after its incorporation or registration, be registered with the NIPC. * A foreign enterprise may buy the shares of any Nigerian enterprise in any convertible foreign currency. A foreign investor in an approved enterprise is guaranteed unconditional transferability of funds through an authorised dealer, in freely convertible currency of: 1. dividends or profit (net of taxes) attributable to the investment; 2. payments in respect of loan servicing where a foreign loan has been obtained; and 3. the remittance of proceeds (net of all taxes) and other obligations in the event of sale or liquidation of the enterprise or any interest attributable to the investment. Priority Areas of Investment The NIPC issues guidelines and procedures which specify priority areas of investment and prescribed incentives and benefits which are in conformity with Government policy. Incentives For Special Investment For the purpose of promoting identified strategic or major investment, the NIPC may in Page | 15

consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment FOREIGN INVESTMENT REQUIREMENTS AND PROTECTIONS: Investment Protection Assurance The NIPC Decree provides that: 1. No enterprise shall be nationalised or expropriated by any Government of the Federation; and 2. No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other persons. There will be no acquisition of an enterprise by the Federal Government unless the acquisition is in the national interest or for a public purpose under a law which makes provision for: 1. payment of fair and adequate compensation; and 2. a right of access to the courts for the determination of the investor’s interest of right and the amount of compensation to which he is entitled. Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable. Apart from the investment guarantee assurances of the NIPC Decree, countries are welcome to execute and enter into bilateral Investment Promotion and Protection Agreements (IPPA) with the Nigerian government. Several countries have thus concluded such agreements with Nigeria.

Checklist of Steps For Establishing New Companies in Nigeria with Foreign Shareholding STAGE A 1. Establish partners/shareholders and their respective percentage shareholdings in the proposed company. 2. Establish name, initial authorised share capital and main objects of proposed company. Page | 16

3. [EXCEPT in instances where the proposed company will be 100% owned by nonresident shareholders] - Prepare Joint-Venture Agreement between prospective shareholders. The Joint-Venture may specify; inter-alia, mode of subscription by parties, manner of Board Composition, mutually protective quorum for meetings, specific actions which would necessitate share-holders approval by special or other resolutions. 4. Prepare Memorandum and Articles of Association, incorporating the spirit and intents of the Joint-Venture Agreement. 5. 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 Business Permit (i.e. formal legal status for foreign branch/subsidiary operations) to the foreign shareholder. 6. Conduct a search through the CAC as to the availability of the proposed company name and, if available, reserve the name with the CAC. 7. Effect payment of stamp duties, CAC filing fees and process and conclude registration of the company as a legal entity. STAGE B 1. Obtain “Tax Clearance Certificate” for the newly registered company 2. 2. Prepare Deeds of Sub-Lease/Assignment, as may be appropriate, to reflect firm commitment on the part of the newly registered company, to acquire business premises for its proposed operations. STAGE C 1. Prepare and submit simultaneous applications to the NIPC (on the prescribed NIPC Application Form) for the following approvals:* Business Permit and Expatriate Quota; * Pioneer Status and other incentives (where applicable) 2. The application to the NIPC should be accompanied with the following documents:* Copies of the duly completed NIPC Form; * Copies of the treasury receipt for the purchase of NIPC Form; * Copies of the Certificate of Incorporation of the applicant company; * Copies of the Tax Clearance Certificate of the applicant company; * Copies of the Memorandum and Articles of Association; * Copies of treasury receipt as evidence of payments of stamp duties on the authorised share capital of the company as at date of application; * Copies of the Joint-Venture Agreement - UNLESS 100% foreign ownership is envisaged; Page | 17

* Copies of feasibility Report and Project Implementation Programme of a company for its proposed business. It is advisable that quotations, letters of intent and other such documentations relating to industrial plant and machinery to be acquired by the company, be forwarded either as annexes or separately. In order to discourage the dissipation of administrative energy on speculative applications, the NIPC favours the applicant who has demonstrated positive intention to commence business as and when approvals are granted. Hence, the requests for evidence of acquisition of business premises and evidence of having sourced the plant and machinery to be utilised in the company’s business; * Copies of Deed(s) of Sub-Lease/Agreement evidencing firm commitment to acquire requisite business premises for the company’s operation. By implication, the ultimate NIPC approvals do incorporate approvals of the industrial site locations indicated in the application; * Copies of training programme or personnel policy of the company, incorporating management succession schedule for qualified Nigerians; * Particulars of names, addresses, nationalities and occupations of the proposed directors of the company; * Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions. It is pertinent to note that expatriate quota on a “Permanent Until Reviewed” (PUR) status is only accorded to a Managing Director, where the non-resident shareholders own a majority of the company’s shares, and the authorised capital of the company is N5 million and above; * Copies of information brochure on foreign shareholder (if available) as testimony of international expertise and credibility of the foreign partner in the proposed line of business. STAGE D 1. Having obtained the requisite NIPC approvals and Business Permit Certificate, the non-resident shareholder must act with despatch to import its foreign equity holding in the company. To ensure prompt importation of the foreign equity components, the NIPC may grant Business Permit but defer approvals for Expatriate Quota and Pioneer Status and other applicable investment incentives until evidence of capital importation is produced. 2. After obtaining Certificate of Capital Importation from the bank, the NIPC is to be notified of this fact with the supporting documentation, in order for it to resume processing of pending approvals that might have been deferred on such ground. 3. As soon as expatriate quota position are granted and the respective individuals to fill the quota positions are recruited, the company must embark on steps to obtain work Page | 18

permit and residency status for the expatriate employees and their accom-panying spouses and children (if any).

The Difference Between ‘BUSINESS PERMIT’ and ‘EXPATRIATE QUOTA’ Business permit, as the name connotes, is the permanent authorization for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise. Expatriate quota is the official permit to a company, conveying permission for the company to employ individual expatriates to specifically approved job designations, and also specifying the permissible duration of such employment. The expatriate quota forms the basis of work permits for expatriate individuals employed ( whose qualifications must fulfill the criteria established for the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted not more than one (1) “PUR” Quota ( i.e. Permanent Until Reviewed) position. The Current Regulation on The Appointment of Foreign Directors The promoters of business ventures in Nigeria are free to appoint Directors of their choice, either foreign or Nigerian, and the Directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign Directors (with an indication of resident and non-resident Directors). The Business Permit Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the Directors representing each proprietor or co-proprietor. Payments of foreign directors’ fees are remittable in the same manner as dividends accruing to the foreign company. However, since such fees are taxed at source (5% as a withholding tax), each foreign director’s fees are remittable subject to satisfactory evidence that the taxable amounts on such fees have been paid.

Pioneer Status (Tax Holiday) Advantages to a Company The Industrial Development (Income Tax Relief) Act, Cap. 179 Laws of Nigeria, 1990, declares a number of industries as pioneer industries. Thus, any company whose Page | 19

products fall within the categorised industries could be conferred with Pioneer Status. This designation is not necessarily a reflection that a company was pioneer per se in the industry, as several companies within the same pioneer industry classification could qualify for Pioneer Status. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief available on conferment of Pioneer Status would be restricted to income derived from pioneer products only. Under the current industrial policy, conferment of Pioneer Status accords a company relief from income tax liability for a period of up to 5 years (tax-holiday status). Finally, it should be noted that even if a company’s activities and/or products are classified within pioneer industries, the grant of Pioneer Status is not automatic. The criteria for granting Pioneer Status are related and/or based on the following considerations:1. the amount of underlying capital investment in a company (N5 million and above) must be verifiable by physical inspection and supported by a report of the Industrial Inspectorate Division of the Federal Ministry of Industries, before a Pioneer Certificate is granted. 2. the socio-economic advantages of a company’s activities to the Nigerian economy as set out in its Feasibility Study is also an important consideration. Without prejudice to these conditions, NIPC is empowered to confer Pioneer Status and other investment incentives in any other deserving circumstance as the Council of NIPC may approve. 2

Starting a Business in Nigeria Procedure 1. on-line check the availability of company name with the Corporate Affairs Commission Time to complete: 2 days Cost to complete: NGN 200 application form Comment: The Corporate Affairs Commission (CAC) Online System was commissioned in June 2005. The system envisaged an online search of unique company names immediately upon the purchase of an e-payment card from an accredited bank. Although this services is widely adevertised by CAC, until now the system is not fully operational either because of power fluctuation or because of lack of availability of the pre-paid cards- necessary to conduct the on-line transaction. In

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most cases, the applicants have to go to the CAC office to complete this procedure. Procedure 2. Prepare the requisite incorporation documents and pay the stamp duty Time to complete:7 days Cost to complete:stamp duty included in procedure 4 Comment: To prepare the requisite incorporation documents, the incorporators must complete the requisite statutory forms, prepare and print the memorandum and articles of association, and have them stamped by the Federal Board of the Inland Revenue Service. Procedure 3. Notarize the declaration of compliance (CAC 4) Time to complete: 1 day Cost to complete: NGN 200 Comment: A sworn declaration that the requirements of the Companies and Allied Matters Act have been met must be sworn to by - A barrister or solicitor engaged in the formation of the company. - A person named in the memorandum and articles of association as a director or secretary of the company. The declaration must be filed with the High Court Oath for a fee of NGN 200. Procedure 4. Register the company with the Corporate Affairs Commission & pay fees at the bank desk at CAC Time to complete: 11 days Cost to complete:N60,000 legal fees +N500 incorporation forms + N10,000 Incorporation fees (an extra N50,000 for same-day processing) + 1.5% stamp duty paid on capital + N500 for each additional copy of Memorandum and Articles of Association stamped + N3,000 for certified Comment: To register the company with the Corporate Affairs Commission (CAC), the following incorporation documents are submitted: - Name reservation and availability form. - Memorandum and articles of association, stamped by the commissioner for stamp duties (two copies). - Form CAC 3, Notice of registered address. - Form CAC 7, Particulars of directors. - Form CAC 2, Statement of share capital and return of allotment of shares. Incorporation fees are -NGN 10,000 for company whose nominal share capital does not exceed NGN 1,000,000, and NGN 10,000 for every NGN 1,000,000 thereafter. - N500 incorporation forms • 1.5% stamp duty paid on capital Page | 21

• N500 for each additional copy of Memorandum and Articles of Association stamped • N3,000 for certified true copy of memorandum and articles of association • N2,000 for certified true copy of particulars of directors • N2,000 for certified true copy of particulars of shareholders. Moreover, NGN 60,000 is the approximate cost of company incorporation conducted by professionals ( lawyers, charted accountants of charted secretaries) accredited by CAC. The payment can be done at the bank desk at CAC. The Corporate Affairs Commission introduced a same-day incorporation option at an increased statutory fee (five times that of standard incorporation). In June 2005, the Corporate Affairs Commission commissioned a system for online company registration, in which registration documents and payments may be processed electronically by Commission-accredited lawyers. However, the system is not yet fully implemented. Procedure 5. Register with the Federal Board of Inland Revenue Department of the Ministry of Finance Time to complete: 4 days Cost to complete: no charge Comment: The Federal Inland Revenue Service (FIRS) requires the applicant to complete tax registration forms for corporate income tax registration as well as VAT. The company submits an application letter to the tax authority for a tax clearance certificate and, for income tax purposes, registers at the integrated tax office. The registration process requires submitting a completed tax office–issued application (taxpayer registration input form, TRIF/2006/001 COYS) and the following documents: - Completed FIRS questionnaire. - Memorandum and articles of association (copy). - Certificate of incorporation (copy). - Directors’ names and addresses. - Tax advisor’s name and address. - Letter of appointment of a tax adviser and corresponding letter of acceptance. To register, the company must submit the taxpayer registration input form in triplicate, and the original certificate of incorporation must be presented for review by the controller. Upon the completed taxpayer registration input form and all other documents being received, a tax reference number is allocated. An application must be filed for the tax clearance certificate; its issuance is not Page | 22

automatic. Fee schedule for tax clearance certificate: - Registration within 6 months of incorporation: no cost. - Registration after 6 months of incorporation (if the company has yet to start business operations): -A pre-operation levy of NGN 20,000 for first-year requests and NGN 25,000 for each subsequent-year request, until the company files a notice of commencement of business as per amendment to section 29 of the company’s income tax of 2007. -Companies that register after the start of operations must file a set of audited accounts. TCC is issued based on tax paid for 3 years. If the position is at a loss, the TCC will be issued to reflect the position. Companies required to register for VAT complete the VAT registration form (VAT Form 001, obtainable free of charge from all FIRS offices) and return it to the integrated tax office, which will issue a taxpayer identification number (TIN). Companies required to register for VAT must do so within 6 months from the date of starting business operations. Although the registration for corporate income tax and VAT are done in the same place; the integrated tax office, 2 tax numbers are issued. Procedure 6. Register for personal income tax PAYE at the State Tax Office Time to complete: 2 days, simultaneous with previous procedure Cost to complete: no charge Comment: All employers shall register with the relevant state tax authority for income tax withholding. Once the application is filed, with a copy of the certificate of incorporation attached, a reference file is opened for the company. Procedure 7. LSSAA signage inspection Time to complete: 7 days. simultaneous with previous procedure Cost to complete: Comment: The Lagos State Government has developed a new State Law which entitles it to impose signage fees. This law is much more developed than most other State laws. The local government was divested of the power to carry out this function in January 2007 to Lagos State Signage and Advertising Agency (LSSAA). now the Signage law is enforced by LSSAA. LSSAA regulates outdoor display in business premises in Lagos State. Any company that is doing business in Lagos State that has an outdoor display in form of advertisement in the premises or any vehicle of the company must register the display with the agency. LSSAA issue the questionnaire regarding the application to erect a signboard outside Page | 23

business premises, etc. That questionnaire is completed by newly established businesses within the State and submitted to LSSAA, who will scrutinise the completed questionnaire and arrange for an inspection of the signboard at its location.The registration is done in two phases: • Pre-scrutiny stage: the applicant pays the sums of N8, 500 and N6, 500 as initial fees for assessment and survey respectively. • Formal application: the application fee is N2000. After the above, the application will be forwarded to the Billing and Assessment department of the agency to determine the fee payable for the issuance of the permit. The amount of fee is determined by the dimension and location of the outdoor display. However, in most states in Nigeria, signage and related compliance issues are handled by the local government council. Procedure 8. Pay signage fees at a designated bank Time to complete: 1 day Cost to complete: NGN 17000 3

Taxation

In Nigeria, all persons in employment, individuals in business, non residents who derive income from Nigeria as well as companies that operate in Nigeria are liable to pay tax. Some taxes are payable to the Federal Government (and administered by Federal Inland Revenue Service), some are payable to the State Governments and some to Local Governments. For a complete listing of which tax is payable to which level (or tier) of Government, please see Taxes and Levies (Approved list for collection) Act. No 21 of 1998 There is usually a Body of Appeal Commissioners that is a court of first instance to handle Tax appeal cases. There is also a Value Added Tax Tribunal The different taxes are as listed below Name of Tax A Capital Gains Tax

Law authoring the tax B Capital Gains Tax Act. Chapter 42. LFN 1990

Brief description of the tax c A 10% tax imposed on Capital Gains arising from a sale, exchange or other disposition of properties known as chargeable assets. Page | 24

Companies Income Tax

Companies Income A tax chargeable on all companies Tax Act (other than Companies engaged in Chapter 60. LFN 1990 petroleum operations as defined under the PPTA) registered in Nigeria.

Education Tax

Education Tax Act No 7 of 1993

Personal Income Tax

Personal Income Tax A tax payable by all individuals and Act registered businesses and No 104 of 1993 partnerships except those registered under Part A of Companies and Allied Matters Act 1990.

Petroleum Profits Tax

Petroleum Profits Tax Tax charged at 85% of the Act chargeable income for companies Chapter 354. LFN engaged in petroleum operations 1990 as specified under the Act.

Stamp Duties

Stamp Duties Act Chapter 411. LFN 1990

Stamp Duty is Chargeable according to a scale fixed by the Joint Tax Board.

Value Added Tax

Value Added Tax Act No 102 of 1993

A tax payable by the consumer at 5% of the net value added based on eligible transactions once consumed.

A tax chargeable on all companies registered in Nigeria at 2% of chargeable profits as contribution to the Education Tax Fund.

All registered businesses are expected to register and have a VAT registration certificate, and boldly display their VAT registration number on all invoices. Page | 25

Withholding Tax

This is not really a tax. It is an advance payment of tax (at 10%) to which individuals and organizations are entitled to demand a withholding tax credit note.

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